Tesla plunges 9% in pre-market trading! Musk's "pie in the sky" strategy fails, Wall Street focuses on profit margin issues
After Tesla announced disappointing second-quarter results, its stock price plummeted by 9%. Wall Street is focusing on the issue of profit margins, with Tesla's gross margin declining due to incentive measures and slowing growth of the Cybertruck. Despite this, analysts remain optimistic about Tesla's future, believing that autonomous driving, robotaxis, and artificial intelligence will drive Tesla's growth. Analysts have downgraded their ratings on Tesla, but some have also maintained or reiterated their ratings. This news falls under company financial information
Zhitong Finance APP learned that after Tesla (TSLA.US) announced disappointing second-quarter results, its stock price came under pressure. As of the time of publication, the stock plummeted by 8.75% in pre-market trading to $224.82, close to the level at the beginning of the year. CEO Elon Musk stated during the earnings call that discounts in the electric vehicle industry have posed challenges for Tesla, but he remains confident in autonomous driving and the large robotaxi fleet. Nevertheless, investors are now focusing on the weak profit margins.
Bank of America lowered Tesla's earnings per share expectations due to a decline in gross margin in the second quarter, mainly attributed to incentive measures (low-rate financing) and the slowdown in Cybertruck growth. Analyst John Murphy mentioned that as competitors delay their electric vehicle production targets, the strengthening of Tesla's regulatory credits in dollars may continue to offset pressure on profit margins.
Bank of America reiterated a "buy" rating on Tesla citing future catalysts including the robotaxi event in October, potential approval for FSD, new product launches, and achieving cost savings.
Wedbush Securities analyst Dan Ives did not panic about Tesla's soft profit margins. He emphasized, "In our view, the next phase of Tesla's growth story will revolve around autonomous driving, robotaxis, and artificial intelligence, a vision that is now within reach."
Needham reiterated a "hold" rating on Tesla. Analyst Chris Pierce stated, "Given the ongoing financial sacrifices made to drive sales growth, we remain cautious on specific Tesla demands, and we have lowered our estimates for automotive gross margins excluding regulatory credits following the earnings release."
Cantor Fitzgerald downgraded Tesla from "buy" to "neutral" based on valuation.
Evercore ISI maintained a "market perform" rating on Tesla, despite noting disappointing gross margin trends in the second quarter without credits. Analyst Chris McNally expects investors to focus on this "messy" quarter. He also warned that Tesla has set very high standards for a significant increase in profit margins in the near term.
According to TipRanks data, overall, Wall Street analysts rate Tesla as "hold" with an average target price of $213.92, 13% lower than the current level.
