Tesla's second-quarter earnings fell more than 40%, leading to a stock downgrade and several target price cuts. Revenue exceeded expectations at $25.5 billion, fueled by surging regulatory credits, but earnings per share missed predictions, dropping to 52 cents per share. Despite maintaining its outlook and announcing a significant investment in AI and robotaxi technology, Tesla's stock fell over 12% due to concerns about declining margins and a conservative vehicle volume growth rate for 2024. Analysts had mixed reactions, with some highlighting the consistent outlook while others pointed to weak fundamentals.
Kit Norton, Investors Business Daily author, reported, “Following earnings, Cantor Fitzgerald downgraded Tesla to neutral from overweight while lifting the price target to 245 from 230.
The firm wrote that with TSLA up more than 70% in the last three months, it is ‘becoming a bit more conservative on valuation in the near-term.’ Meanwhile, both Goldman Sachs and Citigroup cut Tesla stock price targets. Goldman lowered its price target on Tesla to 230 from 248 and kept a neutral rating on the shares. Citi analyst Itay Michaeli reduced his target price to 258 from 274.” The declines in price targets from analysts significantly contributed to the 12% intraday loss in Tesla's stock. Additionally, Tesla's gross margins fell to 18%, with auto gross margins excluding regulatory credits at 14.6%, well below expectations.
Concerns were raised about the impact of potential policy changes, such as the removal of EV tax credits if former President Donald Trump wins the 2024 election, which could affect Tesla's near-term profits. Despite these concerns, CEO Elon Musk remained optimistic about the future of self-driving technology, the Optimus robot, and the upcoming robotaxi.
He confirmed that the robotaxi event would be postponed to October 10 to allow for important design changes and additional reveals. Despite this positive outlook by Musk, the stock continued to decline, reflecting investor concerns over the company's current financial performance and future growth strategies. Investors should exercise caution moving forward and closely monitor how these developments impact the company's future performance.
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