Tesla stock fell as much as 9% in pre-market trade Wednesday following the softer-than-expected earnings report. In response to this news, analysts at Cantor Fitzgerald and New Street Research slashed their ratings on TSLA to Neutral, citing valuation and margin concerns.
Analysts at Cantor Fitzgerald downgraded Tesla (NASDAQ:TSLA) stock on near-term valuation concerns, “given the recent run-up in the share price.” At the same time, the financial services firm lifted its price target to $245 from $230.
They also raised their Tesla revenue estimate for the fiscal year 2024 (FY24) to $101.2 billion from the previous $100.6 billion, driven by an increased projection for energy storage and deployment.
Similarly, New Street Research analysts argue that “margins will take time to recover,” hence the downgrade move.
“We see limited (and unreliable) valuation upside, and limited risks of material positive revisions on that time horizon. Next inflection in the stock unlikely in the next 12 months,” they said.
Tesla reported Q2 adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion. This fell short of Wall Street’s EPS estimate of $0.61 but exceeded the expected revenue of $24.33 billion.
The earnings were affected by a decline in automotive sales, which dropped to $18.53 billion from $20.42 billion a year earlier.
The EV giant delivered 443,956 electric vehicles during the quarter, marking a 5% decrease compared to the same period last year.
Long-term, Cantor analysts said they remain confident that Tesla stands to benefit from future gains due to its Full Self-Driving (FSD) software, the forthcoming RoboTaxi segment, the introduction of lower-priced models, a global manufacturing footprint with economies of scale, and the industry’s largest charging infrastructure.
“We also believe TSLA will benefit from an acceleration of AI, software, and fleet-based profits over the medium term to longer-term,” they wrote.
“Separately, we are encouraged by Elon’s comments on the 2Q24 call in which he disclosed that there are “a few OEMs interested in licensing FSD,” although the company did not disclose additional details,” analysts added.
