Wall Street is bracing for a rocky road ahead for shares of Tesla on the heels of a messy second-quarter print. The electric vehicle giant fell short of Wall Street’s earnings expectations , as its auto business came under pressure. Tesla posted adjusted earnings of 52 cents a share, versus an LSEG estimate of 62 cents. The company also reported a decline in its adjusted operating margin , as it spends on artificial intelligence and discounts its vehicles. The lack of “razzle dazzle” left investors and analysts focused on deteriorating fundamentals, wrote Wells Fargo’s Colin Langan, who has an underweight rating on shares. “We are cautious on margins given likelihood of more price cuts & lower volumes. Moreover, we are concerned about the roll-out of their next models and their demand & margins,” he added. TSLA 1D mountain Shares fall after earnings disappointment Shares slumped nearly 11% on Wednesday , with at least two firms — New Street and Cantor Fitzgerald — downgrading shares to neutral. “We see limited (and unreliable) valuation upside, and limited risks of material positive revisions on that time horizon,” said New Street’s Pierre Ferragu. “Next inflection in the stock unlikely in the next 12 months.” Tesla was riding high prior to releasing its latest quarterly figures. On July 2, the company reported second-quarter delivery figures. That week Tesla shares rallied more than 27% to briefly erase a year-to-date loss . The stock is down 10% in 2024, but up more than 12% for July. TSLA YTD mountain TSLA year to date “Until Tesla is able to begin production of new lower cost models, which the company expects in 1H25, we believe pricing/incentives could remain a key demand lever and weigh on margins,” added Goldman Sachs analyst Mark Delaney as he trimmed his price target and lowered EPS estimates. Delaney has a neutral rating on the stock. Some analysts also view AI initiatives from the company as fully backed into the stock. UBS analyst Joseph Spak noted the current stock price reflects a investors ascribing a “hefty value” to these plans. “To us, over the near term we see more downside to the stock if/when confidence in these initiatives waver, vs. upside from likely only incremental data points supporting the [long-term] bull case,” wrote Spak. “Robo-taxi day (now 10/10) could be a sell-the-news event.” Spak has a sell rating on Tesla. Long-time Tesla bear Toni Sacconaghi maintained an underperform rating following the print, viewing the risk-reward over the long run as “unfavorable.” His $120 price target implies about 28% downside from Tuesday’s close. “Tesla’s auto business does not appear to have found a bottom in terms of margins, we continue to expect little to no growth in 2024 and 2025, and believe that in general growth stocks only work when they grow,” he wrote. TSLA YTD mountain Shares this year To be sure, some firms reiterated their support for the EV company following the report. Piper Sandler’s Alexander Potter upped his price target to $300 from $205 a share, citing expectations for a faster-than-expected rollout of full self-driving (FSD) capabilities. Baird’s Ben Kallo also suggested that investors utilize the pullback to “buy the dip” before the company’s October Robotaxi event. “We reiterate our belief that TSLA remains very well positioned longer term, and FSD and Robotaxi impact will be critical value drivers,” said Stifel’s Stephen Gengaro.
