You’re here (NASDAQ:TSLA) Tesla’s journey through 2024 has not been smooth sailing. We’ve had to deal with factory shutdowns, shipping issues, and serious competition coming at Tesla, especially in China. Yet, Elon Musk’s unwavering commitment to expanding Tesla’s EV lineup has kept the company on track. The recent release of Tesla’s second-quarter production and delivery report has been generating a lot of buzz. While the numbers show a decline from last year, they still managed to beat analyst expectations, giving the stock a much-needed boost.
Personally, I am bullish on Tesla stock. While the company faces significant challenges, its ability to exceed delivery expectations in a difficult environment, combined with its strong brand and leadership in electric vehicles, suggests continued growth potential.
Second Quarter Delivery and Production Highlights
Tesla managed to produce about 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 making their way to customers’ driveways. That’s a 4.8% decline in deliveries year-over-year and a 14% decline in production compared to the same period in 2023.
As expected, the Model 3 and Model Y were the stars of the show, accounting for the lion’s share of production with 386,576 units and deliveries with 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 being down about 7% for the year.
In just three trading days, from July 1 to July 3, Tesla shares jumped 23%. In fact, nearly a quarter of the company’s value was added in just 72 hours, and the stock has risen even more in recent days.
What’s even more impressive is that this rally has completely erased Tesla’s year-to-date losses. The stock is now up 1.8% for the year, well below where it was just two weeks ago.
It is important to note, however, that even with this recent decline, Tesla still trades at a significant premium to other automakers. Its price-to-earnings ratio of 64.3x is well above that of General Motors (New York Stock Exchange: GM) (5.7x) and Ford (New York Stock Exchange: F) (13.3x), indicating that strong growth is already priced into the stock. The next few quarters will be crucial to determine whether Tesla can maintain this momentum and justify its high valuation.
Tesla’s Challenges and Strategic Responses
Tesla is feeling the pressure of competition, especially in China. BYD (OTC:BYDDF), their biggest rival, sold about 426,000 pure electric vehicles in the second quarter, slightly less than Tesla’s 443,956 deliveries, a gap of just 17,956 units. And it’s not just BYD; other Chinese automakers like Geely (OTC: GELYF) are also stepping up their game, with Geely’s sales jumping 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 squeezed profit margins. Its 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 an arson attack at its German factory and disruptions to shipments due to the Red Sea riots, which contributed to a 14% decline in second-quarter production compared to the previous year.
Despite these obstacles, Tesla is not content to play defense. Elon Musk plans to accelerate mass production of affordable electric vehicles, which could launch in the first half of 2025. This could be a game changer for reaching a broader market. In addition, Tesla’s energy storage business is thriving, with record revenue of $1.64 billion in the first quarter and energy deployments reaching 4.1 GWh.
Tesla is also investing heavily in artificial intelligence and robotics, nearly doubling its AI training capacity. Elon Musk is so confident in his Optimus humanoid robots that he believes 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 have a significant impact on Tesla’s future. First, the Q2 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 is 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 milestone in the recovery.
Robotaxi Day on August 8 could mark a turning point in Tesla’s autonomous driving ambitions. Still, analysts have mixed views on Tesla stock. Wedbush’s Dan Ives is bullish and raises his price target to $300, saying the worst is behind Tesla and future innovations like Robotaxi could drive growth.
Wells Fargo’s Colin Langan, meanwhile, is cautious and recommends selling Tesla shares due to concerns about slowing delivery 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, noting Tesla’s impressive energy storage deployments as a key driver.
Is Tesla Stock a Buy, According to Analysts?
According to the latest analyst ratings, Tesla stock has a consensus rating of Hold. Of the 35 analysts covering the stock, 13 rate it as a Buy, 14 as a Hold, and 8 as a Sell. The average price target for TSLA stock of $184.41 implies a downside potential of ~27.1% from the current price.
The essential
In conclusion, Tesla’s second-quarter delivery report was mixed. While the company beat expectations, deliveries still fell from a year earlier. The market reacted positively, but analysts are divided on the stock’s future. Some believe the worst is over for the company, while others remain cautious about competitive pressures and potential margin squeezes.
Despite these challenges, I am 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 Robotaxi Day on August 8 could provide more clarity and potentially send the stock higher. As always, do your homework and invest wisely.
Disclosure