Al Root
Tesla stock rose Friday, bouncing from its large post-earnings drop. The overall picture for shares, however, looks relatively unchanged.
Thursday's dip came after CEO Elon Musk warned on Tesla's earnings conference call that "rough quarters" could lie ahead. Investors are also starting to worry that the new lower-priced model they have been waiting for isn't a new model at all, but a lower-priced Model Y.
"It's a Model Y," Musk appeared to say, talking over CFO Vaibhav Taneja on the Wednesday evening call. Tesla didn't respond to a request for clarification of his statement.
A cheaper Model Y with potentially fewer features, less power and range, and lower-end materials wouldn't be a new model. In the car business, that would be called a new trim level of an existing model.
Shares of the electric-vehicle maker were up 5.6% in midday trading, at $322.35, while the S&P 500 and Dow Jones Industrial Average were up 0.2% and 0.3%, respectively.
The rise follows Thursday's 8.2% dip, which came in response to the company's second-quarter earnings reports. Most numbers were essentially in line with Street expectations, but CEO Elon Musk's comments might have spooked investors.
"Yeah, we probably could have a few rough quarters," said Musk, answering a question about free cash flow and the loss of federal electric-vehicle purchase tax credits. "I'm not saying we will, but we could. Q4, Q1, maybe Q2."
One thing designed to temper the pain is a new, lower-priced vehicle. Tesla started producing it in the second quarter, according to management, but it won't go on sale until the fourth quarter.
New production is helpful, but the Street and investors are starting to fear that it isn't an all-new model serving a different segment of the car market. It might just be a lower-end Model Y.
The second half of the year "faces more challenges," wrote Wells Fargo analyst Colin Langan. "We see limited demand offset from the affordable Model Y coming." He rates shares Sell and has a $120 price target for the stock.
"The reveal that the new, more affordable model will look just like the Model Y raises concerns about potential cannibalization," wrote Deepwater managing partner and Tesla investor Gene Munster on X.
Future Fund Active ETF co-founder Gary Black echoed Muster's view. He is a longtime Tesla investor who recently sold his shares at around $358, according to Black, believing there was some froth in the stock related to Tesla's robo-taxi opportunity.
Tesla did launch its robo-taxi service in Austin, Texas in June. And Musk believes the service can cover half the U.S. population by the end of the year, pending regulatory approvals.
Musk believes the end of the rough quarters is tied to Tesla's self-driving technology. That may be the case, but there are still investors who want it to sell more cars.
The midday move leaves Tesla roughly $10 below the pre-earnings price. Shares have recaptured about 60% of the after-earnings drop. Tesla was down about 2% for the week, a relatively small move given the importance of earnings. It's a sign that, for investors, not much has changed. They know about the challenges to EV sales and are looking toward an AI-trained self-driving future.
Coming into Friday trading, Tesla stock was down 24% year to date and up 39% over the past 12 months.
Write to Al Root at allen.root@dowjones.com
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July 25, 2025 12:26 ET (16:26 GMT)
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