Tesla Stock Drops Alot Since January.

Tesla (TSLA) stock was downgraded and saw multiple target price reductions following the electric vehicle company’s announcement of over a 40% drop in second-quarter earnings, which was worse than anticipated. Income exceeded expectations, driven by increasing regulatory credits.

TSLA stocks dropped by 10% to 221.57 on Wednesday amid Tesla Q2 earnings and the company’s conference call. On Tuesday, the stock price of TSLA dropped by 2% to 246.38.

Outlook remains unchanged; Tesla receives downgrade.

Adam Jonas, an influential analyst at Morgan Stanley who supports Tesla, stated on Tuesday that there is no major shift in perspective and that Tesla is managing to navigate through the electric vehicle downturn.

Jonas stated that the 2024 forecast is “mostly the same repetition of wording from last quarter’s forecast” and that this “will likely have little impact on the consensus.”

After reporting earnings, Cantor Fitzgerald changed their rating on Tesla from overweight to neutral, but increased the price target from 230 to 245. The company stated that due to TSLA’s increase of over 70% in the past three months, it is starting to take a more cautious approach to valuation in the short term.

At the same time, Tesla stock price targets were reduced by both Goldman Sachs and Citigroup. Goldman reduced its target price for Tesla to 230 from 248 but maintained a neutral rating on the stocks. Citi analyst Itay Michaeli lowered his target price from 274 to 258.

Summary of Tesla financial performance.

On Tuesday, the electric car company announced a 43% drop in earnings to 52 cents per share. In the meantime, revenue for the quarter reached $25.5 billion, showing a 2% increase compared to the same quarter last year. Tesla announced that it had reached its highest ever quarterly earnings, despite challenging operating conditions.

At the same time, Tesla’s profit margins decreased by 23 basis points to 18%. Automobile gross margins, not including regulatory credits and leases, were recorded at 14.6%. According to FactSet, analysts were anticipating a 15.1% growth rate.

The giant in the electric vehicle industry also achieved a record revenue of $890 million from regulatory credits in the second quarter.

Tesla stated that the growth rate of vehicle volume in 2024 could be significantly less compared to last year. The electric vehicle leader stated that its energy storage division’s growth is expected to exceed that of its automotive sector.

During the earnings call, Elon Musk, Tesla’s CEO, did not share much new information but remained optimistic about self-driving technology, the Optimus robot, and the robotaxi service. Musk has verified that the robotaxi unveiling will take place on October 10 instead of the original date of August 8.

Tesla’s stock is not impacted by factors related to Trump’s presidency.

Wells Fargo stated that Tesla stock does not seem to be linked to the actions or policies of President Trump. The analysts pointed out that Tesla’s stock is decreasing due to poor fundamentals being evident in the second quarter.

The company stated that Tesla’s short-term profits may be affected if ex-President Donald Trump wins the 2024 election and eliminates EV tax credits under the Inflation Reduction Act.

UBS analyst Joseph Spak informed investors about pressure in the automotive industry. Spak stated that Tesla’s existing range of vehicles is “restricted” and, although quantities could go up, it might need ongoing advertising.

UBS reiterated the sell rating and set a price target of 197, suggesting that the robotaxi day on October 10th may lead to a “sell-the-news” scenario.

Exciting Robotaxi Experience

In the meantime, Dan Ives, a Wedbush Securities analyst who has been optimistic about Tesla for a long time, mentioned on Wednesday that the robot taxi event will mark the start of Tesla’s AI journey, which he estimates to be worth $1 trillion on its own in the coming years.

Ives also mentioned that Tesla skeptics will pay attention to the auto gross margins and the overall regulatory credit revenue. The analyst stated that those items are essential elements in the larger Tesla narrative.

Potential future investments in xAI company with Musk could also be a wise decision, considering its broader AI/Robotaxi potential.