Tesla’s Q2: Affordable Vehicle Still on Track for 2025 Launch

Tesla’s
TSLA
second-quarter
results
were
largely
in
line
with
our
view
for
the
cadence
of
the
year.
Operating
profits
were
down
roughly
33%
year
over
year
due
largely
to
lower
average
automotive
selling
prices,
but
up
37%
sequentially
versus
the
first
quarter,
driven
by
strong
energy
generation
and
storage
profits
and
lower
corporate
expenses.
With
our
outlook
largely
unchanged,
we
maintain
our
$200
per
share
fair
value
estimate.
Our
narrow
moat
rating
also
remains
unchanged.

Tesla
shares
were
down
8%
in
after-hours
trading.
We
think
the
market
is
reacting
to
earnings
coming
in
below
FactSet
consensus
estimates,
as
well
as
management’s
lack
of
details
for
two
key
growth
projects:
the
affordable
vehicle
and
the
full
self-driving.
At
current
prices,
we
view
Tesla
shares
as
slightly
overvalued,
with
the
stock
trading
in
3-star
territory
but
a
little
over
10%
above
our
fair
value
estimate.
Accordingly,
we
recommend
investors
wait
for
a
larger
pullback
and
for
shares
to
trade
below
our
fair
value
estimate
and
offer
a
margin
of
safety
before
we
would
recommend
an
entry
point.

With
regard
to
the
affordable
vehicle,
management
declined
to
offer
vehicle-specific
details
and
said
that
Tesla
would
reserve
these
details
for
product
rollout
events.
However,
management
did
say
the
vehicle
remains
on
track
to
begin
production
in
2025.
In
our
view,
Tesla
maintaining
the
vehicle
production
timeline
is
the
key
takeaway.
As
this
vehicle
is
likely
to
be
a
less
expensive
version
of
the
Model
3/Y
platform,
we
doubt
there
will
be
as
unique
technology
versus
more
premium
product
rollouts
such
as
the
Cybertruck,
or
the
Roadster
that
should
be
launched
in
the
coming
years.
As
a
result,
we
continue
to
view
2026
as
the
year
when
Tesla
deliveries
return
to
double-digit
growth,
driven
by
the
affordable
vehicle.