Proactive Investors - Tesla Inc (NASDAQ:TSLA) shares tumbled more than 10% to about $220 on Wednesday morning after the electric vehicle maker’s second quarter earnings report prompted a selloff of the stock.
Notably, lower-than-expected profits and a 200 basis points auto gross margin miss spooked investors.
Analysts at UBS were also unimpressed with Tesla’s report, reiterating their ‘Sell’ rating and awarding the stock a $197 price target.
The bank’s analysts believe the stock is being priced not on its auto or energy units but on autonomy and AI, which they does not believe will deliver any payoff in the near term.
“These future initiatives are difficult to value, but the current stock price already assigns a hefty value to these ventures,” they wrote. “The realities of the business fall back to (mostly) auto.”
They see only about $74 per share attributed to Tesla’s core auto and energy offering “so we believe there is already an expensive option built into Tesla shares.”
“To us, over the near term we see more downside to the stock if/when confidence in these initiatives waver, versus upside from likely only incremental data points supporting the long-term bull case,” the UBS analysts wrote.
Analysts at Wedbush upheld their more bullish stance, reiterating their ‘Outperform’ rating and $300 price target on Tesla post-earnings.
“The bull/bear debate on Tesla will rage on today as the company delivered mixed results with auto gross margins (ex-credits) missing the Street by 200 basis points as cuts/average selling price continue to pressure this number, while on the other hand, EV demand metrics are showing signs of momentum into the second half of the year and the AI story is now on the doorstep,” they wrote.
While the margin weakness weighed on the stock on Wednesday, Wedbush’s analyst see the next phase of the Tesla growth story around autonomous, Robotaxis, and AI playing out.
“Tesla is a robotics and AI play and we believe potential investments into the xAI company under [CEO Elon] Musk could also be in the future and a smart move along with this broader AI/Robotaxi strategy set to be unveiled October 10th,” they wrote.
Further, a new sub $30,000 vehicle set for the first half of 2025 is set to be key in driving major volumes to Tesla over the coming years, the analysts believe.