Wall Street analysts’ reactions to Tesla’s second-quarter earnings report are starting to come in, and the latest one sees one of the mild bulls, RBC Capital’s Tom Narayan, lowering the company’s price target to $480 from $500.
Tesla's earnings reaction
RBC’s reaction regarding the earnings report is understandable. After announcing its automotive deliveries in its delivery report at the start of the month, the market had already penciled in the numbers it expected from Tesla’s earnings report. It’s worth noting that the 480,126 deliveries were way ahead of the market’s estimate of 406,024 and, incidentally, ahead of RBC’s estimate of 405,000.
While expectations were high before the results, the market was disappointed by three key factors:
First, rising cost of goods sold due to rising commodity costs and an increase in “interest rate subvention costs.” In other words, rising interest rates increased Tesla’s cost of offering financial incentives and favorable financing to drive the delivery growth referenced earlier.
Second, as RBC notes, non-recurring items increased operating expenses, along with higher research and development costs related to the Optimus and Robotaxi initiatives.
Third, the muted commentary on the Robotaxi rollout hit home the fact that costs are rising, but revenue from Robotaxi is being pushed out – not great news for near-term margins.
Add Your RBC cuts its price target Text
Under the circumstances, the price target cut makes sense, as a new sense of reality now pervades the stock. There won’t be any overnight ramp of Robotaxi, and margins are being squeezed by rising costs to pay for Robotaxi/Optimus when neither is delivering meaningful revenue yet.
Still, sell-offs create opportunities, and if RBC is right, then there’s a near 50% upside to Tesla stock from here. Something to think about, even after a mixed earnings report.
Wall Street analysts’ reactions to Tesla’s second-quarter earnings report have started coming in, and the latest one sees one of the mild bulls, RBC Capital’s Tom Narayan, reducing the company’s price target to $480 from $500.
Tesla's earnings reaction
RBC’s reaction regarding the earnings report is understandable. After announcing its automotive deliveries in its delivery report at the start of the month, the market had already penciled in the numbers it expected from Tesla’s earnings report. It’s worth noting that the 480,126 deliveries were way ahead of the market’s estimate of 406,024 and, incidentally, ahead of RBC’s estimate of 405,000.
While expectations were high before the results, the market was disappointed by three key factors:
First, rising cost of goods sold due to rising commodity costs and an increase in “interest rate subvention costs.” In other words, rising interest rates increased Tesla’s cost of offering financial incentives and favorable financing to drive the delivery growth referenced earlier.
Second, as RBC notes, non-recurring items increased operating expenses, along with higher research and development costs related to the Optimus and Robotaxi initiatives.
Third, the muted commentary on the Robotaxi rollout hit home the fact that costs are rising, but revenue from Robotaxi is being pushed out – not great news for near-term margins.
RBC cuts its earnings target
Under the circumstances, the price target cut makes sense, as a new sense of reality now pervades the stock. There won’t be any overnight ramp of Robotaxi, and margins are being squeezed by rising costs to pay for Robotaxi/Optimus when neither is delivering meaningful revenue yet.
Still, sell-offs create opportunities, and if RBC is right, then there’s a near 50% upside to Tesla stock from here. Something to think about, even after a mixed earnings report.
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