Is Tesla Stock A Buy As Nvidia’s Auto Segment Grew 37% In Q2 On Autonomous Driving?

Tesla (TSLA) stock is angling lower, falling about 15% so far this year. However, since hitting 2024 highs in July, TSLA shares have declined more than 20% as the EV giant’s second-quarter earnings sank more than 40%. Now, investors are awaiting the October robotaxi reveal event.

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Tesla’s Robotaxi Is Delayed. Will It Make A Difference For Tesla Stock?

On July 23, the electric-vehicle giant reported that Q2 earnings fell 43% to 52 cents per share. Meanwhile, quarterly revenue totaled $25.5 billion, up 2% vs. the year-earlier quarter. Analysts had predicted Tesla would report earnings of 61 cents a share with sales sliding to $24.54 billion, according to FactSet.

Tesla announced it “achieved record quarterly revenues despite a difficult operating environment.” However, Tesla’s gross margins fell 23 basis points to 18%. Auto gross margins, excluding regulatory credits and leases, came in at 15.1%, inline with analyst expectations, according to FactSet.

This comes after Chief Executive Elon Musk on the Q1 earnings call said that “if somebody doesn’t believe Tesla is going to solve autonomy” that they “should not be an investor in the company.” The Tesla chief doubled down on this line on the second-quarter conference call.

Going into the Q2 earnings report, investor sentiment had been upbeat, with TSLA surging more than 25% in July after the EV maker announced a surprise second-quarter beat in vehicle deliveries.

However, Tesla stock is down around 11% in August and has declined 16% since Q2 earnings.

As analysts await the rootaxi event, updates around Tesla’s strategy, new products and EV demand, the top question for investors is always, when is it a good time to buy or sell Tesla stock.

Nvidia Earnings Hints: Autos And AI

Chief Financial Officer Colette Kress said on the Aug. 28 earnings call that Nvidia’s second-quarter automotive revenue totaled $346 million, up 5% from the previous quarter and up 37% from a year ago.

“Automotive was a key growth driver for the quarter as every automaker developing autonomous vehicle technology is using Nvidia in their data centers,” Kress said.

She added that its automotive segment “will drive multibillion dollar in revenue.”

Nvidia’s Jensen Huang On Tesla

Nvidia Chief Executive Jensen Huang earlier this year said that Tesla’s autonomous driving, claiming the EV giant is “far ahead” on self-driving vehicles and that all cars will eventually have autonomous abilities.

Tesla along with Elon Musk are major customers of Nvidia.

Nvidia on its Q1 earnings call mentioned myriad automotive customers working on AI self-driving, including several China EV players. In Q1, Nvidia reported that revenue from automotive was $329 million, up 17% sequentially and up 11% year-on-year. Nvidia added that this increase was primarily due to its “self-driving platforms.

Kress said on the Q1 earnings call that Nvidia “supported” Xiaomi to launch its first electric vehicle, the SU7 sedan, which is posing a serious threat to the Tesla Model 3 in China.

Kress added that its updated AI car computer software, Nvidia Drive Thor, is slated for production in vehicles in 2025. Customers include BYD (BYDDF), XPeng (XPEV) and others.

“We expect automotive to be our largest enterprise vertical within data center this year,” Kress said.

Musk Sets Date For Robotaxi

Tesla has been stepping up rhetoric about Full Self-Driving and AI That messaging has been on full display during the company’s quarterly earnings in 2024.

Musk kicked off the Q2 earnings call by saying that executives “won’t get too much into the product roadmap here because that is reserved for product announcement events.”

Musk said on July 23 the robotaxi unveiling event had been pushed to Oct. 10, back from the previously scheduled Aug. 8 date.

“I wanted to make some important changes that I think would improve the vehicle, the sort of the robotaxi, the main thing that we’re going to show and we’re also going to show off a couple of other things,” Musk said.

“So moving it back, moving it back a few months, allowed us to improve the robotaxi, as well as add in a couple other things for the product unveil,” he added.

This comes after on April 28, Musk said Tesla will spend around $10 billion in 2024 in “combined training and inference AI, the latter being primarily in car.”

The company has said it plans to ramp up its AI infrastructure capacity in the “coming months” and that it is currently working on ride-hailing functionality that will be “available in the future.”

This could potentially put Tesla in competition with Uber (UBER) and Lyft (LYFT).

Cathie Wood’s Robotaxi Projections

Meanwhile, Cathie Wood and her Ark Invest firm on June 12 updated its Tesla stock price target to 2,600 by 2029. Wood has long been bullish on Tesla’s autonomy push and robotaxi aims. Ark Invest estimates that around 90% of Tesla’s enterprise value and earnings will be attributed to the robotaxi business in 2029.

Without a robotaxi network and business, Ark Invest says its TSLA price target would be around $350 per share, according to the report.

“We remain confident that the service will launch within the next five years,” Ark Invest said.

Low Cost Vehicle Upcoming?

Tesla added last month that its plans for new vehicles, including affordable models, remain on track to start production in the first half of 2025. That suggests that mass production won’t start until late 2025 at the earliest.

There were media reports going into Q2 that Tesla had decided to scrap its next-generation Model 2, a $25,000 vehicle.

Meanwhile, Tesla also said in its July earnings report that its vehicle volume growth rate in 2024 “may be notably lower than the growth rate” last year. The EV giant added that growth in its energy storage business should outpace its automotive segment.

Musk in the Q1 earnings call said he expected 2024 vehicle deliveries to grow compared to 2023. The EV giant saw deliveries in 2023 hit a record 1.81 million.

Tesla Top Auto Pick

Following Q2 earnings, Morgan Stanley made Tesla its “top pick” in the U.S. auto space, replacing Ford Motor (F). It sees around 40% upside to TSLA stock and believes the EV giant is managing risk around its automobile business and “cornering the market” on zero emission vehicle credits.

Adam Jonas, Morgan Stanley’s high-profile autos analyst and a Tesla bull, wrote that Tesla leads the U.S. auto stocks. Behind Tesla, Ford is ranked second and Ferrari (RACE) is third. EV startup Rivian (IBD) is ranked 11th on Morgan Stanley’s list.

Jonas stressed that Tesla is shifting resources away from its auto segment as booming EV demand forecasts have dwindled.

“While Tesla is still making cars, we note the company is aggressively redeploying incremental resources, technology, people and capital away from the auto side of the house,” Jonas wrote. “We found it notable that Ford management spent far more time on its 2Q conference call discussing EVs than Tesla did.”

Musk And Tesla Control

Tesla shareholders also recently voted in favor of giving Musk his 2018 $56 billion pay package and reincorporating the company in Texas, moving it from Delaware.

Musk has hinted throughout the year he feels he needs more TSLA shares and voting power before making Tesla a “leader in AI & robotics.”

In January, Musk posted on X that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control.” The chief executive added that he wants enough shares to be “influential but not so much that I can’t be overturned.”

Musk currently has a nearly 13% stake in Tesla. Prior to selling TSLA shares to purchase Twitter, now X, for $44 billion in late 2022, Musk owned around 22% of Tesla.

Elon Musk, Layoffs And Superchargers

With Musk focused on FSD and artificial intelligence, he is also shaking up Tesla, letting top executives go and announcing layoffs.

Musk decided to let two top executives go while also cutting the EV company’s entire supercharger team, according to reports on April 30.

In late April, Musk dismissed Rebecca Tinucci, senior director of Tesla’s supercharger efforts, and Daniel Ho, head of the new vehicles program. The Tesla CEO also reportedly cut teams under Tinucci and Ho along with laying off its public policy employees and the entire staff working on Tesla superchargers.

However, since then he appears to have since started hiring back employees.

Musk also decided in April to lay off more than 10% of Tesla’s global workforce, an effort to prepare for the “next phase of growth.” Drew Baglino, who served as senior vice president of powertrain and energy, and Rohan Patel, vice president of public policy and business development, both departed Tesla around the time of those cuts.

Meanwhile, reports emerged on Aug. 20, that Uber (UBER) has hired Tinucci to oversee the company’s shift to electric vehicles. Tinucci will start her new position on Sept. 16.

Competition between Tesla and Uber appears to be heating up with the EV giant scheduled to unveil its robotaxi on Oct. 10, and claims it is currently working on its own integrated ride-hailing service.

EU China EV Tariffs

The European Union said on Aug. 20 it will hit Tesla vehicles imported from China with a lower tariff than other EVs manufactured in China.

the Financial Times reported Tuesday that the European Union has decided to levy an additional 9% tariff on Tesla vehicles imported from China, in addition to the existing duties of 10% applied to all foreign-made cars. That rate is lower than on other China EV makers and comes in below expectations which were closer to 21%.

Tesla exports the Model 3 and some Model Y vehicles from its Shanghai plant to Europe.

On June 12, the European Union announced it provisionally will impose additional tariffs of up to 38.1% on Chinese EVs starting in July, on top of the current 10% duties. Specifically, a 17.4% tariff will imposed on EV giant BYD, 20% on Geely, which owns Zeekr (ZK) and 38.1% on state-owned SAIC.

For other automakers, they’ll receive an average duty of 21% if they cooperate and 38.1% if they do not.

Tesla EVs In Regulators’ Sights

The EV giant also faces mounting pressure from regulators in 2024. A Reuters investigation found the EV giant has known of faulty suspension and steering parts across its model lineup going back at least seven years, but often blamed drivers when those parts failed.

Norway’s traffic safety regulator in late 2023 confirmed it’s been investigating suspension failures in Model S and X vehicles since September 2022. Sweden also announced on December 22, 2023 that it’s also looking into similar issues.

This comes after a National Highway Traffic Safety Administration (NHTSA) investigation spurred Tesla to perform an over-the-air software “recall” on more than 2 million vehicles after determining that the Autopilot is prone to misuse after reviewing 1,000 accidents.

The NHTSA recently closed its Autopilot safety probe. However it has opened a new investigation into whether the over-the-air update was sufficient.

Is Tesla Stock A Buy?

Tesla stock is down around 15% in 2024, but has rebounded nearly 50% from a late-April low amid some steep ups and downs.

Shares rallied onto positive ground for the year in mid-July, then rolled over into a five-week slide. After rebounding somewhat, TSLA stock has fallen back below its 50-day line and is fighting to hold its 200-day moving average, according to MarketSurge charts.

Wall Street consensus also has 2024 Tesla earnings firmly below last year’s level. That signals another year of earnings declines for this growth stock. Analysts currently expect Tesla earnings per share of just $2.24 in 2024, according to FactSet. That would be a 28% decline vs. $3.12 in 2023.

Tesla stock ranks fourth in the 35-member IBD Auto Manufacturers industry group. The stock has a 46 Composite Rating out of a best-possible 99. Shares also have a 32 Relative Strength Rating and a 57 EPS Rating.

Almost single-handedly, Elon Musk has turned the auto industry on its head. He has essentially forced it to get aboard the electric-vehicle train. Tesla has been a monster stock over much of its history, especially during its stratospheric run from mid-2019 to late 2021.

The stock has had mammoth runs and could again. A strong move off the 50-day line could offer an early entry for aggressive investors, perhaps using the Aug. 20 high of 228.22 as a specific trigger. That would also move TSLA up the right side of new base, which has a 271 buy point, though the stock is near the bottom of the consolidations.

Please follow Kit Norton on X @KitNorton for more coverage.