Tesla (TSLA 0.69%) is a polarizing stock. When investors are bullish on it, shares can soar in a hurry, but when there are concerns about its financials or growth prospects, it can end up in a free fall. This year has been a particularly volatile one for Tesla, and it was at one point down more than 40% in 2024. It has rebounded, but its year-to-date loss is still around 20%.
Whether Tesla has a strong finish to the year could depend on one key event, which is likely to be more important than even its next earnings report.
NASDAQ: TSLA
Key Data Points
The highly anticipated robotaxi event
Tesla is going to showcase its robotaxi this year, which could be a game changer for the ride-hailing industry. More importantly for the growth stock itself, the event will also show how far along Tesla is in achieving full self-driving capabilities, which has long been a big question mark. The company is even facing lawsuits over its self-driving claims, with many owners believing Tesla misled them into thinking that fully-autonomous capabilities would be available soon.
While Tesla's vehicles do have some self-driving capabilities, a driver still needs to be present and paying attention to the road. The vehicles aren't fully autonomous. If the company is able to show that it's making progress toward developing a fully-autonomous robotaxi, it would go a long way in winning over investors and proving its doubters wrong. The event was planned for August but has been pushed back to October due to a design change.
The poor earnings numbers may get worse
Tesla needs the robotaxi event to serve as a positive catalyst because, unfortunately, the business simply hasn't been doing all that well. Last month, Tesla reported its second-quarter results with revenue up just 2% year over year to $25.5 billion. And with operating expenses rising and margins shrinking, its net income was cut nearly in half, declining 45% for the quarter.
Competition has been ramping up from Chinese electric vehicle makers, and as other companies work on self-driving vehicles, the pressure is on Tesla to show both consumers and investors its vehicles are worth a premium. If it can't prove its self-driving technology has improved significantly, that could lead to more downward pressure on its margins.
Even with Tesla stock tumbling this year, it still trades at more than 80 times its forward earnings estimates. That's not the kind of premium many growth investors would be comfortable paying for a business struggling to grow its top line. With a market cap of nearly $640 billion, there's a lot of room for Tesla stock to fall further this year (and beyond) if it fails to show significant progress on its earnings report or during the October showcase.
Should you buy Tesla stock today?
Given the uncertainty that lies ahead, the company's deteriorating electric vehicle business, and CEO Elon Musk's tendency to set expectations too high, I'm wary of the stock right now.
Weak economic conditions could put even more pressure on the business. With how much Tesla has to prove in just the remainder of 2024, the smartest option for investors is to wait and see.
