Wall Street is eyeing more challenges for Tesla heading into its 2nd-quarter earnings report

Business Insider

5 days ago

Tesla will report second-quarter results on Wednesday, and Wall Street is cautious after what's been a wild first half of the year for Elon Musk's carmaker.
Analysts remain generally bullish on the stock's long-term outlook but are eyeing challenges ahead, particularly regarding Musk's political ambitions and sagging demand for Teslas in recent months.
Wall Street expects Tesla to report $22.7 billion in revenue for the quarter, down around 11% from the same period last year. Earnings per share are expected to come in at $0.33, down 36% from EPS in the second-quarter of 2024.
The stock has been on a roller coaster ride this year amid concerns about tariffs, Musk's political activities, and his public feuding with President Donald Trump. The stock is down 18% year-to-date.
The latest earnings will also offer critical updates to hot topics on investors' radar, including the closely watched robotaxi business.
Here's what Wall Street forecasters are saying ahead of Tesla's earnings report.
Morgan Stanley: Musk's politics still a headwind
Musk creating a new political party could become a short-term headwind on Tesla stock, analysts at Morgan Stanley wrote in a note, calling the situation a "party crasher."
The bank pointed to the immediate drop in Tesla stock after Musk officially announced his plan to form the " America Party" in a post on X, which sent shares tumbling around 7%.
"While the situation remains fluid, we believe investors should be prepared for further devotion of resources (financial, time/attention) in the direction of Mr. Musk's political priorities which may add further near-term pressure to TSLA shares," analysts wrote.
Tesla's deliveries are also likely to "remain subdued" through the rest of the year, the analysts added, forecasting a 13% decline in the second-half. That's slightly less than the 14% year-over-year drop in deliveries Tesla saw in the second quarter.
Still, Tesla stock remains a "top pick" for the bank. Analysts reiterated their $410 price target on the stock, pointing to their growth forecasts for Tesla's auto business. The price target implies 23% upside from current levels.
Bank of America: Q2 earnings are challenged
Tesla is in a difficult spot ahead of earnings, Federico Merendi, an analyst at Bank of America, wrote on Monday.
"Tesla 2Q earnings are likely to be challenged due to tariffs and disappointing deliveries," Merendi wrote, adding that Tesla sourced its batteries from China and that its exposure to tariffs was "not insignificant."
On the positive side, Merendi pointed to Tesla rolling out its Robotaxi service in Austin last month, as well as the possibility that demand for the company's vehicles will improve in the third quarter, as consumers could "pull" their demand forward before the EV tax credit gets phased out later this year.
The bank reiterated its "Neutral" rating on the stock and raised its price target to $341 a share, up from the prior estimate of $305. Its new price target implies about 3% upside from the current levels.
Wedbush Securities: Stock could be at a "positive crossroads"
Tesla stock could be heading toward an inflection point, if Musk continues to lead Tesla and stay on top of its most important projects, analysts at Wedbush Securities said.
In a note on Tuesday, the firm said that the outlook for Tesla looked "dramatically different" today compared to three months ago, when Musk was still working closely with the Trump administration.
Since then, Musk's time as a special government employee has come to an end, and the CEO now looks "laser focused" on Tesla's ongoing projects, they said, pointing to the Robotaxi launch and Tesla possibly investing in xAI, the artificial intelligence startup Musk founded in 2023.
"If Musk continues to lead and remain in the driver's seat this pace, we believe Tesla is on a path to an accelerated growth path over the coming years," the firm said, adding that they believed AI could generate around $1 trillion in value for Tesla alone.
In a previous note, Wedbush analysts expressed concerns over Musk's political intentions, calling his plan to create a new political party a "Soap Opera" that needed to end. The firm also outlined a list of actions Tesla's board needed to take to move the company forward, which included drafting a new pay package for Musk and setting guidelines for Musk's political plans.
"We are at a 'positive crossroads' in the Tesla story," the analysts added. "While near-term and this quarter the numbers are nothing to write home about, we believe investors are instead focused on the AI future at Tesla with a motivated Musk back driving Tesla's future."
Wedbush reiterated its "Outperform" rating and the stock and $500 price target, implying about 52% upside from the stock's current levels.
William Blair: Eyeing headwinds from Trump's Big Beautiful Bill
Tesla could see further downside, partly thanks to policy changes in the Republican tax and spending bill, analysts from William Blair wrote in a note earlier this month.
The firm pointed to the bill's ending of the EV tax credit, as well as the removal of corporate average fuel economy fines — fines for carmakers when their vehicles aren't energy efficient enough. Both changes are expected to impact Tesla's revenue, given that the company sold emissions credits to other carmakers that didn't meet energy efficiency standards.
"While the $7,500 tax credit is likely to affect demand, the combination of a demand headwind and over $2 billion in profit from regulatory credits at risk may be too much for investors to bear," Jed Dorsheimer and Mark Shooter, two analysts at the firm, wrote.
Musk's political plans could also remain an overhang on Tesla stock, Dorsheimer and Shooter added, pointing to Musk's new party.
"We expect that investors are growing tired of the distraction at a point when the business needs Musk's attention the most and only see downside from his dip back into politics. We would prefer this effort to be channeled towards the robotaxi rollout at this critical juncture."
The firm downgraded Tesla to a rating of "Market Perform."
Cantor Fitzgerald: Handful of risks ahead
Analysts at Cantor Fitzgerald lowered their second-quarter revenue forecast for Tesla to $21 billion, down from their prior estimate of $24.1 billion.
The revision reflects the year-over-year decline in Tesla deliveries in the second quarter, analysts said, though they noted that they weren't changing their year-end revenue and earnings target for the stock.
Cantor also outlined a handful of potential catalysts and key risks to the stock ahead:
Analysts added that they saw particularly long-term upside from Tesla's Robotaxi business.
"Overall, we continue see Tesla's Robotaxi segment as a software-as-a-service, high-margin model, and we expect TSLA to have the ability to rapidly scale following commercialization. We continue to believe that TSLA will capture significant share of the autonomous driving and ride-sharing industries," they added.
The firm reiterated its "Overweight" rating and $355 price target on the stock, implying 8% upside from the stock's current level.