TLDR
- Tesla stock fell 1.4% to $321.20 on Tuesday after early gains, continuing to recover from an 8.2% drop following Q2 earnings
- Morningstar maintains a $250 fair value estimate with a 2-star rating, viewing Tesla as overvalued at current prices
- CEO Elon Musk warned of “rough quarters” ahead due to loss of federal EV tax credits and regulatory support
- The company’s long-awaited affordable vehicle will be a stripped-down Model Y rather than a completely new car
- Tesla is testing robotaxis in Austin with safety features and plans Cybercab production in 2026, though full deployment may not happen until 2028
Tesla shares struggled to maintain momentum on Tuesday, falling 1.4% to $321.20 despite early morning gains. The electric vehicle maker had been attempting a three-day winning streak following its post-earnings recovery.
The stock opened higher but couldn’t hold those levels as broader markets declined. The S&P 500 dropped 0.3% while the Dow Jones Industrial Average fell 0.5%.
Tesla had gained 3.02% on Monday, marking its second consecutive gain of more than 3%. This followed an 8.2% plunge on Thursday after the company reported second-quarter earnings on July 23.
The earnings results met Wall Street expectations but contained some disappointing news. CEO Elon Musk warned investors about “rough quarters” ahead as the U.S. EV industry faces headwinds from the loss of federal purchase tax credits.
Affordable Vehicle Disappoints Some Investors
Tesla management revealed that its long-awaited lower-priced vehicle would be a stripped-down version of the Model Y. This wasn’t the completely new car that some investors had hoped for.
The affordable vehicle is set to enter production in the fourth quarter of this year. Morningstar analysts expect production to ramp up in 2026.
Tesla’s delivery guidance also raised concerns among analysts. Management did not provide specific delivery numbers for the year, which Morningstar interprets as a signal that volume growth is no longer expected.
Morningstar forecasts Tesla deliveries will decline to 1.65 million in 2025 from 1.79 million in 2024. The first half of the year is expected to be particularly challenging due to the new Model Y not being available in all markets.
AI and Robotics Take Center Stage
Investors are focusing less on Tesla’s car business and more on its artificial intelligence ventures. The company launched an AI-trained robotaxi service in Austin, Texas, in June with additional safety features.
Tesla employees sit in the front passenger seat during testing, and operations are limited to a specific geographic area. This indicates the autonomous driving software is still in early testing stages.
Musk spoke over the weekend about Tesla’s Optimus humanoid robot. The company is currently on version three of the robot and plans to produce them in larger quantities starting in 2026.
Tesla maintains its timeline for Cybercab robotaxis to enter production in 2026. However, Morningstar analysts don’t expect a full robotaxi product without safety drivers and geographic restrictions until 2028.
Morningstar assigns Tesla a narrow economic moat based on its brand strength and cost advantages. The company’s luxury brand positioning allows for premium pricing while manufacturing expertise keeps costs competitive.
Tesla’s financial position remains strong with around $37 billion in cash and investments. Total debt stands at approximately $7 billion, with non-recourse debt below $5 million.
The stock carries a “Very High” uncertainty rating from Morningstar due to the wide range of potential outcomes. Competition from traditional automakers and new entrants poses ongoing risks to Tesla’s market position.
Year to date, Tesla stock is down about 19% but remains up roughly 40% over the past 12 months. Morningstar maintains its $250 fair value estimate, suggesting the stock is overvalued at current levels around $321.
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