Why Next Week's Earnings Call is a Time to Shine for Tesla Stock (TSLA)
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Why Tesla's Stock Swung Wildly in Q2
Tesla investors are accustomed to seeing their shares undergo considerable fluctuations, and Q2 was no exception. The period was a whirlwind for Tesla's stock, driven by a mix of breakthroughs and setbacks. The robotaxi pilot launch in Austin, using Model Ys with Full Self-Driving (FSD) tech, sparked excitement, building some bullish momentum as investors saw a glimpse of a driverless future. Tesla's energy storage business also hit a high note, deploying 9.6 GWh, a record that underscores its growing role in the renewable energy sector. These wins once again fueled the long-lasting narrative that Tesla is not just a carmaker, but a tech and energy juggernaut.
On the other hand, the bearish case did maintain legs after Tesla's core automotive business stumbled. Deliveries fell 13.5% year-over-year to 384,122 vehicles during the second quarter, hit by softening U.S. demand and fierce competition from Chinese EV makers like BYD (BYDDF), which, for context, sold over 4 million units last year.
In the meantime, Musk's political moves didn't help, as his public feud with Donald Trump over a tax-and-spending bill and talk of a new political party stirred boycotts among various buyer groups. Investors, rightfully so, fear that Musk's divided focus could stall Tesla's momentum.
What's Driving Q2 Expectations
Just a week before Tesla's Q2 earnings are released, Wall Street expects the EV giant to report $0.40 per share and $22.7 billion in revenue, a decline compared to last year's EPS of $0.52, reflecting a tough auto market. Deliveries of 384,122 vehicles, though up from Q1's 336,681, mark Tesla's steepest year-over-year drop yet, driven by price cuts of up to $7,500 on Models 3 and Y to counter lost EV tax credits. Yet, the focus is shifting to Tesla's strategic bets, particularly FSD and affordable models.
You may remember that in Q1's shareholder letter, Tesla highlighted record energy storage margins and FSD progress, with Musk noting that unsupervised rides could start in Austin by mid-2025. The Q2 letter should build on this, with the Model Y refresh gaining traction, given China saw a 145% surge in weekly insurance registrations in June.
Tesla is also localizing its supply chains to circumvent tariffs, which should stabilize margins despite the Q1 decline to 16.3%. The earnings call will likely emphasize robotaxis and Optimus robots over raw delivery numbers, so pay close attention to these fronts.
Another area that investors want clarity on is Tesla's affordable vehicle and the regulatory path for FSD. I think management is likely to reaffirm a 20-30% delivery growth target for 2025, despite Q2's lag, leaning on strong sales in China and the hype surrounding robotaxis. If Tesla can demonstrate FSD reliability and cost efficiencies, it could shift sentiment from cautious to confident, even in the face of near-term headwinds.
A Valuation Justified by Autonomy
10.6x this year's expected sales and 173x this year's expected EPS), but its long-term potential in autonomous driving makes it a compelling bet, in my view.
Tesla's camera-based FSD tech, although somewhat controversial for skipping lidar, leads the pack, with its Austin pilot, despite early traffic violations, outpacing rivals like Alphabet's (GOOGL) Waymo in cost efficiency. With plans to expand to California and beyond, Tesla's data-rich AI could unlock the potential for scalable robotaxis, potentially generating billions in revenue by 2026. This is why investors are willing to take a bet on the shares today.
From a financial health perspective, Tesla is also unmatched in the space. With $23.8 billion in net cash, it dwarfs legacy automakers and can free up tons of capital to dominate AI and autonomy. Unlike GM (GM) or Ford (F), which scrapped AV plans and have substantial net debt positions of $131 billion and $115 billion, respectively, Tesla's balance sheet allows it to weather EV slowdowns while investing heavily in technology. Additionally, as TipRanks data indicates, TSLA's energy storage segment is experiencing strong growth multiples, with 9.6 GWh deployed in Q2. This adds a much-needed growth diversifier that serves as a headwind cushion.
The robotaxi market's risks, as well as regulation, competition, and Musk's distractions, are real, and one could argue that for these reasons, the stock should trade at a discount. However, in my view, Tesla's tech edge and financial muscle justify its premium. If FSD delivers, Tesla could redefine mobility, much like it reshaped EVs. For patient investors, the stock's price reflects a rare shot at a transformative future, not just a car company.
Is TSLA a Buy, Sell, or Hold?
Currently, analysts are divided on TSLA, which clearly illustrates the stock's polarizing nature. Tesla carries a Hold consensus rating, based on 13 Buy, 13 Hold, and nine Sell ratings assigned over the past three months. Today, TSLA's average stock price target of $293.38 implies the stock is expected to decline 8.3% over the next twelve months.
Tesla's Long-Term Vision Outshines Near-Term Volatility
While Tesla's recent trading period has been marked by volatility, the company's long-term vision around autonomy, energy, and AI gives it an edge. Despite delivery headwinds and Musk's distractions, I believe the fundamentals, including substantial cash, tech leadership, and strategic execution, justify a Bullish stance. With robotaxis and FSD progress in focus, Tesla's current valuation appears to be a fair entry point for investors betting on the future of mobility.
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