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Transportation
Jennifer Sor and Grace Kay
Key Updates
- Tesla missed earnings estimates in the second quarter even as revenue grew.
- Elon Musk failed to reassure investors during the analyst call, with the stock falling more than 7% in after-hours trading.
- Musk didn't reveal much about the delayed Robotaxi or the upcoming lower-cost Tesla.
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Tesla's problems are piling up.
During Tesla's analyst call on Tuesday after its second-quarter earnings report, Elon Musk faced questions about the carmaker's aging lineup, the delay of its Robotaxi event, and concerns about the carmaker's AI chip supply.
Tesla missed earnings estimates while reporting better-than-expected revenue in the quarter. Its adjusted earnings margin also dropped from 18.7% to 14.4% year-over-year as the company executed price cuts in an attempt to drive sales amid a challenging demand environment.
Musk had little to reassure investors on Tuesday night, and those eager to hear details about Tesla's upcoming vehicles were likely disappointed.
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The Tesla CEO confirmed Tesla's Robotaxi event had been delayed until October 10, but didn't have much to say on when the first Robotaxi rides on the autonomous service could be expected.
Regulatory approval for the Robotaxi and its unsupervised full self-driving technology will also be a key hurdle for Tesla to overcome. While Musk said he was optimistic Tesla's self-driving efforts would receive regulatory approval — he said he would be "shocked" if the first Robotaxi ride wasn't possible next year — he was unable to give a clear timeline and conceded he tended to be optimistic about them. Musk argued regulators would have a "moral obligation" to approve Tesla's autonomous technology when shown the driving data.
The Tesla CEO also gave vague answers to questions regarding Tesla's updated Roadster and a next-generation, lower-cost vehicle. Musk said the company would unveil its cheaper EV in the first half of 2025, but failed to give any further specifics about the product — which Tesla has been promising for years.
He also faced some tough questions during the call, including about how he makes resource-allocation decisions between his multiple companies.
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Specifically, he was asked about a news report that he had diverted a shipment of Nvidia GPUs originally intended for Tesla to his other ventures, X and xAI. Musk attempted to spin the move as actually beneficial to Tesla, as the carmaker had lacked the infrastructure at the time to use the chips.
But minutes earlier, the Tesla CEO had expressed concern regarding the carmaker's access to Nvidia's AI chips in light of the high demand for them amid the AI arms race, adding that Tesla aims to eventually supplement the chips with its Dojo supercomputer, which is still in the process of being built.
One bright spot was Tesla's energy storage business, which the company revealed set a record during the quarter for profits in the segment. The company also brought in $890 million in revenue from selling regulatory credits to automakers whose fleets didn't meet emissions requirements — a huge increase over last quarter.
Despite Musk's optimism that the company would solve autonomy and eventually achieve a $5 trillion valuation, investors appeared unconvinced.
By the time Musk had signed off from the earnings call, the carmaker's stock had tumbled more than 7% in after-hours trading.
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Musk ends with a question on whether Tesla will be impacted if Trump is elected and the Inflation Reduction Act goes away.
Musk says there will be some impact if the incentives were to end, but it would be more "devastating" for Tesla's competitors.
The Tesla CEO reiterates that the company's value is focused on its efforts toward autonomous cars, and anyone who doesn't think the company will solve self-driving shouldn't own shares.
That was the final question and the call ends. Tesla's stock was down more than 7% in after-hours trading.
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Musk says he doesn't think regulatory approval will be a limiting factor for self-driving cars.
"In our experience, once we demonstrate that something is safe enough or significantly safer than human, we find that regulators are supportive of deploying deployment of that capability," Musk says, adding that he thinks regulators will have a moral obligation to approve Tesla's Full Self-Driving software if the data of miles driven show it is safer than human drivers.
Musk says Tesla is likely to receive regulatory approval in Europe and China by end of the year.
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Tesla's stock is taking a beating during the call.
Shares of Tesla are down more than 6% in after hours trading. Musk is asked about a report that he diverted a shipment of Nvidia GPUs away from Tesla to one of his other ventures.
Musk says the report is old and he did so because there was nowhere for Tesla to plug them into. Diverting the shipment was actually beneficial to Tesla, he argues.
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Musk talks how hard it is to get Nvidia GPUs.
Musk says the demand for the product is so high its "often difficult to get the GPUs." As a result, Musk says Tesla is putting more effort into its Dojo supercomputer, which he hopes will eventually compete with Nvidia.
Musk posted some photos of Dojo on X
Dojo pics pic.twitter.com/Lu8YiZXo8c
— Elon Musk (@elonmusk) July 23, 2024
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Musk dodges question on when the Robotaxi trips will be possible.
Asked when the first Robotaxi trip is possible, Musk says that's basically asking when unsupervised full-self-driving is possible.
Musk says his predictions have been off in the past, but he'd be "shocked if we cannot do it next year."
Musk says he expects production on the updated Roadster will occur next year.
He says Tesla has completed most of the engineering, but there are still some upgrades he wants to make to the vehicle.
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Musk reiterates that Tesla plans to deliver a more affordable model in the first half of 2025.
He doesn't provide any further specifics about what the product will look like.
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Musk says Tesla will host the Robotaxi event on October 10 after its delay.
"We're also going to show off a couple of other things," Musk says.
The Tesla CEO previously said on X that the Robotaxi event had been delayed from August due to some design changes he requested.
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The call kicks off. Elon Musk is on and speaking.
Travis Axelrod, Tesla's new head of IR, officially kicks things off before Musk takes over.
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Tesla investors want to hear about new vehicles.
Some of the top questions going into Tesla's earnings call revolve around new products, according to Tesla's anonymous Q&A forum. Retail investors can submit questions on the forum and vote on their favorite ones.
According to the platform, shareholders want to know about Tesla's timeline for its updated Roadster, as well as the potential for a Tesla van. Another popular question revolves around Tesla's upcoming Robotaxi event.
Musk acknowledged earlier this month that Tesla had decided to delay its Robotaxi event, which was initially set to take place August 8, so that the company could make a design change he requested.
Tesla has yet to provide a new date for the event.
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People will be listening for Elon Musk's comments on AI and Robotaxi, EMARKETER analyst says.
"While Tesla faces headwinds from slowing EV sales, Musk could offset the challenges if he articulates a credible path to monetizing robotaxis and emphasizes the company's focus on AI initiatives, cheaper EVs, and energy division expansion," EMARKETER analyst Jacob Bourn said in a note.
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Tesla’s companywide restructuring and layoffs cost around $622 million.
Tesla said the $622 million also included some other unspecified costs.
In April, Musk announced more Tesla layoffs, telling staff that the company planned to reduce its total workforce by more than 10%. The company instituted a series of layoffs over the course of several weeks.
Tesla has since posted hundreds of job openings on its careers page.
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Tesla stock down 4% after missing earnings for the fourth quarter.
Tesla stock slid as much as 4% as investors digested earnings results that missed expectations.
The stock was trading at $240.25 in aftermarket hours, lower by about 2.5% from its closing price of $251.51.
Investors will now be tuned into the earnings call for updates on hotly anticipated initiatives including the company's Robotaxi and full self-driving tech.
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Tesla posts earnings results.
- Adjusted earnings per share: $0.52 vs. estimate of $0.60
- EPS: $0.42 vs. $0.78 year-over-year
- Revenue: $25.50 billion vs. estimate of $24.63 billion
- Gross margin: 18% vs. estimate of 17.4%
Operating income: $1.61 billion, -33% y/y, vs. estimate of $1.81
billion
Source of analyst estimates: Bloomberg
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Morningstar: Stock is likely overvalued.
Tesla's stock price is likely around 20% above its fair value, Morningstar analysts estimated.
"Accordingly, we recommend investors wait for a larger pullback and for shares to trade below our fair value estimate with a solid margin of safety before we recommend a good entry point into the stock," Seth Goldstein, a stock strategist at Morningstar, said in a recent note.
The firm maintained its three-star rating on Tesla stock and assigned a fair value of $200 per share, implying 20% downside.
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CFRA Research: Robotaxi could be more important than earnings.
Tesla's Robotaxi Day will likely outshine the results of its upcoming earnings report, CFRA senior stock analyst Garrett Nelson said in a recent note.
"Musk successfully shifted investor focus to long-term opportunities in AI, robotics, energy storage, and other business lines, diverting attention away from near-term challenges," Nelson wrote, adding that he foresaw "long-term growth" ahead for the EV maker.
Nelson maintained his "buy" rating on Tesla and raised his price target for the stock to $250 a share, implying 4% upside from current levels.
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Oppenheimer: AI initiatives will be key.
Artificial intelligence remains central to Tesla's growth story, Oppenheimer analysts said.
Tesla's full-self driving technology could potentially raise earnings per share by $1-$2 a year through the end of the decade, the analysts estimated in a recent note. Meanwhile, the firm could reap as much as $1.7 billion in value from its Robotaxi market, they added.
"While TSLA delayed its AI, driving some modest softness in shares, we believe the value of its AI platform remains at the center of the TSLA valuation debate," analysts said, reiterating their "perform" rating on the stock.
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Morgan Stanley: Seeing potential in Tesla’s energy business.
Tesla's "show-stealer" update from its annual shareholder meeting was that its energy business reported record-high energy storage for the second quarter, which could be a major tailwind for the company, Morgan Stanley said.
"As Gen AI acceleration spurs a multigenerational increase in energy demand, electricity generation, and data center investment, we believe investors will begin to pay more attention to Tesla Energy, which we value at $36 per Tesla share ($130bn) as the business uniquely positioned to benefit from investment in the US electric grid accelerated by the AI boom," analysts said in a July note.
The analysts maintained an "overweight" rating on the stock and issued a price target of $310 per share, implying 30% upside from current levels.
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Wedbush: Tesla is on track to hit a $1 trillion valuation.
Tesla is still poised to reach a $1 trillion valuation, assuming that the carmaker continues to make headway on AI initiatives, Wedbush said.
"The key for Tesla's stock looking ahead is the Street recognizing that Tesla is the most undervalued AI play in the market in our view with a historical Robotaxi Day ahead for Musk and Tesla," the firm added.
Tesla stock skidded lower last week after Musk said the company's highly-anticipated Robotaxi Day would be pushed out to early October. But a delayed Robotaxi unveiling doesn't change Tesla's long-term growth trajectory, analysts said.
The firm maintained its "outperform" rating and $300 price target, implying another 35% upside from the stock's current levels.
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Tesla's consensus second-quarter adjusted EPS estimate is $0.60.
Second quarter
- Adjusted EPS estimate: $0.60
- EPS estimate: $0.49
- Automotive gross margin estimate: 17.9%
- Revenue estimate: $24.63 billion
- Free cash flow estimate: $1.92 billion
- Gross margin estimate: 17.4%
- Capital expenditure estimate: $2.54 billion
- Cash and cash equivalents estimate: $20.58 billion
- Operating income estimate: $1.81 billion
Third quarter
- Automotive gross margin estimate: 17.8%
Full-year 2024
- Deliveries estimate: 1.8 million
- Automotive gross margin estimate: 18%
- Capital expenditure estimate: $10.31 billion
- Production estimate: 1.67 million
Source: Bloomberg data
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