Earnings Infocus | Tesla's 43% Rally: Overvalued or Not?
$Tesla (TSLA.US)$, the global leader in EV, has experienced a remarkable 43% surge over the past 10 consecutive trading days, following the release of Q2 production and delivery number that exceeded analyst‘s expectation. The sentiment towards Tesla appears to have shifted dramatically after a challenging first half of the year, during which the stock experienced a 20% decline. The recent rise has led investors and analysts to question whether the current valuation is justified. This article will break down Tesla's various business segments to assess whether the company is truly overvalued.
Automative
Tesla's core business remains the production and sale of EV. In Q2 2024, Tesla delivered around 444,000 vehicles, exceeding market expectations and marking the first time in a year that deliveries have surpassed projections. However, despite this achievement, the delivery volume still represents a 4.8% year-over-year decline. In contrast, the global EV market grew by approximately 18% in Q1 2024, indicating a significant loss in market share for Tesla.
To boost sales, Tesla has implemented multiple price cuts and promotional strategies, but these measures have shown diminishing returns. Q1 saw an 8% price cut but a 9% drop in deliveries. Growth trends in the U.S., EU, and China are slowing. Because of further price reductions and increased competition in the Chinese market, Tesla’s EPS for 2024 could decrease.
Energy Generation and Storage
Tesla’s energy generation and storage segment saw significant growth in Q2 2024, deploying 9.4 GWh of energy storage products, more than double from Q1 2024. While the energy business is growing rapidly, it remains relatively small compared to the automotive segment. Its potential to become a significant revenue stream for Tesla in the future remains to be seen. The market is optimistic about this segment, but it may not be enough to fully offset the automotive business's issues.
AI and Robotics
Tesla’s management has consistently emphasized that the company is not just a vehicle manufacturer but an AI or robotics company. Despite the potential of Full Self-Driving (FSD) and Robotaxi, their commercialization timeline is highly uncertain. Tesla’s progress in autonomous driving technology has been slow, and the market remains skeptical about its future profitability in this area.
Tesla’s development in humanoid robots has also garnered attention. Although the company plans to achieve small-scale production by 2025, the market size and actual demand in this area are highly uncertain. Tesla’s leadership and innovation in this field could positively impact its valuation, but short-term profitability is unlikely.
In summary, while Tesla’s stock has dropped about 35% from its all-time high, its valuation remains high, trading at approximately 67x P/E(TTM). Though Tesla has innovation and leadership advantages in multiple areas, its current high valuation and uncertain future profitability cast doubt on its sustainability. The automotive business faces competitive pressures and declining profitability due to price cuts, while emerging businesses like FSD, Robotaxi, and humanoid robots have uncertain commercialization timelines.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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