Tesla Earnings: Affordable Vehicle Still on Track for 2025 Launch and 2026 Ramp

Key Morningstar Metrics for Tesla

• Fair Value Estimate: $200.00
• Morningstar Rating: 3 stars
• Economic Moat: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Tesla’s Earnings

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 fair value estimate of $200 per share and narrow moat rating.

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 on two key growth projects: the affordable vehicle and full self-driving software. 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 seeking an entry point.

Management declined to offer specific details on the affordable vehicle and said the firm 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 much 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.

Management set a date of Oct. 10 for the Robotaxi event. Management also said the rollout would be for the FSD supervised feature, while the current version of FSD becomes FSD unsupervised. This would be followed by an eventual launch at which all Tesla drivers could opt to have their cars join the Robotaxi fleet. In our view, even if the technology is ready, we think Tesla may face regulatory delays in approving Robotaxis, leading to little incremental revenue in the coming years. Regardless, as FSD software continues to improve, we view it as a selling point.