Tesla Inc TSLA’s automotive gross margins are the headline takeaway from the electric automaker’s second-quarter financial results for Street analysts.
Here’s what analysts said about margins and upcoming catalysts.
The Tesla Analysts: Bank of America analyst John Murphy reiterated a Buy rating on Tesla and lowered the price target from $260 to $255.
Needham analyst Chris Pierce maintained a Hold rating.
Goldman Sachs analyst Mark Delaney maintained a Neutral rating and lowered the price target from $248 to $230.
Stifel analyst Stephen Gengaro reiterated a Buy rating and $265 price target.
Piper Sandler analyst Alexander Potter reiterated an Overweight rating and raised the price target from $205 to $300.
Cantor Fitzgerald analyst Andrew Sheppard reiterated an Overweight rating and $230 price target.
RBC Capital analyst Tom Narayan reiterated an Outperform rating and $227 price target.
Guggenheim analyst Ronald Jewsikow reiterated a Sell rating and $134 price target.
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Bank of America On Tesla: The electric vehicle company has several catalysts ahead after the second-quarter earnings report, Murphy said.
Among the key upcoming events are the Robotaxi Day in October, new product launches, potential licensing of FSD and realized cost savings, the analyst said.
"Unsurprisingly, TSLA Noted that 2024 unit growth is likely to be much slower than the 38% YoY growth in 2023 as the development of its next gen vehicle," Murphy said.
The analyst said the message for Tesla going forward is clear: the company has enough capital for its product roadmap and continues to focus on reducing costs through manufacturing and operations.
Needham On Tesla: Electric vehicle adoption is showing improved growth and optimism, Pierce said in a new investor note.
"We remain lukewarm on TSLA-specific demand given consistent financial sacrifices being made to drive unit growth, with our auto gross margins ex regulatory credits estimates moving lower post results," the analyst said.
Tesla's second half of 2024 could see modest growth for delivery figures given increased competition and difficult comparables from last year, he said.
"Lower-priced offerings in 1H25 will drive a return to higher growth rates."
Tesla stock trades at a high valuation given optimism for FSD and Optimus, Pierce said.
"TSLA's valuation premium was easier to justify when looking at its margins on an absolute level vs. peers.”
Goldman Sachs On Tesla: Margins were a key item in the quarter that led to Delaney maintaining a Neutral rating and lowering Goldman’s price target.
"The underlying gross margin in Tesla's auto business was weaker than we had expected and below consensus, with headwinds from both price/incentives and cost qoq," Delaney said.
Tesla's automotive non-GAAP gross margin was 14.6% in the quarter, below consensus estimates in the 16% range and below 16.4% in the first quarter and 18.1% in the second quarter of 2023.
"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 weighing on margins."
Stifel On Tesla: The company's second quarter had a mixed bag of positives and negatives and shares could continue trading lower after recent strength, Gengaro said in an investor note.
The big negative in the quarter that bears will focus on is automotive margins that were hurt by lower selling prices and new financing efforts, the analyst said.
Positives in the quarter for the analyst were strong energy generation and storage revenue, continued progress on Full Self Driving and plans for lower priced models being on track for the first half of 2025.
"We reiterate our belief that TSLA remains very well positioned longer term, and FSD and Robotaxi impact will be critical value drivers," Gengaro said.
The analyst said Tesla is well positioned for "robust multi-year growth" in 2024 through 2027 and beyond.
Piper Sandler On Tesla: While automotive gross margins get the headlines, Potter said they shouldn't matter in the context of Tesla's wider ambitions of self-driving software and artificial intelligence.
"TSLA's after-hours weakness likely reflects and unexpectedly large q/q decline in automotive gross margin," Potter said.
The analyst raised the price target due to full-self driving comments being positive and the timeline accelerated.
"Though we're boosting our FSD forecast, we're nowhere close to as bullish as Elon Musk."
Cantor Fitzgerald On Tesla: Robotaxis, FSD and new vehicle models were key items from the quarter for Sheppard.
The analyst doesn't expect robotaxis to launch until 2027 or after, but highlighted the importance of the segment.
"We do expect it to be a meaningful business segment for the company over the long term," Sheppard said.
Sheppard said revenues from FSD and robotaxis are fundamental to the bullish thesis on Tesla for the long term.
"We continue to believe Tesla benefits from future upside from its Full Self-Driving software (plus upcoming Robotaxi segment), the introduction of lower-priced models, a global manufacturing footprint with economies-of-scale, and the industry's largest Charging Infrastructure."
RBC On Tesla: The electric vehicle company’s discounts on EV models during the quarter pressured automotive margins, Narayan said.
"We would expect shares to trade lower on the Auto gross margin ex-credits, especially considering the tremendous run the stock has had in the past month," the analyst said.
The analyst said commentary on robotaxis by Tesla management was "high level in nature." Narayan said he worries about Tesla being able to secure regulatory approvals for the segment, adding that the timeline is potentially unrealistic.
Guggenheim On Tesla: The second quarter had several key negatives and some forward-looking positives, Jewsikow said, noting "the realities of today vs. the dreams of tomorrow" for Tesla.
The headline negative was weak gross margins, the analyst said. Other negatives highlighted by the analyst are EU tariffs, the Model 3 refresh backlog being exhausted and negative demand in the second quarter.
"We expect more discounting to be required to hold deliveries flat vs. 2Q as demand elasticity trends continue to skew negative," Jewsikow said.
Tesla's new affordable models being on track for 2025 could be "the dreams of tomorrow," Jewsikow said.
"We believe a reveal alongside the Robotaxi event is possible."
TSLA Price Action: Tesla shares are down 10.2% to $221.26 on Wednesday versus a 52-week trading range of $138.80 to $278.98.
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Photo courtesy of Tesla.
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