Automotive financials are weighing on Tesla shares Wednesday, but Elon Musk - and many bulls - are focused on the future potential in autonomy and robotics
To most people, Tesla Inc. is a car maker. But to Chief Executive Elon Musk, Tesla is an autonomy company focused not only on vehicles, but humanoid robots too.
But what's Tesla $(TSLA)$ to Wall Street? That's a question analysts are trying to unpack in the wake of the company's mixed latest earnings report, which followed a 35% monthly surge in Tesla's stock price. Shares are down about 12% in morning action Wednesday.
From the perspective of UBS's Joseph Spak, who is bearish on Tesla, the stock "is not being priced on auto (or arguably even energy) but autonomy and AI." But Tesla's latest earnings report, which brought a beat on revenue but a miss on automotive gross margins excluding credits, was centered on the automotive business that's paying the bills in the present day.
Since AI and related efforts have payoffs that are much "further out," Spak noted that "on earnings updates, the realities of the business fall back to (mostly) auto."
"These future initiatives are difficult to value, but the current stock price already assigns a hefty value to these ventures," he wrote. Thinking about the near term, he sees "more downside to the stock if/when confidence in these initiatives waver, vs. upside from likely only incremental data points supporting the [long-term] bull case."
Spak rates the stock at a sell with a $197 target price.
But more bullish analysts remained encouraged about the longer-term horizon.
"While the margin weakness is weighing on the stock this morning....the next phase of the Tesla growth story is around autonomous, robotaxis, and AI playing out for Musk & Co. in our view and that vision is on the doorstep," Wedbush's Daniel Ives wrote.
Tesla confirmed the delay of its robotaxi event to October, but Ives is still bullish about that event, which he dubbed "the beginning of the AI story at Tesla, which we value at $1 trillion alone over the next few years." Tesla "is a robotics and AI play," Ives added.
He rates the stock at outperform with a $300 target price.
Piper Sandler's Alexander Potter weighed in similarly: "If there's one message investors should take away from the Q2 earnings call, it's this: Sequential fluctuations in automotive gross margin hardly warrant mention, in the context of Tesla's wider ambition (namely: commercializing self-driving software and other A.I.-enabled products)."
He upped his price target to $300 from $205, while sticking with his overweight rating.
"Comments on full self-driving $(FSD)$ software were unabashedly positive, and as demonstrated by our 50% price target increase, bullish tweaks to the FSD forecast can easily overwhelm all other considerations," Potter wrote.