Tesla fell sharply during Thursday's stock market, giving up key support levels, as analysts and investors responded to the EV giant's second-quarter earnings and CEO Elon Musk's comments that Tesla "could have a few rough quarters" without U.S. EV incentives.
Musk sounded a more muted tone on the second-quarter conference call and just before it ended, Musk said that Tesla "probably could have a few rough quarters" as the $7,500 tax credit goes away after Q3 under President Donald Trump's budget.
"I'm not saying there will, but we could. You know, Q4, Q1, maybe Q2 but once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I think I would be surprised if Tesla's economics are not very compelling," Musk said.
This comment underscores Musk is counting on the robotaxi ride-hailing service and full self-driving to revive growth with the auto business struggling. Meanwhile, analysts mostly responded late Wednesday and early Thursday with pessimism.
"Tesla is crossing the chasm to autonomy while absorbing slower volume, EV incentive elimination, tariffs and investing in new initiatives that may not make margins for years," Morgan Stanley analyst Adam Jonas, a longtime Tesla bull, wrote early Thursday.
"There was no attempt to sugar coat the market headwinds for EVs through the remainder of the year," Jonas added of Musk's comments on Tesla's auto segment.
Tesla Stock Tumbles
TSLA stock sank 8.2% to 305.3o at the close of Thursday's stock market, undercutting the 50-day and 200-day lines.
Tesla stock has a new base with a traditional 367.71 buy point, according to MarketSurge chart analysis. That base is within a much-larger consolidation.
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Q2 Earnings Breakdown
Tesla earnings fell 23% to 40 cents a share, in line with views. Revenue declined 12% to $22.496 billion, slightly beating.
Automotive revenue fell once again while Tesla Energy revenue declined vs. a year earlier.
Regulatory credits fell to $439 million vs $595 million in Q1 and $890 million in Q2 2024. ZEV (zero emission vehicle) credit revenue is likely to trend lower. The Trump budget immediately ended U.S. ZEV credits and said automakers no longer face emission fines for the past three years.
Tesla said in the Q2 earnings release that it did produce some initial builds of the "affordable" vehicle in June, with "volume" output later this year. Musk said the new EV will "look just like the Model Y," a further signal that it'll be a stripped-down MY.
Another Tesla executive said deliveries won't start until at least Q4, after $7,500 U.S. tax credits end Sept. 30.
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Musk was bullish on robotaxis during the conference call, predicting a rapid expansion within Austin and in key markets, pending "regulatory approval."
The Analysts' Take On Tesla Earnings
UBS analysts early Thursday wrote that Tesla's near-term outlook is "challenged" with the end of the Biden-era EV tax credits going away at the end of September. The firm noted that Tesla's EV business already has demand challenges in Europe and China. UBS has a sell rating on TSLA with a price target of 215.
Meanwhile, CFRA analyst Garrett Nelson reduced his Tesla stock price target by $20 to 300 after the earnings call.
"We thought the conference call confirmed many of the concerns we had raised regarding the TSLA story," Nelson said. "Musk stated that TSLA was in a 'weird transition period,"' adding that the company could probably have a few rough quarters and lamenting that the vast majority of TSLA customers still do not know Full Self-Driving exists, but that he expects TSLA's economics to be very compelling by the end of 2026. We continue to view the near-term challenges facing the company as underappreciated by investors."
William Blair analyst Jed Dorsheimer on Thursday said Tesla is "entering a vulnerable time" as "near-term headwinds, like auto and energy demand, subsidy cuts, and tariffs, pressure financials in the crucial transition to the long-term vision of real-world AI and higher-margin products like robotaxi and Optimus."
"Commentary on the call solidified our view, including Elon Musk stating that the next few quarters may be 'rough.' We expect this transition to be heavily debated between bulls and bears and the stock to be volatile," Dorsheimer noted Thursday.
While many analysts warned of Tesla struggles coming out of the conference call, Wedbush Securities analyst Dan Ives, another longtime Tesla bull, said Thursday that the company is making "solid progress" with autonomy and AI with "Musk now acting as wartime CEO."
"While the company will continue to manage the business strategically to maintain a strong balance sheet during this uncertain period, the company expects to see an acceleration of AI, software and fleet-based profits over time which will bring higher-margin revenues to the business," Ives said.
Tesla Stock Trend
Tesla stock rallied from late April to late May in part because Musk said he was backing away from politics and the Trump administration. Since then, Tesla stock has tumbled and rebounded according to news cycles — many generated by debate between Musk and Trump.
The stock initially soared after the robotaxi launch but Tesla stock closed Thursday down more than 5% since the June 22 service release.
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At Thursday's stock market close, Tesla stock was up 28% since the April 22 Q1 conference call, lifted by robotaxi bets. Shares are down about 24% for the year, and 37% below their all-time high of 488.54.
Tesla stock has a 21-day average true range of 3.81%. The ATR metric, available on IBD's MarketSurge charting tool, gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily stock market action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
Investors can keep tabs on the IBD Leaderboard watchlist, the IBD 50 list of top growth stocks and IBD SwingTrader along with the IBD Sector Leaders list.
Tesla stock has a 65 Composite Rating out of a best-possible 99. The stock also has an 87 Relative Strength Rating and a 59 EPS Rating.
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