Tesla shares are worth just $85 after gross margin, analyst says: Wall Street reacts
After Tesla’s mixed second quarter, which left a poor impression on its gross profit margin thanks to a steady drumbeat of price cuts, a Wall Street analyst is coming out and blowing the EV maker’s stock.
“I still think Tesla is wildly overvalued right now,” Roth Capital Partners Tesla bear Craig Irwin said on Yahoo Finance Live (video above).
In its earnings release late Wednesday, Irwin had an $85 price target on Tesla, suggesting a whopping 71% downside potential.
Tesla shares fell 3% to $281.55 in premarket trading Thursday. The company’s ticker page was the most active on the Yahoo Finance platform.
The analyst did not rule out cutting the price target further due to Tesla̵[ads1]7;s various profit challenges – everything 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 a lot of the other names either in conventional automakers or some of the new players as investment opportunities.”
Tesla’s results had some red meat for bulls and bears.
On the positive side of the ledger, Tesla’s sales of $24.9 billion easily beat analysts’ forecasts of $24.51 billion. Earnings per share of $0.91 topped forecasts of $0.81, and marked a 45% increase from a year ago.
The company reiterated its expectation of 1.8 million vehicle production for the year.
For the bears, Tesla’s gross profit margin of 18.2% fell short of estimates of 18.8%. The figure represented another continued decline from the peak in the fourth quarter of 2022 of 24%.
CEO Elon Musk struck a downbeat note on the economy, again.
“One day the world economy seems to be falling apart. And the next day everything is fine. I don’t know what the hell is going on,” Musk told analysts on the earnings call.
Tesla shares fell 3% to $281.55 in premarket trading 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 top and bottom line beats after several rounds of aggressive price cuts, has put Tesla in a position of strength after building its EV castle and is now set to further cash in on its success. The gross margin beat for earlier cars was in the lead and is clearly indicative of Musk & Co. 2Q pressure 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 result consistent with our preview neutral to slightly negative setup. Q2 revenue ~1% ahead and gross margin in line, but GAAP operating profit and free cash flow below. EPS beat, but mainly on a below-line gain. The outlook comments did not shed much light on the second half of the year the factory is expected to face some decline during Q3 margin. The future role of AV/full self-driving was once again strongly emphasized in the call – a view that is completely consistent with our own brand sense that AV/AI is the biggest value unlocker in this race. Still, for this to anchor the Tesla investment case, we’d need to see more evidence of full self-driving progress (including on the licensing front) given Tesla’s most likely unique approach of expecting current market share to be lower. Q2 outcome. That said, no big surprises here either.”
Brian Sozzi is Yahoo Finance’s managing editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Advice on agreements, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com.
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