Tesla (NASDAQ:TSLA) is at its highest price in 2024 and has bounced more than 80% higher from its April lows. Better than expected second-quarter deliveries drove the shares higher and Tesla stock notched its ninth consecutive day of gains.
While Ark Invest’s perma-bull Cathie Wood still sees the electric vehicle maker going on a 10x run over the next five years to hit $2,600 per share, should less sanguine investors at least expect Tesla to continue on this road higher?
Let’s dive into the leading EV stock and see whether Tesla should take its place among its fellow Magnificent Seven brethren as a stock to buy.
Not So Magnificent Performance
2023 was a remarkable year that saw Tesla double in value. It was the third-best performer among the Magnificent Seven stocks that were almost wholly responsible for the S&P 500’s 24% gain. This year has been markedly different.
| Magnificent Seven Stock | 2023 Performance | 2024 Performance |
| Alphabet (NASDAQ:GOOG, GOOGL) | 58.8% | 35.2% |
| Amazon (NASDAQ:AMZN) | 80.9% | 31.2% |
| Apple (NASDAQ:AAPL) | 48.2% | 18.3% |
| Meta Platforms (NASDAQ:META) | 194.1% | 49.5% |
| Microsoft (NASDAQ:MSFT) | 56.8% | 24.0% |
| Nvidia (NASDAQ:NVDA) | 238.9% | 158.9% |
| Tesla | 101.7% | 1.8% |
| S&P 500 | 24.2% | 16.8% |
All the Magnificent Seven stocks, except Tesla, are running higher because of artificial intelligence. And until the second-quarter deliveries report came out, Tesla stock was deep in the red for 2024. It wasn’t a stellar report either.
The EV maker delivered 443,956 vehicles, almost 5% fewer than the year-ago figure. What made the report so powerful was Wall Street was expecting deliveries to come in at 439,000 vehicles and in some instances as much as a 15% year-over-year decline. So the market interpreted the less bad number as being good.
Giving Up Profits for Sales
We’ve seen most EV makers reporting surprisingly good results for the second quarter. Lucid Group (NASDAQ:LCID) reported a 70% spike in deliveries to almost 2,400 EVs, Rivian Automotive (NASDAQ:RIVN) saw a 1.5% gain to 13,790 vehicles and virtually all of the Chinese EV stocks reported record deliveries too.
Adding Tesla’s better-than-expected results into the mix is being touted as a revival of the EV market. Yet not all is what it seems.
Most major EV manufacturers slashed prices on their cars earlier this year after Tesla ignited a price war by cutting prices on its Model three and Y vehicles. Tesla juiced its sales again this year by offering additional discounts and incentives, including low-interest loans and lower-cost leasing plans.
These were not organic boosts to sales volumes but EV manufacturers juicing their numbers by giving up profits. While Tesla is profitable and can perhaps afford to let margins narrow a bit, most other EV makers cannot.
Lucid and Rivian are loss-generating machines that puts GAAP profitability further out of reach. They are losing tens of thousands of dollars on every single EV they sell. The only reason they remain in business is because of outside cash injections from third parties.
Cutting prices and increasing incentives can only go so far in boosting sales. It is not an indication of a healthy industry.
Tesla Stock Is Stuck In the Breakdown Lane
Declining deliveries is not as positive for Tesla as the market is making out. Unlike many of its peers, though, the EV leader is not at risk of bankruptcy if the cash infusions dry up.
Yet it still looks improbable that Tesla can somehow catapult itself to a $2,600 valuation as Cathie Wood imagines (she has a top-line estimate of $3,100 and a low-end $2,000 worst-case scenario).
Having nearly doubled in value from its low point, Tesla stock looks like it has given the market as much as it is going to get.
Its fellow Magnificent Seven peers can glide along on AI’s halo, but unless there is a dramatic change for the better with the economy, Tesla’s run higher looks like it will stall out.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
