Tesla’s (NASDAQ: TSLA) journey to 2024 has been anything but smooth. We have factory closings, transportation issues, and some serious competition holding Tesla back, especially in China. However, Elon Musk’s unwavering commitment to expanding Tesla’s EV lineup has kept the company on track. The recent release of Tesla’s T2 production and delivery report has everyone talking. While the numbers show a decline compared to 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 beat delivery expectations in a difficult environment, along with its strong brand and leadership in EV technology, suggests potential for continued growth.
T2 Key points of delivery and production
Tesla managed to produce around 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 hitting customer roads. This marks a 4.8% year-over-year drop in shipments and a 14% drop in production compared to the same period in 2023.
As expected, the Model 3 and Model Y were the stars of the show, taking the lion’s share of production at 386,576 units and deliveries at 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 about 439,302 vehicles, so the company’s performance was a welcome surprise. The news sent Tesla shares up 10% to $231.26, despite falling about 7% for the year.
In just three trading days, from July 1st to July 3rd, Tesla shares soared 23%. That’s right, nearly a quarter of the company’s value was added in just 72 hours, and the stock has risen quite a bit in recent days.
What’s even more impressive is that this increase has completely erased Tesla’s year-to-date losses. The stock is now up 1.8% for the year, a far cry from where it was just two weeks ago.
However, it’s important to note that even with this latest drop, Tesla is still trading at a significant premium compared to other automakers. Its P/E ratio of 64.3x is miles higher than that of General Motors (NYSE: GM) (5.7x) and Ford (NYSE:F) (13.3x), indicating that a large increase has already been built into the stock price. The next quarter will be crucial in determining whether Tesla can maintain this momentum and justify its lofty valuation.
Tesla’s strategic challenges and responses
Tesla is feeling the heat from competition, especially in China. BYD (OTC: BYDDF), their biggest rival, sold about 426,000 pure electric vehicles in the second quarter, short of Tesla’s 443,956 deliveries—a gap of just 17,956 units. And it’s not just BYD; other Chinese manufacturers such as Geely (OTC: GELYF) are also upping their game, with Geely sales up 41% in the first half of 2024.
In response, Tesla has aggressively cut prices since early 2023, which has helped maintain sales volume but also narrowed profit margins. Automotive gross margin 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 a fire at their German factory and transportation disruptions due to the Red Sea unrest, contributing to a 14% year-over-year decline in second-quarter output.
Despite these setbacks, Tesla isn’t just playing defense. Elon Musk has plans to accelerate mass production of affordable electric vehicles, which could be launched in the first half of 2025. This could be a game changer to reach a wider market. Additionally, Tesla’s energy storage business is booming, with first-quarter revenue reaching a record $1.64 billion and energy deployments reaching 4.1 GWh.
Tesla is also investing heavily in AI and robotics, nearly doubling its 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 (its market cap is currently around $800 billion).
What’s next for Tesla and its investors?
There are several key events coming up that could significantly affect Tesla’s future. First, the second quarter earnings report on July 23 will give us a detailed look at their financial performance. Analysts expect revenue to reach $23.83 billion. They also forecast earnings per share (EPS) of $0.60, with a range of $0.41 to $0.87. This represents a significant improvement from the previous quarter’s EPS of $0.45. If Tesla’s revenue growth turns positive in the third quarter, it would mark a major recovery milestone.
Then there’s Robotaxis Day on August 8, which could be a big deal for Tesla’s autonomous driving ambitions. However, analysts have mixed views on Tesla’s stock. Wedbush’s Dan Ives is bullish, raising his price target to $300, believing the worst is behind Tesla and that future innovations like Robotaxi could fuel growth.
On the other hand, Wells Fargo’s Colin Langan is cautious, recommending selling Tesla shares because of concerns about declining 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, pointing to Tesla’s impressive energy storage deployments as a key factor.
Is Tesla stock a buy, according to analysts?
According to recent analyst ratings, Tesla shares have a consensus rating of Hold. Of the 35 analysts covering the stock, 13 rate it a Buy, 14 a Hold and eight a Sell. TSLA stock’s average price target of $184.41 implies a potential downside of about 27.1% from the current price.
After all
In conclusion, Tesla’s Q2 delivery report was a mixed bag. While the company beat estimates, shipments still fell year over year. The market has reacted positively, but analysts are divided about the future of the stock. Some believe the worst is over for the company, while others remain cautious about competitive pressures 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 a compelling investment. The upcoming Q2 earnings report on July 23 and Robotaxis 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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