'Bubble-Fraud Tesla Worth Around $8.40 Per Share:' Stock Valuation Under Scrutiny As EV Maker Gets Sizeable Profit From One-Time ZEV Credit

Tesla, Inc. (NASDAQ:TSLA) reported a second-quarter top-line beat while the earnings per share trailed expectations and the stock plunged sharply in the after-hours session, reacting to the mixed results and the management commentary on the earnings call. Most market watchers were quick to point out the bad quality of the results and here’s a compilation of reactions from X, a social media platform Tesla CEO Elon Musk owns.

Black Blames Margins: Fund Manager and Tesla investor Gary Black did not attach much significance to the earnings miss. He noted that excluding a restructuring charge amounting to $622 million or 14 cents per share, the adjusted earnings would have been 66 cents per share compared to the 62-cent per share consensus estimate. The restructuring charge is related to the 10% job cuts the company announced in the second quarter.

The Future Fund LLC Managing Partner was disappointed with the second-quarter auto gross margin, excluding regulatory credits, which came in at 14.6%, trailing the 16.2% consensus estimate. “We believe TSLA's weak AH stock price is more a function of disappointing auto gross margins ex-reg credits than the reported Adj EPS miss,” he said.

Among the other negatives were:

• forecast for 2024 volume growth rate that is now expected to be notably lower than the 38% growth achieved in 2023 versus the Street forecast of a marginal drop
• Second-quarter free cash flow at $1.3 billion, much lower than the $1.9 billion consensus
• Regulatory credits at $890 million vs. the $450 million consensus, potentially inflating adjusted earnings per share by 10 cents

Tesla bear Gordon Johnson also raised questions about the quality of earnings. Over 50% of Tesla’s operating income came from one-time zero-emission vehicle credit sales, he said. “The rate-buy-downs appear to be ABSOLUTELY crushing $TSLA’s auto margins,” he said, referring to the ultra-low financing terms the company has made available for customers.

See Also: How To Buy Tesla Stock

Tesla Valuation Questioned: An options data analyst decried the year-over-year declines seen in most P&L items, barring energy and other services revenue as well as the total revenue, which was up a mere 2% and gross profit, which rose 1%. “$This last column is so impressively bad, no wonder Elon has to constantly make things up,” he said.

“This company isn’t even worth $20/share on what it’s actually doing,” he added.

Stanphyl Capital’s Mark Spiegel, a Tesla bear, noted that despite 55% of Tesla’s operating income coming from emission credit sales, the overall operating margin was only 6.3%. This is among the worst in the industry, he said.

“This is bubble-fraud a car company that should sell at 4x earnings,” he added.

Based on the second-quarter results, the annualized GAAP earnings per share run-rate is $1.68 per share, Spiegel said, adding that automakers with similar or better margins and better growth rates currently sell for around 5 times earnings. “That makes bubble-fraud Tesla worth around $8.40/share,” he said.

Tesla shares are currently trading at a trailing P/E multiple of 63 and a forward P/E multiple of 99, according to Yahoo Finance’s database.

Most Telling Catalyst: New Street Research’s Pierre Ferragu said he does not see the robotaxi unveil or progress as a catalyst. “It is 1,000 Optimus droids doing useful things in the factories next year,” he said. The company has pushed back the robotaxi unveil event from the originally communicated schedule of Aug. 8 to Oct. 10.

Making sense of Musk’s comments to his question on the call about the mode of robotaxi deployment, Ferragu said the company will likely get the service to unsupervised high-reliability autonomy, deploy, mainly sell, in high volumes in the order of millions, and then potentially look to turn the service on.

Tesla ended Tuesday’s session down 2.04% at $246.38 and fell an incremental 7.76% to $227.25 in the after-hours, according to Benzinga Pro data.

Check out more of Benzinga’s Future Of Mobility coverage by following this link.

Read Next:

• Elon Musk Talks Robotaxi Delay, Nvidia Clusters, And Mexican Gigafactory Postponement Amid Tariff Worries If Trump Wins — Tesla Falls Almost 8% After-Hours

Photo courtesy: Shutterstock