After a brutal start to the year, shares of Tesla (TSLA 0.44%) started to recover throughout the second quarter. Between April 1 and June 30, Tesla stock rose by 18% -- outperforming both the S&P 500 and the Nasdaq Composite.
With the company schedule to report second-quarter operating results on July 23, is now a good time to follow the momentum in Tesla stock and buy shares before that report?
NASDAQ: TSLA
Key Data Points
What fueled the rebound in Tesla stock during Q2?
About a month ago, I wrote an article in which I explained how Tesla's share price movements are often highly correlated with a specific narrative surrounding the company.
For example, earlier this year Tesla stock took a nosedive thanks in large part to two factors. First, it seemed likely that Tesla's supply chain operations would struggle following President Donald Trump's sweeping new tariff policies. In addition, co-founder and CEO Elon Musk's involvement with the initiative known as the Department of Government Efficiency (DOGE) seemed to both investors and Wall Street analysts like a giant distraction from his duties as CEO of Tesla, as well as an anger-fueling endeavor. Unsurprisingly, investors became bearish and started to sell.
However, following Musk's departure from DOGE, the serial entrepreneur turned his attention back to Tesla's artificial intelligence (AI) ambitions -- namely, the launch of the company's autonomous vehicle fleet, dubbed the robotaxi.
Seemingly overnight the narrative surrounding Tesla flipped from bearish skepticism to one of excitement and hype. Guess what happened? Tesla stock started to climb.
The larger theme I'd like to drive home here is that Tesla's share price volatility is notoriously difficult to navigate, largely because it can be unclear whether market moves are influenced by the company's underlying fundamentals (i.e., operating results) or fueled by shifting narratives and changes in perception.
Image source: Getty Images.
What should investors be on the lookout for during the earnings call?
There are a number of high-priority items that Tesla investors should be on the lookout for next week.
First, I think it would go a long way with investors if management spent some time talking in detail about the uninspiring performance of Tesla's electric vehicle (EV) business. While an uncertain macroeconomic environment combined with rising competition both domestically and overseas from the likes of Rivian and BYD serve as challenges to Tesla, these are pretty obvious headwinds. Insights around how the company can outmaneuver these road bumps and reignite growth would be welcomed.
Piggybacking off that idea, my hope is that management addresses how Trump's "big, beautiful bill" -- now signed into law -- could affect Tesla in both the near and long term. With EV tax subsidies being phased out later this year, Tesla may witness a surge in demand for its cars over the next couple of quarters. How can the company capitalize on that and try to turn it into a long-term growth opportunity?
It's important that investors hear more about the robotaxi launch from last month. While robotaxis remain a small contributor to Tesla's business today, much of the future growth narrative surrounding the company hinges on this effort. For this reason, shareholders need to understand the highlights and lowlights from the launch, what management has learned from consumer feedback so far, and how the company plans to increase its autonomous vehicle fleet based on these details.
Lastly, and perhaps most importantly, investors should listen closely to Musk and how he answers questions from analysts. At times, Musk can go off script during earnings calls -- focusing on Tesla's ambitious projects and generating investor hype with speculative commentary rather than providing concrete updates.
With Musk potentially entering the political arena once again -- this time by creating his own political party -- it's up to investors to determine how focused the chief executive of Tesla is during the call next week.
Is Tesla stock a buy right now, before its report?
As an investor with a long time horizon, I'm not big on timing my buys and sells. Rather, I add to or trim positions based on my conviction and to keep my portfolio balanced.
From my perspective, the narrative surrounding Tesla is sharply divided. There are many unknowns surrounding Tesla's actual business right now, so I'd caution investors against following the stock's momentum and trying to get in or out before a certain day.
