Tesla (NASDAQ: TSLA) and its CEO Elon Musk recently achieved a big milestone — they launched the company’s first self-driving robotaxis for paying customers in Austin, Texas. It’s an initiative that Musk first discussed in 2016. While it looks more like a soft launch, it’s still a big step for Tesla, which plans to launch a fully autonomous robotaxi fleet. Many investors think that could be a massive new business for the company that will justify Tesla’s monster valuation.
Still, Tesla has a lot going on right now. Remember, the company’s core business is still electric vehicles (EVs), and that business is facing a critical event in just a few weeks’ time.
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Q2 EV Deliveries to soon be announced
Tesla is expected to announce its second-quarter EV delivery figures in the first week of July. As many investors likely recall, first-quarter deliveries came in at roughly 337,000, its lowest quarterly number in over two years. Many investors have been concerned that Musk’s close ties to President Donald Trump and his period of leading Trump’s Department of Government Efficiency (DOGE) have alienated a significant portion of Tesla’s potential customer base.
Image source: Getty Images.
While Musk has stepped down from his work with DOGE to refocus on his businesses, data thus far on Tesla’s sales in the second quarter has been less than encouraging. Monthly sales data from Europe showed that Tesla’s sales once again faltered in April in countries including the United Kingdom, the Netherlands, Denmark, Portugal, Sweden, and France.
Other data suggests that its sales in China have struggled in the second quarter as well. Aside from politics and brand image, Tesla may also be struggling there as a result of increasing competition from competitors like BYD, which has grabbed a dominant market share in China. BYD’s EVs are cheaper and its newest tech can charge faster than Tesla’s. These factors, in my opinion, will pose a bigger problem for Tesla than its brand or political issues, which are likely to fade over time.
Wall Street analysts are modeling for second-quarter deliveries of roughly 400,000, which would be an improvement from the first quarter, but a 10% year-over-year decline. However, some analysts don’t expect investors to care much if Tesla misses estimates.
“The Tesla narrative has increasingly turned to AV/Robotaxi, with investors likely more focused on the planned June 22 Robotaxi launch and Tesla’s path to scaling AV than on 2Q deliveries/overall fundamentals,” wrote Barclays analyst Dan Levy in a recent research note. Levy is modeling for 375,000 Tesla EV deliveries in the second quarter.
Other analysts are more concerned.
In early June, Wells Fargo analyst Colin Langan posted a research note suggesting Tesla’s deliveries in the second quarter were down 21% year-over-year on a quarter-to-date basis. Langan has a sell rating on the stock and a price target that implies a downside of more than 60%.
It’s also worth noting that Tesla has become a battleground stock, with some analysts extremely negative and others like Wedbush’s Dan Ives very bullish.
Will anyone care if Tesla disappoints?
At this point, there have been many negative headlines about Tesla’s EV deliveries in the second quarter, but the stock is up close to 24% quarter to date as of June 20.
As Levy mentioned, most Tesla shareholders at this point appear to be focused on future initiatives like robotaxis and Optimus humanoid robots. If Tesla does underperform on EV deliveries, I think it could suggest that the core EV business has a real problem and is being undermined by more than just Musk’s politics, which would present a fundamental problem for the EV business.
The stock may not fall much, but then investors will be heavily dependent on the performance of the robotaxi fleet, and reliant upon the Optimus robot business to scale up quickly as well. With Tesla trading at 168 times forward earnings, that bet is only becoming riskier for investors.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company and Barclays Plc. The Motley Fool has a disclosure policy.
