Wall Street Bullish-Bearish Divide "Growing Bigger", Tesla's Earnings Day Exciting?

The highly anticipated Tesla Q2 financial report is about to be released, and the divergence between the bulls and bears on Wall Street is becoming more pronounced, resulting in a record spread in the average target price given by "buy" and "hold" analysts.

This could mean that Tesla's performance this time may cause a stir in the market. In the past four quarters, Tesla's stock price has on average risen or fallen by 9% after the release of its financial reports.

Since the end of May, Tesla has accumulated a gain of over 55% to $290 per share, increasing its market value by over $30 billion. This euphoric surge has made it difficult for some analysts to maintain their current ratings, leading to revisions in Tesla's target price.

Data from FactSet shows that since the end of May, Tesla's average target price has risen from $190 to about $230, an increase of approximately $40.

On Monday, Colin Langan, an analyst at Wells Fargo, raised Tesla's target price from $170 to $265 and maintained a "hold" rating. At the same time, Ben Kallo, an analyst at Baird, raised Tesla's stock price target from $252 to $300 and gave Tesla a "buy" rating.

Among all the major research institutions and brokerages on Wall Street, the highest target price comes from New Street Research, where analyst Pierre Ferragu has set an extremely high target price of $350 per share.

Overall, the average target price given by "buy" analysts is $300, slightly higher than Tesla's current stock price. The target price given by "hold" analysts ranges from $165 to $265 per share, with an average price of about $215, much lower than Tesla's current stock price.

The spread between the average target prices given by "buy" and "hold" analysts is $85, setting a new recent record.

In May, before the surge in Tesla's stock price, the average target price given by "hold" analysts was close to $180, while the average target price given by "buy" analysts was $240, resulting in a difference of $60.

Currently, Wall Street expects Tesla's second-quarter operating profit to be approximately $2.7 billion, roughly the same as the first quarter, with revenue of $24.8 billion, higher than the first quarter's $23.3 billion.

The second-quarter forecast does not seem exaggerated, especially considering that Tesla delivered over 466,000 vehicles in the second quarter, surpassing the 423,000 vehicles delivered in the first quarter.

Wall Street also predicts that Tesla's second-quarter operating margin will remain within the range of 11%, slightly lower than the first quarter. This may also be a conservative estimate, as analysts do not want to be caught off guard again. Kallo wrote in the quarterly report preview on Monday: "This should be the lowest point of automotive profit margins, but (Tesla's) comments on future price reductions and profit margins will be crucial."

Bulls expect improvement in the second half of the year, but analysts with a "hold" rating are uncertain.

Langan wrote in Monday's report: "Due to continued price reductions and a weak product portfolio, we expect automotive gross (profit) to decline to 17.5%." For comparison, Tesla's gross margin in the first quarter was about 19%.