Does Tesla Stock Look Attractive Despite Q2 Delivery Miss?

Tesla’s (NASDAQ:TSLA) deliveries for the second quarter declined by about 18% sequentially to 254,695, down by almost 18% from the prior second quarter, although it grew by about 27% year-over-year. The decline is largely due to the rise in Covid-19 cases in China, which led to extended lockdowns and restrictions. Tesla had to suspend production at its Shanghai factory, which accounts for about 40% of its production capacity, multiple times throughout the quarter. Tesla previously indicated that it could deliver as many as 1.5 million to 1.6 million vehicles this year, and this could now be an uphill task considering that the company would have to deliver close to 1 million vehicles in six months to meet the target.

That said, we think that investors are likely to look beyond these temporary issues.  Tesla stock has already corrected by over 40% year-to-date, due to the headwinds in China, the broader rotation out of growth stocks following the Fed’s rate hikes, and also due to concerns about the U.S. economy. It’s likely that Tesla’s production and deliveries will pick up from here. In its Q2 production press release, the company indicated that June was the best production month in its history and this probably bodes well for the coming quarter. Moreover, China has also been easing Covid-19-related curbs to an extent and this could also be positive for Tesla’s supply. Additionally, Tesla should benefit from the production ramp of its new facilities in Germany and Texas.

We value Tesla stock at about $1,100 per share, which is almost 60% ahead of the current market price. Some factors supporting our price estimate include Tesla’s solid recent execution and strong demand for its EVs. For perspective, Tesla’s  Model Y long range, one of its most popular models, is back-ordered until at least January, despite the company’s growing production capacity. Moreover, Tesla appears to be better placed to handle economic headwinds compared to other automotive players, given its thick margins and strong balance sheet. See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How TSLA Makes Money

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

[1] Month-to-date and year-to-date as of 7/4/2022
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates