Tesla stock worth $85 after gross margin whiff, analyst says: Wall Street reacts

After Tesla’s mixed second quarter, which featured a poor acceleration in gross profit margins due to sustained price cuts, one Wall Street analyst blasted the EV maker’s stock.

“I still think Tesla is overvalued right now,” Roth Capital Partners Tesla bear Craig Irwin said on Yahoo Finance Live (video above).

Heading into the earnings release late Wednesday, Irwin had an $85 price target on Tesla, implying potential downside of a whopping 71%.

Tesla shares fell 3% to $281.55 in premarket trading on Thursday. The company’s ticker page was very active on the Yahoo Finance site.

The analyst did not rule out lowering his price target because of Tesla’s various profit challenges — from price cuts to increased investments in AI software and cyberdrug production.

Irwin added: “We’re very bullish on Tesla. We think it’s great that people are looking at the names of conventional automakers or some emerging companies as investment opportunities.”

Tesla’s results had little red meat for the bulls and bears.

On the positive side of the ledger, Tesla’s sales of $24.9 billion easily beat analyst estimates of $24.51 billion. Earnings per share topped forecasts of $0.91 for $0.81 and represented a 45% increase from a year ago.

The company reiterated its 1.8 million vehicle production expectation for this year.

For the bears, Tesla’s gross profit margin fell to 18.8% versus estimates of 18.2%. This figure represents another consecutive decline from the fourth quarter 2022 peak of 24%.

Tesla’s Cybertruck is displayed in Manhattan’s Meatpacking District on May 8, 2021 in New York City, United States. REUTERS/Jeenah Moon

CEO Elon Musk once again struck a downbeat tone on the economy.

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“It looks like one day the world economy is going down. The next day everything is fine. I don’t know what’s going on,” Musk told analysts on an earnings conference call.

Tesla shares fell 3% to $281.55 in premarket trading on Thursday. The company’s ticker page was very active on the Yahoo Finance site.

Here’s what else Wall Street is saying about Tesla’s quarter.

Wall Street Reactions

Wedbush analyst Don Ives (buy rating; $300 price target):

“Tesla delivered its June quarter results, where the company saw beats on the top and bottom lines following several rounds of aggressive price cuts, putting Tesla in a strong position after building its EV stronghold and now looking to further cash in on its success. Automotive X-Credit gross margin beat front and center was and clearly indicates that Musk & Co. continue to play chess while other EV players play checkers. Overall, this is Musk & Co.’s Goldilocks 2Q print. The story continues this quarter.”

Citi analyst Ide Micheli (neutral rating; $278 price target):

“Mixed results combined with slightly negative structure from our forecasted neutral. Q2 revenue ~1% ahead and gross margin in-line, but GAAP operating profit and free cash flow down. EPS beat but mostly down- Outlook Commentary doesn’t shed much light on second-half margin bridge, but The Q3 is expected to face some factory downtime (for improvement), which is emphasized on the call that it will cause some inefficiencies—AV/AI in this race is perfectly consistent with our own industry thesis. However, to round out the Tesla investment case, we need to see more evidence of Tesla’s whole self. Progress based on unique approach (including in-licensing).We expect the stock to trade moderately as the current valuation requires a strong Q2 result.

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Brian Sozzi He is the managing editor of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi And on LinkedIn. Tips on deals, links, fan situations or something else? Email [email protected].

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