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From being the worst player in the Magnificent Seven to being the best, Tesla (NASDAQ: TSLA ) stock has been wildly volatile for a mega-cap company in 2024.
However, Tesla gave back some of its recent gains in premarket trading on July 23 after its second-quarter earnings missed expectations.
The stock was down about 2% before the results call. It also fell 7% after the market closed.
So, what is happening, and is this an opportunity for UK investors?
Another painful quarter
The electric car maker reported revenue of $25.5bn in the second quarter, showing an increase of 2.3% year-on-year.
However, core earnings per share (EPS) fell below expectations to $0.52, compared to the consensus estimate of $0.62 and down from $0.91 last year.
The company delivered 443,956 vehicles in the quarter – slightly more than analysts expected – and up from Q1. Production stands at 410,831 vehicles, suggesting that Tesla is reducing its inventory.
Meanwhile, the company's net income stood at 18%, down slightly from 18.2% last year. That reflects the price cuts Tesla has made to put pressure on its loss-making peers.
The balance sheet was in a strong position at the end of the quarter with cash of $30.4bn, putting it in a strong position for future investments in Robotaxi and artificial intelligence (AI).
What does all this mean?
Unless someone follows Tesla stock regularly, it can be difficult to understand what's going on with the share price and valuation.
After two disappointing quarters, we can expect the stock to trade higher. But it's not, and it's starting to look incredibly expensive.
It now trades at 98.4 times forward earnings. Let that sink in.
However, Elon Musk does not want investors to see Tesla as a car company. And he has been very successful in convincing people to invest in Tesla in its future projects – Robotaxi, the Optimus robot, and its energy business.
In fact, after a disappointing Q1 profit, and a price drop, Musk went to X to promise the launch of Robotaxi on August 8th.
And this created the hype Musk wanted.
However, it was confirmed in the Q2 results that Musk was less optimistic, and the unveiling will be pushed back.
That kicks in the teeth for anyone invested in Tesla waiting for the Robotaxi to be ready to ship on August 8th.
It's also embarrassing for some of Musk's biggest fans like Cathie Wood himself Ark Invest The fund recently predicted Tesla's Robotaxi business will bring in more than £900bn in profits by 2029 alone.
Is this an opportunity for UK investors?
About 18 months ago, Tesla shares fell to $100 each, and I didn't buy because the pound was so weak.
Now the pound is very strong – almost 30% stronger – and it may not stay like this forever. So, in that sense, it would be a good time to buy US-listed stocks like Tesla.
However, a dip in share price after earnings doesn't look like a buying opportunity to me.
Yes, Tesla has great potential, but I have yet to see the technological advancements that will deliver on that promise.
Apart from the technology, it is a very expensive car company.
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