With Q2 earnings falling far short of expectations, there may be more losses to come
Tesla (NASDAQ:TSLA) stock slumped 10% Wednesday as investors reacted to disappointing Q2 revenue and delivery figures for the automaker.
The eagerly anticipated earnings report, published Wednesday morning, showed a net income deficit of 45% year over year, while EV deliveries were down nearly 5%.
CEO Elon Musk also warned that the firm’s promised shift to more affordable models was proving more difficult than anticipated.
There were still some positive signs for the electric vehicle (EV) giant, with revenue up 2.4% to $25.5bn, beating Wall Street’s call for $24.5 billion. That isn’t a wide beat, though, and it wasn’t enough to assuage eager stock traders.
Tesla stock is expensive vs. the company’s earnings
The bottom line is that Wall Street only expected Tesla earnings to represent $0.61 per share in 2024’s second quarter. That’s not much to ask for when the stock price is over $200.
However, Tesla couldn’t even manage that, having earned only $0.56 per share in Q2. Ultimately, investors may find it difficult to forgive this “Magnificent Seven” stock member for reporting two consecutive quarters of declining profits.
Moreover, Tesla earnings have now missed Wall Street’s consensus EPS estimates for four consecutive quarters. By our calculations, Tesla’s EPS for the past four quarters is $0.66 + $0.71 + $0.45 + $0.52, or $2.34 per share.
Assuming a share price of $230, this implies a trailing 12-month price-to-earnings (P/E) ratio of $230 / $2.34, or around 98x. That’s after TSLA stock’s post-earnings tumble, so don’t be too surprised if the shares continue to lose value in the near term.
In light of Tesla’s quarterly results and the resultant share-price drop, it makes sense that some analysts are openly expressing their disappointment. For example, Citigroup analyst Itay Michaeli complained that “underlying second-quarter results were somewhat worse than expected”.
Meanwhile, Wells Fargo analyst Colin Langan warned that the firm’s second quarter “had no razzle-dazzle, leaving investors focused on the weakening fundamentals”. Tesla’s shareholders might wonder, then, whether they should have approved Musk’s massive $56 billion pay package not long ago.
Robotaxi delay adds to frustration
In case disappointing quarterly data weren’t problematic enough, investors were undoubtedly also frustrated to hear Musk’s announcement that Tesla’s much-touted robotaxi reveal will be delayed from Aug. 8 to Oct. 10. This raises a question that the Tesla stock bulls might not want to ask: Is there “trouble under the hood” that Musk’s not telling investors about?
Musk tried to reassure investors, saying the reveal is being pushed back to add “a couple other things” to Tesla’s robotaxis. Now, the anticipation will continue to build and Tesla’s robotaxi unveiling will have to impress. Otherwise, investors may be sorely disappointed.
But CFRA analyst Garrett Nelson doesn’t see Tesla’s robotaxi delay as good news for the automaker.
“While Tesla shares have rebounded strongly in recent months, with the Robotaxi Day having been delayed until October, we see little in the way of near-term catalysts for the story,” he said.
Nelson reduced his Tesla stock price target from $250 to $240, but the share price was already substantially below that on Tuesday. If more analysts slash their price targets – and Tesla doesn’t amaze Wall Street with its eventual robotaxi reveal – there’s likely more share-price carnage in store.
