Tesla's second quarter delivered record revenue and almost no operating profit, and the stock fell about 15% in response. Wall Street's average price target barely moved, leaving a 29% gap between that target and the closing price. Across the analysts covering the company, the consensus rating is still a buy.
Tesla shares sank about 15% Thursday, closing at $319.69, after the company reported that second-quarter operating income fell 57% year over year to $398 million. But the average analyst price target still sits near $412, about 29% above that close.
Record revenue that never reached profit
Revenue rose 26% year over year to $28.2 billion, helped by 480,126 vehicle deliveries — the company's best second quarter ever. That accelerated from 16% growth in Q1 and pushed the carmaker past $100 billion in trailing-12-month revenue for the first time.
The profit line moved the other way. The 57% drop in operating income squeezed the operating margin to 1.4% from 4.1% a year earlier, and adjusted earnings per share came in at $0.33, down 18%.
Where the money went
Selling cars was not the problem: automotive gross margin slipped only modestly, to 16.9%. The damage sat below that line, where Tesla spends heavily on AI, its robotaxi service and its Optimus robot program, plus stock-based compensation tied to CEO Elon Musk's 2025 pay award.
Regulatory credit revenue, a high-margin helper in past quarters, also collapsed 67% to $146 million. And capital expenditures more than doubled to $5.8 billion, pushing free cash flow to negative $1.1 billion — the first quarterly cash burn in years.
What the 29% of upside rests on
Across the 44 analysts covering the company, the consensus rating is still a buy, and their models on average still credit Tesla for a future of high-margin software, a scaled robotaxi network and strong returns on its AI spending. Even after the drop, the shares trade at about 300 times earnings — a valuation that $0.33 of adjusted earnings per share does not support on its own.
The report did offer evidence that the newer businesses are moving. Services and other revenue rose 50% year over year, and energy storage deployments climbed 41% to 13.5 gigawatt-hours, though both lines remain small next to the car business that still pays Tesla's bills.
Motley Fool analyst Daniel Sparks does not treat the gap as an opportunity in itself, because targets get updated on a delay after a move this size: the average could keep drifting down toward the price instead of the price rising to meet it.
Source: The Motley Fool
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