Tesla's Stock Pulls Back After Q2 Earnings: What Do Analysts Think?

Tesla Inc TSLA shares traded lower on Tuesday after the company’s second-quarter earnings beat failed to wow the market.

Tesla reported adjusted second-quarter EPS of $1.45 on revenue of $11.96 billion. Both numbers exceeded analyst estimates of 98 cents and $11.3 billion, respectively. Revenue was up 98% from a year ago.

Tesla’s GAAP net income for the quarter topped $1 billion for the first time and was up nearly tenfold from a year ago. Only $354 million of that income came from regulatory credit sales. Tesla also reported a $23 million impairment related to the value of its Bitcoin BTC/USD holdings.

Tesla’s automotive gross margins were 28.4%, their highest level of the past four quarters.

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Priced To Perfection: CFRA analyst Garrett Nelson said Tesla’s quarter was impressive, but there is already a lot of optimism priced into the stock amid a climate of rapidly growing electric vehicle competition.

“TSLA said it remains on track to build its first vehicles in Berlin and Austin in 2021, which was positive given recent chatter of potential delays in Germany,” Nelson wrote in a note.

Needham analyst Rajvindra Gill said Tesla shares are already priced to perfection, which could explain the stock’s weakness on Tuesday.

“Tesla's ‘priced to perfection’ valuation is hard for us to justify, even with more positive recent Results,” Gill wrote.

Morgan Stanley analyst Adam Jonas said the quarter likely didn’t change the narrative for bulls or bears, and Tesla is still not a value stock priced at an enterprise multiple of 70x.

“Tesla is not only among the fastest growing auto companies in the world, it is also one of the most profitable,” Jonas wrote.

Impressive Margins: Bank of America analyst John Murphy said Tesla is executing well and benefiting from auto industry price dynamics.

“While it remains to be seen whether or not TSLA will be dominant over the long-term, we continue to believe that as long as the company can fund outsized growth (new model introductions, capacity installation, etc.) with little to no cost of capital, as it has over the past decade, its high stock price will be justified,” Murphy wrote.

Wells Fargo analyst Colin Langan said auto gross margins were impressive, but they may not last.

“We see auto margins moderating in Q3/Q4 due to rising raw mat costs and mix dilution as the lower priced Model Y SR launches in China,” Langran wrote.

RBC Capital Markets analyst Joseph Spak said Tesla’s use of China as a global export hub is driving margins higher.

“However, the lift from China as an export hub does have us thinking about some potential margin pressure once the Berlin factory opens (Germany is a higher cost country) unless additional cost reductions come through (structural pack, new castings, logistics),” Spak wrote.

EV Market Leader: Mizuho analyst Vijay Rakesh said Tesla and Nio Inc NIO are well-positioned to dominate the high-growth EV market while legacy automakers struggle to transition.

“We see the global EV market growing at a long-term 30% CAGR, with Tesla driving a significant differentiation with its in-house battery, hardware and self-driving software, leading to sustained market leadership,” Rakesh wrote.

Wedbush analyst Daniel Ives said Tesla has clear momentum heading into the second half of 2021 despite the ongoing chip shortage.

“In 2Q, Tesla had its back against the wall (chip shortage, China PR/safety issues, competition) and delivered numbers that speak to an EV growth story still in its early innings of playing out,” Ives wrote.

• TSLA Ratings And Price Targets: CFRA has a Hold rating and $675 target.
• Bank of America has a Neutral rating and $800 target.
• Morgan Stanley has an Overweight rating and $900 target.
• Needham has an Underperform rating.
• Mizuho has a Buy rating and $825 target.
• Wells Fargo has an Equal Weight rating and $660 target.
• RBC has a Sector Perform rating and $745 target.
• Wedbush has an Outperform rating and $1,000 target.

Tesla's stock traded down 4% to $630.88 at publication time.