Tesla Q2 Earnings Preview: Is TSLA Stock a Buy or Sell Ahead of the Report?

The second-quarter earnings season kicks off in earnest this week, with Tesla (TSLA) and Alphabet (GOOG) among the notable reports to watch. It’s been a particularly dismal year for Tesla, as the electric vehicle (EV) giant was in the red for 2024 throughout the first half. The Elon Musk-run company did turn positive on a YTD basis earlier this month, but once again turned negative for the year by the end of last week's trading.

Here’s what analysts are predicting for the company’s Q2 report, and the stock's forecast ahead of earnings.

Tesla Q2 Earnings Preview

Analysts expect Tesla to report revenues of $24.7 billion in Q2 – a YoY fall of 0.9%. The expected fall in revenues is hardly surprising, as Tesla’s deliveries fell on a yearly basis in Q2. While its deliveries were still better than expected, it marked the first time in a decade that the company’s deliveries fell for two consecutive quarters.

Analysts expect Tesla’s earnings per share (EPS) to dip 41% YoY to $0.46. Over the last couple of years, Tesla has cut vehicle prices multiple times, which has taken a toll on its once industry-leading margins.

What to Watch in TSLA’s Earnings Report

There will be a lot to watch when Tesla reports its Q2 earnings on Tuesday, but I will especially be watching for the following:

• Delivery Forecast: During the Q1 earnings call, Musk sounded confident that Tesla should be able to report a YoY rise in 2024 deliveries. However, during the Q2 call, markets will want to hear more color on the delivery forecast, and whether Tesla is still confident about growing its deliveries in 2024, despite them falling in the first half of the year.
• Comments on China: It will be pertinent to watch Tesla’s comments on its China business, which has been facing intense competition from the likes of BYD (BYDDY). Wedbush Securities analyst Dan Ives incidentally believes that the company's China business is recovering. Tesla might also comment on its partnership with Chinese tech giant Baidu (BIDU), which could help it bring its full self-driving (FSD) to the world’s biggest automotive market.
• New Models and Model Y Refresh: Tesla is looking to launch a low-cost model early next year. During the Q2 earnings call, the company might talk more about that model, which will help the company expand its target market. On a similar note, it might comment on the Model Y refresh, which Musk previously ruled out for at least this year.
• New Timeline for Robotaxi: While Tesla is not exactly known to respect the aggressive timelines that it sets, robotaxi and FSD particularly stand out. The company is set to miss the August 8 deadline to unveil the robotaxi, and during the earnings call, Musk might provide a new timeline for that. Also, the company might talk about its progress toward full autonomy.

Tesla Stock Forecast

Tesla has received a consensus rating of “Hold” from analysts. Of the 33 analysts covering the stock, 9 rate it as a “Strong Buy” while 2 say it's a “Moderate Buy.” Fourteen analysts rate TSLA as a “Hold,” while 8 say it's a “Strong Sell.”

Amid the rebound from its lows, Tesla has run ahead of its mean target price of $193.03, while the Street-high target price of $310 is almost 30% higher than last week’s closing prices.

Analysts are mixed at best on Tesla heading into the Q2 confessional; while Dan Levy of Barclays expects continued margin pressure, Baird’s Ben Kallo expects a beat on the bottom line, led by stable pricing and strong revenues from the Energy segment.

Is TSLA Stock a Buy or Sell?

Tesla has to convince markets that it can continue to grow its deliveries at a brisk pace, while not compromising on margins too much. The price war that it initiated has squeezed not only Tesla's margins, but also those of other EV players. The company also needs to display its prowess in artificial intelligence (AI), which is a key driver of its still mammoth valuation.

Cathie Wood of ARK Invest – who Musk has said has a better understanding than most of Tesla's business – believes the company is the “biggest AI project” globally. Last month, ARK Invest revised its Tesla target price to $2,600, which it expects to be hit by 2029. The firm’s bear case and bull case target prices are $2,000 and $3,100, respectively.

Ives echoes Wood's optimistic views, and believes that Tesla is the “most undervalued AI play.” However, the perennial delays in full autonomy and robotaxi are making some apprehensive about whether Tesla can deliver on its most ambitious and futuristic products. That said, Tesla proved skeptics wrong before, and its annual vehicle deliveries have hit nearly 2 million units.

Still, the concerns over AI products are not unfounded. While these are early days for Tesla’s Dojo supercomputer and Optimus humanoid, markets now expect visible progress on FSD and robotaxi, which have long been in the making.

Overall, despite the near-term challenges, I won't yet write off Tesla. While I don't expect much fireworks from the stock after this week's earnings release, I would be a buyer of any material weakness following the report.