Tesla posted its lowest quarterly profit margin in five years late on Tuesday, with earnings per share missing estimates for the fourth consecutive quarter.
It was the biggest one-day percentage drop in Tesla's stock since 2020, and it left Tesla's market capitalization at just under $700 billion, down from over $1 trillion in 2021.
Still the world's most valuable car maker, Tesla's valuation relies on investor expectations of big future profits driven by yet-to-launch products such as its promised robotaxis and robots.
"All of Musk's enthusiasm on the call, outside of (energy) storage, were for products that don't exist," said TD Cowen's Jeff Osborne.
Tesla's weak results, along with a report from Alphabet in which it flagged higher capital expenses, amounted to a poor start to second-quarter reports for Wall Street's most valuable companies.
Google parent Alphabet's stock fell almost 5%, and the losses in its shares and Tesla's sent Wall Street into a deep sell-off as investors worried about pricey valuations.
Tesla's EV deliveries have fallen for two straight quarters, and it has not introduced a lower-cost model that many expected, causing buyers to turn to rival EV makers. China's BYD 002494.SZ, for instance, widened its sales lead over Tesla in Singapore in the first half of 2024.
Tesla has been forced to cut prices and boost incentives to drum up sales of its aging vehicle line-up. Musk said rivals "have discounted their EVs very substantially, which has made it a bit more difficult for Tesla".
The company said the cheaper models it expects to bring out in the first half of 2025 would result in less cost reduction than previously expected, while delaying a widely awaited event for its robotaxi to October.
"Tesla is not being priced on auto, but autonomy and AI ... We believe any payoff from (Tesla's AI) initiatives (is) further out," wrote UBS analyst Joseph Spak, reiterating a "sell" rating on the stock.
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Tesla's stock has recently traded at 85 times its 12-month forward earnings estimates, compared to 7 for legacy automaker Ford Motor.
Musk said on Tuesday Tesla's Optimus humanoid robot had begun performing tasks autonomously in one of its facilities and that he would be shocked if there were no self-driving Tesla vehicles without human supervision next year.
In 2019, Musk told investors that Tesla would be operating a network of robotaxis by 2020.
He also launched a poll asking users on X if Tesla should invest $5 billion in his AI startup xAI - a quarter of which he planned to keep for investors in X. The value of X, formerly Twitter, has plunged since his $44 billion purchase of the platform.
Nearly 1 million people had participated with 68% voting in favour of the investment.
Wall Street analysts questioned whether Tesla will be able to overcome technical and regulatory hurdles to deploy robotaxis within the next few years. Musk said on Tuesday that Tesla pushed back the unveiling of Tesla's robotaxi to Oct. 10 from Aug. 8.
It may take Tesla until the end of the decade, if then, to reach a point where its cars can drive themselves without any human intervention, said TD's Osborne.
The company's price cuts and incentives pushed automotive gross margins, excluding regulatory credits, down to 14.6% in the second quarter.
One of the 50 analysts covering the stock cut their rating, while there were three price target increases and two decreases, according to LSEG data.
Analysts, on average, rate the stock a "hold," with a median price target of $212.50, the data shows.
