Tesla (TSLA +3.01%) shares got a boost following its first-quarter earnings report. Revenues declined 9% year over year and came in slightly below Wall Street's estimates, but the stock's slide heading into the report shows this negative outcome was already expected.
There are mixed opinions on Wall Street regarding where the stock goes from here, but RBC Capital remains optimistic on Tesla's future. Analyst Tom Narayan slightly lowered his price target from $294 to $293, but that's still significant upside from the current share price near $170.
NASDAQ: TSLA
Key Data Points
Tesla continues to invest for the long term
Narayan is maintaining an outperform (buy) rating on Tesla after the company showed progress on two fronts.
First, he sees Tesla executing well on cost controls as gross profit margin on automotive revenue came in above estimates last quarter.
Second, he noted that Tesla has made significant progress in developing its full self-driving (FSD) software. The more progress Tesla makes in artificial intelligence (AI) training for FSD, the higher the profit potential for the company in terms of growing subscription revenue. In the near term, the analyst sees Tesla's progress in FSD benefiting its robotaxi business. Tesla is set to unveil the Cybercab in August.
Is the stock a buy?
Tesla still has a high ceiling to grow vehicle deliveries over the long term, so investors can see a strong return on their investment. But as long as Tesla reports falling revenue and shrinking volumes, there's no reason for the stock to move higher anytime soon. It doesn't hurt to wait for the business to show improvements before buying shares.
