Image source: Getty Images
From being the worst actor of the Magnificent Seven to the best performer, Tesla (NASDAQ:TSLA) stock has been extraordinarily volatile for a large-cap company in 2024.
However, Tesla lost some of its recent gains in premarket trading on July 23 after its second-quarter earnings missed expectations.
Shares had fallen about 2% before the earnings report and a further 7% after the market closed.
So what happened? Is this an opportunity for UK investors?
Another painful trimester
The electric vehicle maker reported revenue of $25.5 billion for the second quarter, reflecting a modest year-over-year increase of 2.3%.
However, earnings per share (EPS) missed expectations at $0.52, versus the consensus estimate of $0.62 and $0.91 a year ago.
The company delivered 443,956 vehicles during the quarter, slightly more than analysts had expected and more than in the first quarter. Production stood at 410,831 vehicles, suggesting Tesla is reducing its inventory.
Meanwhile, the company's gross margin stood at 18%, down slightly from 18.2% a year ago. That reflects the price cuts Tesla has implemented to pressure its loss-making peers.
The balance sheet was in a strong position at the end of the quarter with $30.4 billion in cash, putting it in a strong position for future investments in Robotaxi and artificial intelligence (ai).
What does this all mean?
Unless someone regularly follows Tesla stock, it can be difficult to understand what is happening with the stock price and valuation.
After two disappointing quarters, we were expecting the stock to trade at a much lower price, but that's not the case and it's starting to look incredibly expensive.
It's now trading at 98.4 times forward earnings. Just think about that.
However, Elon Musk doesn't want investors to see Tesla as a car company, and he has been very successful in convincing people to invest in Tesla for its future projects: the Robotaxi, the Optimus robot, and its energy business.
In fact, after disappointing first quarter results and with the stock price falling, Musk turned to x to promise the unveiling of the Robotaxi on August 8.
And this created the stir Musk wanted.
However, the second quarter results confirmed that Musk was a bit optimistic and the presentation will be delayed even further.
This is a blow to anyone who invested in Tesla expecting a Robotaxi ready to be deployed on August 8th.
It's also a bit of an embarrassment for some of Musk's biggest supporters, like Cathie Wood, whose… Investing in Ark One fund recently projected that Tesla’s Robotaxi business will generate more than £900 billion in revenue by 2029 alone.
Is this an opportunity for UK investors?
About 18 months ago, Tesla shares fell to around $100 each, and I didn't buy because the pound was so weak.
The pound is now much stronger (up by around 30%) and may not stay that way forever. So in that sense, it could be a good time to buy US-listed stocks like Tesla.
However, the drop in the stock price after earnings does not look like a buying opportunity to me.
Yes, Tesla has enormous potential, but I have yet to see the technological advancements that will make that promise a reality.
Without technology, it would simply be an enormously expensive car company.
