Tesla (TSLA) Gets Bullish Forecast from Deutsche Bank Ahead of Q2 Earnings
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Yu maintains a Buy rating on TSLA stock and a price target of $345, implying 4.7% upside potential from current levels.
Tesla's Q2 Results Are Expected to Shine
Tesla is scheduled to report its second-quarter fiscal 2025 results after the market closes on July 23. The Street expects Tesla to report adjusted earnings per share (EPS) of $0.40 on sales of $22.42 billion. For Q2, Yu now expects sales of $22.2 billion, slightly below consensus estimates. Additionally, Yu projects that automotive gross margins will improve to 14% in Q2, excluding credits, up from 12.5% in Q1. For fiscal 2025, he has raised his automotive gross margin projections to 13.8%.
For reference, Tesla reported adjusted EPS of $0.52 on sales of $25.50 billion in Q2FY24. The downward trend in expectations reflects growing concerns about Tesla's declining EV sales and intense competition from domestic players in China. Tesla has missed earnings expectations in six out of the last eight quarters.
Yu Is Optimistic About Tesla's Affordable EVs
CEO Elon Musk has been touting the development of a low-cost EV for years, with several analysts expecting it to be launched in the first half of 2025. However, Yu believes that Tesla could roll out the affordable EV soon, potentially boosting deliveries in Q4 of this year.
For the full year 2025, Yu expects total Tesla deliveries to reach 1.58 million units, down nearly 12% year-over-year and below the consensus estimate of 1.62 million units. Currently, Yu includes only 25,000 units of the yet-to-be-launched Model Q series in the total delivery forecast, calling this estimate the 'key swing factor' for Q4.
Yu is also optimistic about the launch of Tesla's new six-seater EV, the Model Y Long, this fall in China. The Model Y L reportedly has a six-inch longer wheelbase, allowing for larger three-row passenger seating with six seats. In December last year, after meeting with Tesla's top executives, Yu predicted that Tesla would launch Model Q in the first half of 2025. He also cited the price of the affordable EV as less than $30,000, positioning it to compete effectively with lower-priced EVs from Volkswagen (VOW3) and BYD (BYDDF).
Tesla's H2 Marked by Robotaxi and Robotics Advances
Tesla's Q2 deliveries of 384,000 units exceeded Deutsche Bank's internal delivery forecast, backed by solid performance in the U.S. and international markets, even as China lagged. However, Yu believes that looking ahead, Tesla's robotaxi and robot businesses will be key value drivers for the company.
Tesla launched its autonomous robotaxi service in Austin, Texas, on June 22, and has already started expanding service areas in the region. Yu expects Tesla to deploy a fleet of 1,000 robotaxis in the next six to nine months, with services expanding to San Francisco, Phoenix, and Miami.
Is TSLA stock a Buy, Hold, or Sell?
On TipRanks, TSLA stock has a Moderate Buy consensus rating based on 13 Buys, 13 Holds, and eight Sell ratings. Also, the average Tesla price target of $298.93 implies 9.3% downside potential from current levels. Year-to-date, TSLA stock has lost 18.4%.
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