Tesla stock is worth only $85 after gross margin whiff, analyst says: Wall Street reacts
2023-07-20 - Scroll down for original article
Company: Tesla Inc.
Summary
Tesla Inc. is an electric vehicle (EV) manufacturer and clean energy company founded by Elon Musk, known for its innovative and disruptive approach to the automotive industry. Tesla has gained significant attention and market share in recent years, propelled by its cutting-edge technology, strong brand, and visionary leadership. It has positioned itself as a leader in the transition towards sustainable transportation.
Article Analysis
The article discusses the mixed second-quarter results of Tesla, highlighting both positive and negative aspects. On the positive side, Tesla exceeded analyst expectations in terms of sales and earnings per share. The company also maintained its vehicle production target for the year. However, the gross profit margin fell short of estimates, indicating challenges in maintaining profitability amid price cuts and increased investments in areas such as AI software and Cybertruck production.
The overall sentiment in the article is mixed. While the positive earnings performance is acknowledged, the focus on challenges faced by Tesla, coupled with a bearish outlook from an analyst, contributes to a somewhat negative tone towards the company.
Market Reaction
Historically, Tesla's stock price has been subject to significant volatility, reacting strongly to news events and analyst opinions. It is important to note that the pre-market trading reaction to the earnings announcement was a 3% decline. However, due to the dynamic nature of the stock market, further analysis is required to determine the longer-term impact on the stock price.
Investor Sentiment
Analyst opinions, trading volume, and options activity can provide insights into investor sentiment. As mentioned in the article, the analyst from Roth Capital Partners expresses a bearish view on Tesla and suggests exploring other investment opportunities in the auto industry. This can influence some investors' sentiment, causing them to reconsider their positions. However, it is crucial to consider a broader range of analyst opinions and monitor trading activity to assess the overall sentiment accurately.
Competitor Comparison
Tesla's performance and market position should be evaluated in comparison to its main competitors in the EV and auto manufacturing industry. While the article does not explicitly discuss competitors, Tesla's leading position in the EV market and its continuous technological advancements give it a competitive edge. However, challenges faced by Tesla, such as maintaining profitability and increasing competition from both traditional automakers and emerging players, should be closely monitored.
Risk Factors
The article highlights several risk factors that could impact Tesla's stock price. These include the pressure on gross profit margin due to price cuts and increased investments, potential inefficiencies from factory downtime, and uncertainty regarding the progress of autonomous driving technology. Other risks that could impact Tesla's stock price include regulatory challenges, potential supply chain issues, and shifts in consumer demand for EVs.
Conclusion
In conclusion, the mixed second-quarter results and the bearish sentiment expressed by an analyst have the potential to impact Tesla's stock price in the short term. Investors should closely monitor the implementation of Tesla's strategic plans, including cost management, production targets, and progress in autonomous driving technology. Moreover, staying informed about competitor activities, potential regulatory changes, and shifts in consumer preferences will be crucial in understanding the long-term implications for Tesla's stock price.
Disclaimer
This analysis is for informational purposes only and does not constitute financial advice. Readers should conduct their own research and consult with a financial professional before making any investment decisions.
Original Article:
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After Tesla's mixed second quarter, which featured a bad whiff on gross profit margin thanks to a steady drumbeat of price cuts, one Wall Street analyst is coming out blasting on the the EV maker's stock. "I still think Tesla is egregiously overvalued right now," Roth Capital Partners Tesla bear Craig Irwin said on Yahoo Finance Live (video above). Coming into the earnings release late Wednesday, Irwin had an $85 price target on Tesla, suggesting downside potential of a whopping 71%. Tesla shares fell 3% to $281.55 in pre-market trading on Thursday. The company's ticker page was the most active on the Yahoo Finance platform. The analyst didn't rule out slashing his price target further owing to Tesla's various profit challenges — ranging from price cuts to increased investments in AI software and Cybertruck production. Irwin added: "We're very bearish on Tesla. We think people are much better off looking at many of the other names either in conventional auto manufacturers or some of the emerging players as opportunities for investment." Tesla's results had a little bit of red meat for bulls and bears. On the bullish side of the ledger, Tesla's sales of $24.9 billion easily beat analyst forecasts for $24.51 billion. Earnings per share of $0.91 topped forecasts for $0.81, and marked a 45% increase from a year ago. The company reiterated its 1.8 million vehicle production expectation for the year. For the bears, Tesla's gross profit margin of 18.2% fell shy of estimates for 18.8%. The figure represented another continued decline from the fourth quarter 2022 peak of 24%. Tesla's Cybertruck is displayed at Manhattan's Meatpacking District in New York City, U.S., May 8, 2021. REUTERS/Jeenah Moon CEO Elon Musk struck a downbeat tone on the economy, again. "One day it seems like the world economy is falling apart. And the next day everything's fine. I don't know what the hell is going on," Musk told analysts on the earnings conference call. Tesla shares fell 3% to $281.55 in pre-market trading on Thursday. The company's ticker page was the most active on the Yahoo Finance platform. Here's what else Wall Street is saying about Tesla's quarter. Wall Street Reacts Wedbush analyst Dan Ives (Buy rating; $300 price target): "Tesla delivered its June quarter results where the company saw beats on the top and bottom lines following multiple rounds of aggressive price cuts has put Tesla in a position of strength after building its EV castle and now is set to further monetize its success. The automotive ex-credits gross margin beat was front and center and is clearly an indication that Musk & Co. continue to play chess while other EV players are playing checkers. Overall this was a goldilocks 2Q print by Musk & Co. given all the noise surrounding the story heading into this quarter." Citi analyst Itay Michaeli (Neutral rating; $278 price target): "A mixed outcome that aligns with our previewed neutral-to-slightly negative setup. Q2 revenue ~1% ahead and gross margin in-line, but GAAP operating profits and free cash flow below. EPS beat but largely on a below-the-line gain. The outlook commentary didn’t shed much light on the second half margin bridge but Q3 is expected to face some factory downtime (for upgrades) that could yield some inefficiencies. The future role of AV/full self driving was once again heavily emphasized on the call—a view that fully aligns with our own industry thesis around AV/AI being the biggest value unlock in this race. Still, for this to anchor the Tesla investment thesis, we’d need to see more evidence of full self driving progress (including on the licensing front) given Tesla’s unique approach. We expect the shares to trade modestly lower as the current valuation likely needed a stronger Q2 outcome. That said, no major surprises here either." Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com. For the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here Read the latest financial and business news from Yahoo Finance