Tesla Stock Outlook After Q2 Earnings: ‘The Present Is Imperfect, the Future Uncertain’

Tesla (TSLA) shares fell more than 12% Wednesday after reporting second-quarter earnings, as the Elon Musk-led company reported mixed results. While the stock has rebounded somewhat from its lows, it has turned negative once again this year after previously trading in the red in the first half of 2024.

Here’s the outlook for Tesla stock following its second-quarter earnings report and the key risks and opportunities investors should watch out for.

Why did TSLA stock fall after Q2 earnings report?

Tesla’s second-quarter revenue rose to a record level and beat estimates, largely thanks to its still-fast-growing energy segment. Tesla’s battery storage deployments hit record levels in the second quarter, and the energy segment — which Musk once said could become as big as the auto business — posted record profits in the quarter.

The company’s regulatory credits have also hit record levels, thanks to the slow growth of electric vehicles (EVs) by traditional automakers. Those credits are feeding into Tesla’s bottom line and helping boost its profits.

But that was about all the good news Tesla had for investors in its second-quarter report and earnings call. As I noted in my pre-earnings analysis , the likelihood of fireworks on Tesla’s earnings call was pretty low. That, combined with the stock’s impressive rally last month, set the stage for a massive sell-off after the results.

Tesla has no growth drivers in the short term

Notably, Tesla’s automotive gross margin – once the envy of other automakers – fell to a five-year low of 14.6% in Q2, well below the 16.3% analysts were expecting. The lower-than-expected margins meant Tesla missed consensus earnings per share (EPS) estimates, despite a large contribution from regulatory credits.

While it may sound ironic, Musk began his comments during the Q2 earnings press conference by blaming other automakers for cutting prices on their electric vehicles, which he said “made things a little harder for Tesla.” In reality, however, other automakers were simply reacting to Tesla’s numerous price cuts over the past two years.

As it stands, Tesla’s automotive business lacks near-term growth drivers. The company’s deliveries fell year-over-year in the first half of the year, and it seems unlikely that the situation will reverse much in the second half of the year, or in 2025.

An upcoming low-cost platform could help speed up Tesla deliveries, but that looks more like a 2026 story — even if deliveries of the model are set to begin in the first half of 2025.

As for margins, there is no sign of respite in the next few quarters either – unless, of course, Tesla takes the lead again, this time by raising car prices.

In summary, the automotive industry, which currently generates the majority of Tesla’s revenues, is not expected to improve its situation any time soon.

Musk believes autonomy and AI products are key to Tesla’s valuation

Musk believes that progress in autonomy is key to Tesla’s valuation, and during the Q2 earnings conference call, he unequivocally reiterated his stance, saying, “For anyone who doesn’t believe Tesla would sell vehicle autonomy, I recommend they stay away from Tesla products.”

The company has formally delayed the robotaxi’s launch to October 10, which Musk said was necessary to “make some important changes” and also because Tesla wants to show “a few other things” at the event. Musk — who has a knack for coming up with big numbers — said Tesla’s robotaxi fleet will eventually surpass 20 million, even if the product launch is delayed by years. Incidentally, Musk once said Tesla’s EV production capacity would reach 20 million units by 2030 — a goal that seems out of reach given the current situation.

Musk, who echoes perma-bull Cathie Wood’s sentiment that Tesla’s market cap could grow to $5 trillion thanks to autonomous cars and robot taxis, believes the humanoid Optimus could be the company’s biggest opportunity and help it achieve a “valuation several times greater.” Tesla, however, plans to start selling the Optimus to external customers only in 2026, and until then it will use it internally.

In summary, while Optimus, the Dojo supercomputer, full autonomy, and robotaxi sound fantastic and could drive long-term growth, none of them are near-term drivers for TSLA stock, especially given Tesla’s track record of meeting its product deadlines.

Tesla Stock Forecast

Overall, I see Tesla as a story of “imperfect present, uncertain future.” While the current business is still limping along, future products are still at least a few quarters away — and with a hint of uncertainty about their timing, as well as their market potential. Commenting on Musk’s comments during the Q2 earnings call, Deepwater Asset Management’s Gene Munster said that while he ticked the right boxes, “those boxes won’t start ticking for a while.”

Following Tesla’s second-quarter report, New Street and Cantor Fitzgerald downgraded the stock, while Barclays, Citigroup and Goldman Sachs lowered their price targets. However, Truist and Piper Sandler raised their price targets for TSLA. Overall, Tesla has a consensus rating of “Hold” from analysts and is trading above Wall Street’s average price target.

All things considered, I’d pick up Tesla here after the earnings crash, but I’d wait for a better price before diving in. While it remains one of the most significant companies of our time, the risk-reward doesn’t look too promising to go all-in at these levels.

On the date of publication, Mohit Oberoi held a position at: TSLA. All information and data in this article is for informational purposes only. For more information, please refer to Barchart’s Disclosure Policy here.