What the Latest Q2 Data Means for Investors

Tesla (NASDAQ:TSLA) journey into 2024 has been anything but smooth. We’ve had factory closures, shipping issues, and some serious competition nipping at Tesla’s heels, especially in China. Still, Elon Musk’s unwavering commitment to expanding Tesla’s EV lineup has kept the company on track. The recent release of Tesla’s Q2 production and deliveries report has everyone talking. While the numbers were down from last year, they still managed to beat analysts’ expectations, giving the stock a much-needed boost.

Personally, I’m bullish on Tesla stock. While the company faces significant challenges, its ability to exceed delivery expectations in a difficult environment, combined with its strong brand and leadership in EV technology, suggests there’s potential for continued growth.

Q2 Delivery and Production Highlights

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 heading into customer driveways. That 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 deliveries with 422,405 units. The Model S, Model X and the much-hyped Cybertruck made up the rest with 24,255 units produced and 21,551 units delivered.

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

In just three trading days, from July 1 to 3, Tesla’s stock 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 risen a bit more in recent days.

Even more impressive is that this surge has completely erased Tesla’s losses so far this year. Shares are now up 1.8% for the year, a far cry from where they were two weeks ago.

It’s important to note, however, that even with this recent dip, Tesla still trades at a significant premium to other automakers. Its price-to-earnings ratio of 64.3x is miles above that of General Motors (NYSE:GM) (5.7x) and Ford (NYSE:F) (13.3x), indicating that there is already a lot of growth in the stock price. The next few quarters will be crucial in determining whether Tesla can maintain this momentum and justify its high valuation.

Tesla’s Challenges and Strategic Responses

Tesla is feeling the pressure from competitors, especially in China. BYD (OTC:BYDDF), their biggest rival, sold about 426,000 pure electric vehicles in Q2, just shy of Tesla’s 443,956 deliveries — a difference of just 17,956 units. And it’s not just BYD; other Chinese automakers like Geely (OTC:GELYF) are also doing increasingly well: Geely’s turnover increased by 41% in the first half of 2024.

In response, Tesla has been aggressively cutting prices since early 2023, which has helped maintain sales volume but has also squeezed profit margins. Automotive gross margin fell from 21.1% in Q1 2023 to 18.5% in Q1 2024. Tesla also faced significant challenges earlier this year, including an arson attack at its German factory and shipping disruptions due to the Red Sea riots, which contributed to a 14% year-over-year decline in production in Q2.

Despite these hurdles, Tesla isn’t just defending itself. Elon Musk has plans to accelerate mass production of affordable electric vehicles, potentially in the first half of 2025. This could be a game-changer for reaching a broader market. What’s more, Tesla’s energy storage business is booming, with first-quarter revenue hitting a record $1.64 billion and energy deployments of 4.1 GWh.

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

What’s next for Tesla and its investors?

There are a few major events coming up that could have a major impact on Tesla’s future. First, Tesla’s Q2 earnings report on July 23rd will give us a detailed look at their financial performance. Analysts are expecting revenue of $23.83 billion. They are also predicting earnings per share (EPS) of $0.60, with a range of $0.41 to $0.87. This is a significant improvement from the $0.45 EPS from the previous quarter. If Tesla’s revenue growth turns positive in Q3, it would mark a major milestone in its recovery.

Then there’s Robotaxi Day on August 8, which could be a big deal for Tesla’s autonomous driving ambitions. Still, analysts have mixed opinions on Tesla’s stock. Wedbush’s Dan Ives is bullish, raising his price target to $300, as he believes Tesla is past the worst and that upcoming innovations like the Robotaxi could fuel growth.

Wells Fargo’s Colin Langan, on the other hand, is cautious, recommending selling Tesla shares amid concerns about slowing supply growth and the impact of price cuts on margins. His price target is a conservative $120. Guggenheim analysts also raised their price target to $134 but maintained a Sell rating, noting Tesla’s impressive energy storage deployments as a key factor.

Is Buying Tesla Stock a Bargain, According to Analysts?

According to the latest analyst ratings, Tesla stock has a consensus Hold rating. Of the 35 analysts covering the stock, 13 rate it as Buy, 14 as Hold and eight as Sell. The average TSLA price target of $184.41 implies approximately 27.1% downside potential from the current price.

It comes down to

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

Despite these challenges, I’m bullish on Tesla stock. The company’s resilience, commitment to expanding its EV lineup, and exciting potential in AI and energy storage make it an attractive investment. The upcoming Q2 earnings report on July 23 and Robotaxi Day on August 8 could provide more clarity and potentially boost the stock. As always, do your homework and invest wisely.


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