Should You Buy Tesla Stock Before Firm’s Q2 Deliveries Report?

Should You Buy Tesla Stock Before Firm’s Q2 Deliveries Report?

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Tesla (Nasdaq: TSLA) is scheduled to release its Q2 earnings report on July 17th. Before that, the leading EV company is set to announce Q2 deliveries this week. The Q2 results are adjacent to the much-anticipated “robotaxi day” announcement on August 8th, which is expected to tweak the Tesla narrative.

In the meantime, Tesla’s stock remains the top weight (12.91%) of Cathie Wood’s flagship ARK Innovation ETF (ARKK). TSLA stock is down 12.6% year-to-date, while ARKK is down 8.5%. From the present price of $208 per share, Wood is confident that TSLA will hit over 10x by 2029 at $2,600 per share

Much of that optimistic outlook revolves around Tesla’s robotaxi evolution, which Wood projected to make 63% of Tesla’s revenue and the bulk (86%) of the company’s pre-tax earnings by 2029. Cutting the robotaxi factor out of the Tesla equation, Wood’s TSLA price target is more modest at $350 per share. 

Should investors buy that outlook now before Q2 deliveries come in?

Tesla’s Delivery Expectations: 16% Uptick from Last Quarter Expected

In Q1 ‘24, Tesla delivered 386,810 EVs, most of which were Model 3/Y. From the prior quarter Q4 ‘23, this was a 20% drop from 484,507 units delivered. However, for the full year 2023, Tesla increased vehicle deliveries by 37.6% year-over-year to 1,808,581 units.

For Q2 ‘24, FactSet consensus for Tesla deliveries sits at 448,000 EVs, constituting a nearly 16% uptick in sales from the prior quarter.Some analysts, like Wedbush’s Dan Ives, noted that a less optimistic range should be expected, within 415,000 – 420,000. 

This is in line with New Street’s projection of 425,000 units for the second quarter, as well as Barclays’ 415,000 estimate. All of the positive forecasts, compared to Q1, are accounting for the uptick of Tesla EV sales in China during May, having sold 72,573 units, which is a 17% increase from the year-ago quarter.

Despite battling aggressive price cuts and tough competition from BYD, Li Auto, XPeng, NIO, and others, Tesla holds the second largest market share in China. The Warren Buffett-endorsed BYD sold 330,488 EVs in May, making it the third consecutive month of increased sales of over 300k units.

The Evolving Tesla Narrative

Although Tesla is tapping into robotics stock with Optimus humanoid robot, not even Cathie Wood expects to see mass commercialized deployment by the decade’s end. Rather, Tesla’s transition into robotics would come primarily from EVs themselves as autonomous robotaxis.

As with eVTOLs, otherwise known as flying cars, China is ahead of the game. Owing to Baidu (China’s Alphabet) and autonomous mobility startup, the self-driving market in China is expected to make 60% of the country’s ride-hailing market by 2030, creating a $180 billion market per IHS Markit forecasting.

According to ResearchAndMarkets, this puts the China Autonomous Vehicle Market’s CAGR at 21.66% for the period 2024 – 2030. Tesla is the dominant EV provider in both the US and EU, making the company the leading candidate for such growth. 

Tesla’s capacity has steadily ramped up over the years to prepare for the EV future. Image credit: Tesla

Much of that leading position stems from the network effect coming from processed captured driver data. Still at SAE Level 2, that data is needed to deliver Full Self-Driving (FSD) capability (FSD is SAE Level 4). However, even if the technical challenges are resolved, Tesla would have to overcome local and federal regulatory hurdles.

Given that Elon Musk underestimated the time frame needed for FSD by about eight years, further lengthy delays are exceedingly likely. Professor Philip Koopman, at Carnegie Mellon University, had previously noted that a 10 – 20 year range aligns more with reality.

If Tesla’s “robotaxi day” on August 8th convincingly breaks such expectations, Tesla’s pivotal stock rally is likely. The most recent news on granted green light to test FSD in China suggests a more optimistic outlook.

Cheaper Tesla EVs and Tesla Energy

Even if the robotaxi narrative is delayed, Tesla shareholders have the “Model 2” project to look forward to. Previously dubbed “Redwood”, the rumored $25k price tag is finally supposed to tackle affordability as the main EV adoption hurdle, by mid-2025. 

The new Tesla hatchback will compete with Volvo EX30, Renault 4, Fiat 500e, VW ID.2 and others.

In addition to EVs and robotics, Tesla Energy has much growth potential. The clean energy division offers solar panels, inverters, powerwalls and large-scale energy storage systems dubbed Megapack. 

In Q1, Tesla Energy broke the record with cumulative 4,053 MWh energy storage deployed, having increased year-over-year revenue by 7%. Likewise, Tesla ramped up its AI training compute operations by over 130% for the quarter.

Tesla Stock Price Targets

Having reduced its free cash flow by 674% YoY, from $2 billion in Q4 2023 to negative $2.5 billion in Q1 2024, Tesla understandably spooked investors. However, these infrastructure capital expenditures (capex) are signaling that Tesla is preparing for the long haul. 

Twelve months ahead, Nasdaq’s forecasting data shows the average TSLA price target at $182.1, with a ceiling of $310 per share. The bottom is $22.86, showcasing many unknowns in tech challenges, macro environment, logistics lithium supply, and the market’s reception of Tesla’s competitors.

At the present price of $208, Tesla is still half way from its all-time high of $409 in November 2021. The average 52-week price of TSLA stock is $216, while the present price level is well above the 52-week low of $138 per share. 

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Disclosure: None.

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