Tesla (NAS: TSLA) reported second-quarter deliveries of 384,122 vehicles, a 13% decline versus the second quarter of 2024. Tesla shares were up 5% in premarket trading on the news.

A second straight quarter of declining year-over-year deliveries is in line with our forecast for deliveries to decline in 2025. Through the first half of the year, Tesla’s deliveries were down 13%.

The result also supports our view that Tesla’s current product lineup is at market saturation. We don’t think Tesla will see meaningful deliveries growth without a new lower-cost vehicle aimed at the affordable market.

We maintain our USD 250 fair value estimate for narrow-moat Tesla. We view shares as overvalued, with the stock trading in 2-star territory.

High hopes for robotaxis

In our view, Tesla’s stock continues to reflect optimism for the rollout of the company’s robotaxi business and prices in a successful full product launch next year, in line with management’s guidance.

We agree that robotaxi deserves a higher valuation than new vehicle launches. In our model, we value the robotaxi business higher than the valuation from new vehicle launches.

Tesla plans to release its earnings on July 23. We hope to hear an update on robotaxi testing and the exact steps to a full launch. We also hope to hear an update on the new affordable vehicle, which management said would launch this year.

The robotaxi is in testing, but we view safety precautions—including employees riding in the vehicles, the geofenced testing area, and invite-only access—as signs Tesla is still in the early stages. This supports our view that Tesla won’t see a full robotaxi launch until 2028.

We define a full launch as when anyone in the Austin, Texas, area can download the robotaxi application and take an un-geofenced ride with no Tesla employee in the vehicle. This is consistent with management’s long-term vision for the robotaxi product.

Tesla bulls say

  • Tesla has the potential to disrupt the automotive and power generation industries with its technology for EVs, AVs, batteries, and solar generation systems.
  • Tesla will see higher profit margins as it reduces unit production costs over the next several years.
  • Tesla’s full self-driving software should generate growing profits in the coming years as the technology continues to improve, leading to a robotaxi service, increased adoption by Tesla drivers, and licensing from other auto manufacturers.

Tesla bears say

  • Traditional automakers and new entrants are investing heavily in EV development, which will result in Tesla seeing a deceleration in sales growth and being forced to cut prices due to increased competition, eroding profit margins.
  • Tesla’s large investment into autonomous driving software will be value destructive as the robotaxi product will face delays and competition from Waymo, who already offers a robotaxi service.
  • Tesla CEO Elon Musk’s political activities will turn consumers away from buying a Tesla in key markets including the US and Europe, leading to lower sales and profits.

Tesla (TSLA)

  • Fair Value Estimate: $250.00
  • Star Rating: ★★
  • Moat Rating: Narrow
  • Uncertainty Rating: Very High

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.