Key Points
The past couple of years have been rough for electric vehicle (EV) makers. Between lagging charging infrastructure, the expiration of EV tax credits in the U.S., and increased competition, even Tesla (NASDAQ: TSLA), the top player in this niche, has seen unimpressive delivery numbers. That is, until recently. Tesla announced its second-quarter deliveries on July 2, and they were strong. Here’s what that means for the stock.
Image source: The White House.
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EVs are back in style
Tesla’s CEO, Elon Musk, may also have played a role in the company’s recent struggles. His political activities led to a backlash and cost Tesla between 1 million and 1.26 million deliveries, according to some estimates. But perhaps that’s all in the past now. In the second quarter, Tesla recorded 480,126 deliveries.
That was 25% higher than the prior-year quarter and significantly above the consensus Wall Street estimate of around 406,000. The last time it posted stronger year-over-year growth in deliveries was the third quarter of 2023, so almost two years ago. This performance was partly due to broader macroeconomic factors.
With tensions in the Middle East driving up oil and gas prices, many consumers opted to buy EVs. However, Tesla’s strong second-quarter deliveries were not enough to impress the market: The stock declined after it released its deliveries report.
All eyes on robotaxis
Tesla is worth $1.2 trillion and has performed pretty well over the past year, with its shares gaining 18%, despite mixed financial results, as of writing. That tells us that the market no longer sees it as just a car company. Several of Tesla’s ongoing projects could be transformative, significantly improving its financial results. That’s what many investors are counting on. One of these initiatives — and perhaps the most important — is Tesla’s robotaxi ambitions. And progress along those lines will be critical to the stock performance over the next few years. Tesla could also make headway with its humanoid robot project. The company said it would start ramping up production of its Optimus 3 in late July or early August.
With all that said, is it worth it to invest in Tesla right now? On the one hand, the company’s robotaxi business, once it is up and running in many cities, could be a hit. Unlike some companies working on this project, Tesla benefits from a brand name, a large fleet of vehicles on the roads that helps the company train and improve its self-driving software, and a large production capacity — thanks to many megafactories — that has allowed it to achieve economies of scale. All these are significant advantages that could help Tesla dominate.
However, the market is already arguably factoring in some of that success into its stock price, and the company’s shares could dip at the first sign of trouble. In other words, Tesla is a rather risky company. Long-term investors comfortable with that should consider initiating a position. But it’s important to brace for the volatility that almost certainly lies ahead.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
