The stock was down about 8% on Thursday.
Tesla (NASDAQ:TSLA), the leading EV manufacturer, saw its stock drop more than 8% on Thursday after the car market posted disappointing results in its second quarter.
It did not come as a huge surprise, as Tesla sales for the second quarter had already been reported, and they were not great. Tesla saw a 13.5% sales decline in Q2 to 384,122, which was below analysts’ expectations.
But the Q2 earnings release Wednesday after the market closed gave a fuller picture, and it wasn’t any better. Total revenue sank 12% to $22.5 billion year-over-year, which fell short of estimates of $22.7 billion.
Automotive revenue dropped for the second straight quarter, sinking 16% to $16.7 billion.
Net income fell 16% to $1.17 billion, while earnings were off 18% to 33 cents per share. Adjusted earnings were down 23% compared to the same quarter last year to 40 cents per share. That also missed estimates of 43 cents per share.
After a terrible start to the year, Tesla stock bounced back over the last few months. But this setback has sent the price back to $304 per share, down 25% YTD. However, its lows of around $23 per share back in April.
Transition period for Tesla
In the second quarter earnings report, Tesla officials called Q2 a seminal point in Tesla’s history – the beginning of its transition from “leading the electric vehicle and renewable energy industries to also becoming a leader in AI, robotics and related services.”
The company launched its robotaxi service in Austin, Texas, this past June, and sees autonomous vehicles as a major revenue driver. But until then, CEO Elon Musk said on the earnings call that things could be bumpy.
“Well, we’re in this like weird transition period where we will lose a lot of incentives in the U.S. We have incentives actually in many other parts of the world, but we’ll lose some in the U.S.,” Musk said on the earnings call, per Seeking Alpha. “Look, we’re still a bit at the relatively early stages of autonomy. On the other hand, autonomy is most advanced and most available from a regulatory standpoint in the U.S. So, I mean, does that mean like we could have a few rough quarters? Yes, we probably could have a few rough quarters. And I’m not saying we will, but we could, Q4, Q1, maybe Q2.”
But Musk added that once the company gets autonomy at scale in the second half of 2026, he would expect Tesla’s economics to be “compelling.”
Analysts are cautious
Tesla stock has a median price target of $330 per share, which would suggest an 8% return after today’s selloff.
That target could move lower, as a few analysts expressed concerns about Tesla stock in the near term. UBS analysts said the end of the EV credits in the U.S. will be a headwind, representing a drag on demand. At the same time, Tesla is facing slowing demand in Europe and China, according to the Fly.
Analysts at Barclays noted that the gulf between Tesla’s actual fundamentals and its share price is widening. The stock is still wildly overvalued with a P/E ratio of 190, which is not sustainable with declining sales.
For these reasons, Tesla is just way too overvalued to consider right now.
