What the latest Q2 data means for investors

Tesla (NASDAQ: TeslaTesla’s journey into 2024 has not been smooth sailing. We’ve seen factory closures, charging issues, and some intense competition, especially in China, hounding Tesla. However, Elon Musk’s unwavering commitment to expanding Tesla’s electric vehicle lineup has kept the company on track. Tesla’s recent release of its second-quarter production and delivery report generated a lot of buzz. While the numbers were down from a year ago, they still managed to beat analyst expectations, giving the stock a much-needed boost.

Personally, I am bullish on Tesla stock. Despite the significant challenges the company faces, its ability to exceed delivery expectations in a difficult environment, coupled with its strong brand and leadership in electric vehicle technology, suggests continued growth potential.

Highlights of the second quarter in delivery and production

Tesla managed to produce about 411,000 vehicles in the second quarter, which is impressive considering the challenges the company has faced recently. Tesla delivered more cars than it produced, with about 444,000 vehicles delivered to customer driveways. This represents a 4.8% year-over-year decline in deliveries and a 14% decline in production compared to the same period in 2023.

As expected, the Model 3 and Model Y were the stars of the show, accounting for the lion’s share of production with 386,576 units and 422,405 deliveries. The much-hyped Model S, Model X and Cybertruck made up the rest, with 24,255 units produced and 21,551 delivered.

Analysts had expected Tesla to deliver about 439,302 vehicles, so the company’s performance was a pleasant surprise. The news sent Tesla shares up 10% to $231.26, despite being down about 7% for the year.

In just three trading days, from July 1st to July 3rd, Tesla shares rose A staggering 23%. That’s right, nearly a quarter of the company’s value was added in just 72 hours, and the stock has been up quite a bit in the past few days.

Even more impressive is that the rally has completely erased Tesla’s losses since the start of the year. The stock is now up 1.8% for the year, well below its level just two weeks ago.

However, it is important to note that even with this recent decline, Tesla is still trading at a much higher price compared to other automakers. Its price-to-earnings ratio of 64.3x is much higher than the likes of General Motors (NYSE: General Motors) (5.7x) Ford (New York Stock Exchange: F) (13.3x), indicating that much of the growth has already been priced into the stock. The coming quarters will be crucial in determining whether Tesla can maintain this momentum and justify its high valuation.

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Tesla’s Challenges and Strategic Responses

Tesla is feeling the heat, especially in China. (BYD)OTC:BYDDFIts biggest rival, BYD, sold about 426,000 pure electric vehicles in the second quarter, just shy of Tesla’s 443,956 deliveries — a gap of just 17,956 units. It’s not just BYD; other Chinese automakers like Geely (OTC:GELYFIt is also intensifying its efforts, as Geely’s sales jumped 41% in the first half of 2024.

In response, Tesla has cut prices aggressively since early 2023, which has helped maintain sales volumes but also squeezed profit margins. Automotive gross profit margins fell to 18.5% in the first quarter of 2024 from 21.1% in the first quarter of 2023. Tesla also faced significant challenges earlier this year, including an arson attack at its German factory and shipping disruptions due to riots in the Red Sea, which contributed to a 14% year-over-year decline in second-quarter production.

Despite these obstacles, Tesla isn’t just defending itself. Elon Musk is planning to accelerate mass production of affordable electric vehicles, likely to launch in the first half of 2025. This could be a turning point in reaching a broader market. Additionally, Tesla’s energy storage business is booming, with first-quarter revenue hitting a record $1.64 billion and energy deployments reaching 4.1 gigawatt hours.

Tesla is also investing heavily in artificial intelligence and robotics, nearly doubling its AI training capacity. Musk is so confident in his humanoid Optimus robots that he believes they could boost Tesla’s market cap to $25 trillion (it’s currently around $800 billion).

What’s next for Tesla and its investors?

There are some major events coming up that could have a major impact on Tesla’s future. First, the Q2 earnings report on July 23 will give us a detailed look at their financial performance. Analysts expect revenue to come in at $23.83 billion. They also expect revenue to come in at $23.83 billion. Expected earnings per share Earnings per share (EPS) were $0.60, with a range of $0.41 to $0.87. This represents a significant improvement from the prior-year EPS of $0.45. If Tesla’s revenue growth turns positive in the third quarter, it would mark a major milestone in the recovery.

Then comes Robotaxi Day on August 8, which could be a big event for Tesla’s self-driving ambitions. However, analysts have mixed views on Tesla stock. Wedbush’s Dan Ives is bullish, raising his price target to $300, believing the worst is over and upcoming innovations like robotaxi could drive growth.

On the other hand, Colin Langan of Wells Fargo is cautious, recommending a sell on Tesla shares due to concerns about declining delivery growth and the impact of price cuts on margins. He sets a conservative price target of $120. Guggenheim analysts also raised their price target to $134, but Keep your sale rating uppointing out that Tesla’s impressive energy storage deployment is a major factor.

Is Tesla Stock a Buy According to Analysts?

According to the latest analyst ratings, Tesla stock has a consensus rating of “Hold”. Of the 35 analysts covering the stock, 13 rate it as a Buy, 14 as a Hold, and eight as a Sell. TSLA Average Price Target The stock is priced at $184.41, which means there is a potential downside of about 27.1% from the current price.

bottom line

In conclusion, Tesla’s Q2 deliveries report was a mixed bag. While the company beat estimates, deliveries were down year-over-year. The market reacted positively, but analysts are divided on the stock’s outlook. Some believe the worst is over for the company, while others remain cautious about potential competitive and margin pressures.

Despite these challenges, I am bullish on Tesla stock. The company’s resilience, commitment to expanding its electric vehicle lineup, and exciting potential in AI and energy storage make it a compelling investment. The upcoming Q2 earnings report on July 23 and RoboTaxi Day on August 8 could provide more clarity and could send the stock higher. As always, do your homework and invest wisely.

disclosure