The electric vehicle giant’s stock has rebounded sharply in recent weeks.
After steep decline in 2022 and a stunning 102% rally in 2023, Tesla (TSLA 1.55%) stock lost ground again in the first half of 2024, falling by 20.4%, according to data provided by S&P Global Market Intelligence.
Will the rest of 2024 look any different for the electric vehicle (EV) stock? It may — the stock has already recovered all of its losses from the first half and is now trading just barely in the green year to date. Here’s all you need to know about Tesla’s first half and what’s fueled the stock’s ongoing rally.
Tesla is facing challenges
Investor enthusiasm for Tesla stock started to fade in January as demand growth for electric cars slowed globally. Tesla repeately trimmed the prices of its vehicles to spur sales as inventory piled up, and its first-quarter numbers left much to be desired.
For the period, Tesla reported a 9% drop in its deliveries and a 9% drop in revenue. Its gross margin dipped 2 percentage points to 17.4%, while its net income nosedived by 55% to $1.1 billion. Tesla’s free cash flow plunged into negative territory, and the company warned that its vehicle volume growth in 2024 could be “notably lower” than last year’s. In the days that followed, Tesla announced it would be laying off more than 10% of its global workforce.
With hardly any good news to chew on, several analysts turned cautious about Tesla, and the stock sank. It’s only in recent weeks that the stock has rebounded, but the biggest driving force behind that rally just lost some of its traction.
Why Tesla stock has rebounded sharply
Tesla stock is up nearly 27% this month, as of this writing.
The EV delivery numbers it announced earlier in July hit the right notes. Its Q2 delivery number beat analysts’ estimates and was only 4.8% lower year over year, marking an improvement over the first quarter. More importantly, Tesla’s deliveries outpaced production in Q2 by nearly 9%, meaning the company is working through its inventory and could be seeing an uptick in demand after its price cuts.
But much of the enthusiasm for Tesla stock was being fueled by anticipation for the upcoming launch of robotaxis, which had been scheduled for Aug. 8. However, Musk just confirmed on social media platform X that Tesla is working on some design changes that have delayed the robotaxi launch. The event could be pushed to October, according to Bloomberg. Investors should get more clarity about the timeline when Tesla releases its second-quarterly report after the close on July 23.
So should you buy Tesla stock before that report comes out?
I’d say no. Tesla’s deliveries, sales, margins, and cash flows are under pressure. Until these metrics start to recover, the stock could remain volatile. As it is, it trades at a price-to-earnings ratio of 64, which isn’t cheap for a company that isn’t growing as fast as it used to.