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Recent price weakness in Tesla stock is a buying opportunity: Argus

Published 2024-07-26, 08:24 a/m
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The recent price weakness in Tesla Inc (NASDAQ:TSLA) following its latest quarterly report presents a buying opportunity, Argus analysts said in a Friday note.

“Despite posting a softer-than-expected second quarter, we remain supportive of the company's strategy and believe future prospects remain robust,” analysts wrote.

Among the key reasons behind its bullish thesis is Tesla’s commentary about its plans to start production of a new low-cost affordable EV model, in the price range of $25,000 to $30,000.

“We view this development as a positive step forward that should enable TSLA to maintain, and potentially expand, their EV dominance,” they noted.

Argus believes that despite several near-term industry and operational challenges, Tesla will manage to navigate these issues and maintain its position as the market leader in the EV market.

They also expect the company to benefit from tax credits for EV purchases under last year's Inflation Reduction Act, as well as from increased semiconductor supplies and moderating raw-material cost inflation.

Although EV sales have moderated in recent months both in the U.S. and globally, the investment research firm views the long-term trend for EV sales as strong.

In terms of valuation, analysts find Tesla stock attractive at current levels, emphasizing that it should not be valued as a "plain-old car company" as it encompasses “significantly much more than that.”

"In addition to manufacturing EVs, Tesla is also dedicated to energy storage, self-driving technology, and advanced robotics,” analysts added.

On July 23, after the closing bell, Tesla reported an adjusted Q2 2024 net profit of $1.812 billion or $0.52 per diluted share, down from $3.148 billion or $0.91 per diluted share in the same quarter last year.

Earnings, alongside auto margins, fell short of expectations, sending the company’s shares tumbling 12% in the after-hours trade.

Argus lowered its 2024 EPS estimate for Tesla to $2.45 from $2.57, which is still above the current consensus projection of $2.35. The firm also cut their 2025 EPS estimate to $3.32 from $3.51 “to reflect weaker demand trends in the EV industry, which we believe is a temporary situation.”

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