Tesla (TSLA) reported mixed results for Q2, including a delay in the robotaxi launch and increased spending on new technology, which affected its operating margins. The robotaxi, initially scheduled for an August 8 reveal, will now be unveiled on October 10 to incorporate additional features and improvements. Let’s explore what these Robotaxi delays and investments mean for Tesla, and how analysts have reacted to this.
Declining Operating Margins
In Q2, Tesla’s adjusted operating margins shrank to their lowest in three years, dropping to 14.4% from 18.7% a year ago. This marked the company’s fourth consecutive quarter of declining margins.
The company’s margins have been under pressure due to rising expenses from increased investments in developing its AI infrastructure, aimed at turning Tesla’s EVs into autonomous cars. Additionally, Tesla plans to begin low-volume production of humanoid robots for internal use next year.
In fact, the company’s CEO, Elon Musk, took to his social media platform X on Tuesday and initiated a poll asking if TSLA should make a $5 billion investment in his artificial intelligence startup, xAI.
Tesla’s Robotaxi Launch Has Been Delayed
On the company’s earnings call, Musk announced that its robotaxi will be revealed on October 10. This launch is delayed from the prior date of August 8 so that Tesla can add “a couple other things.” The robotaxi will feature Tesla’s “unboxed manufacturing strategy.”
Meanwhile, Tesla’s second-quarter deliveries declined by 4.8% year-over-year to 443,956. This has prompted the company to cut prices and offer incentives like low-interest loans. However, the company’s Cybertruck production tripled in the second quarter compared to Q1 and is expected to achieve profitability by year-end. The Semi factory is on track to start production by the end of 2025.
Analysts’ Reactions to Tesla’s Q2 Results
Wedbush analyst Daniel Ives believes that the robotaxi reveal is crucial for Tesla’s valuation to reach more than $1 trillion and for the company’s AI and Full Self-Driving (FSD) story to lead to monetization. Even with the drop in TSLA’s Q2 vehicle deliveries, the analyst believes that there is a positive shift in the demand for EVs. TSLA’s Q2 vehicle delivery number was above consensus estimates of 436,000, “marking a major ‘turning point’ in the Tesla bull case story looking ahead into 2H24/2025.”
Meanwhile, Citi analyst Itay Michaeli reiterated a Hold on TSLA stock and lowered the price target to $258 from $274. The analyst’s new price target implies an upside potential of 4.7% at current levels. The analyst cited Q2’s “somewhat worse than expected” results as automotive gross margins missed Michaeli’s estimate. Furthermore, Michaeli expects the shares to be under modest pressure due to the declining margins.
Is Tesla Buy or Sell?
Analysts remain sidelined about TSLA stock, with a Hold consensus rating based on 12 Buys, 11 Holds, and seven Sells. Over the past year, TSLA has declined by more than 8%, and the average TSLA price target of $208.26 implies a downside potential of 15.5% from current levels.
