Tesla (NASDAQ:TSLA) stock has staged a massive rally in recent weeks. The remarkable turnaround with shares gaining more than 75% since hitting 52-week lows in April indicates that Tesla shares have stepped on the gas after failing to woo the market in early 2024.
Better-than-expected deliveries
The current rally comes on the heels of better-than-expected quarterly deliveries in Q2 2024, with its bulls further encouraged by its fastest-growing segment — its energy storage business.
Moreover, Wall Street’s profit estimates for the second quarter came down to 60 cents from 90 cents at the beginning of the year, as slowing EV demand growth weighed on investor sentiment.
However, the better-than-expected deliveries have made the 60-cent number seem easily attainable, according to some analysts.
Tesla also exceeded expectations by selling more battery storage products in the second quarter.
“…this quarter TSLA reported very strong numbers in Energy Storage, deploying 9.4 GWh in Q2 and up 132% vs Q1 (reflects a combination of Megapack/utility-grade and Powerwall / residential-grade storage systems),” said Wolfe Research.
Tesla, however, had its fair share of challenges in the first half of 2024, and analysts are not to be really blamed. The company struggled with tough competition abroad and waning demand for EVs in the US.
To reduce costs, Tesla cut more than 10% of its global staff earlier this year, which some analysts saw as a signal of tough times ahead. Moreover, it slashed prices last year to spur sales and better compete with its Chinese peers.
"There is still the risk of further price cuts ahead, and there [are] still further questions on fundamentals. We are still facing somewhat of an EV winter on demand," Barclays (LON:BARC) analysts told Yahoo Finance.
What are analysts saying about Tesla stock
Barclays has an equal weight rating on the stock and a $180 price target, implying a near-30% drop from current levels. It, however, remains cautious about the fundamental macro backdrop.
Some Wall Street analysts believe Tesla will need to sell more EVs and prove it can make substantial profits from its AI technologies, which are used to train self-driving cars and humanoid robots.
In the short run, things look much better for the stock than they did at the beginning of 2024. Analysts are also eagerly awaiting August 8, when the company is set to unveil its much-anticipated robotaxi.
"The key for Tesla's stock is the Street recognizing that Tesla is the most undervalued AI play in the market," Wedbush said.
Wedbush has increased its price target on the stock to $300 from $275. It also puts Tesla’s price at $400 for 2025 in case of a new bull case.
At the same time, China Renaissance analysts upgraded Tesla from Hold to Buy with a price target of $290.
While Tesla’s recent performance is impressive, it is not without its challenges. The company needs to mitigate the risks of further price cuts and ongoing questions about EV demand.
However, its energy storage business and upcoming AI initiatives could provide significant growth opportunities. As the August 8 event approaches, investors will be closely watching for any new developments that could impact Tesla’s stock trajectory.
Tesla’s stock has indeed defied analyst expectations with its recent rally, but the future remains uncertain. The company’s ability to continue this upward momentum will depend on its performance in the EV market, its energy storage business, and its advancements in AI technology.