Tesla Blew Away Earnings. Shares Fell. What Gives?

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Updated July 28, 2021 3:07 p.m. ET / Original July 28, 2021 12:54 p.m. ET

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Production delays mightiness beryllium weighing connected Tesla shares.

Spencer Platt/Getty Images

Tesla blew distant earnings expectations Monday evening, reporting the champion 4th successful the company’s history. Shares dropped Tuesday successful effect to the pristine net print.

You can’t blasted the Street. Analysts were precocious connected Tesla’s (ticker: TSLA) earnings. Other things are weighing connected shares. It seems investors are waiting for something more than conscionable coagulated net to bid Tesla shares backmost to caller highs.

For starters, investors tin blame China. That’s the evident problem. Tesla banal opened higher Tuesday, but closed down 2% connected the time arsenic Chinese banal fears bled into assorted sectors. The Nasdaq Golden Dragon China Index dropped 5.2%, dragging down Tesla peers. Shares of Chinese electric-vehicle producers NIO (NIO), XPeng (XPEV) and Li Auto (LI) dropped 8.8%, 14.8%, and 13.9%, respectively.

Tesla banal is up a specified 0.3%, astatine $646.84, successful caller trading, portion the S&P 500 is down 0.1%. Go figure.

Analysts did their portion to enactment the stock. The mean expert price target is up astir $30, oregon astir 5%, since earnings. The people present sits astatine astir $656 a share, higher than Tesla’s banal price. That’s antithetic for the EV pioneer. Over the past 2 years, the mean expert people terms was astir 18% beneath wherever the banal traded.

“Tesla’s 2Q net were truthful beardown that adjacent Elon Musk decided to possibly bid farewell to the expert league calls,” quipped Morgan Stanley expert Adam Jonas successful a Wednesday report. Musk said helium mightiness not bash quarterly calls successful the future. (That’s different happening that tin beryllium debated by bulls and bears.) Jonas’s broader constituent was that Tesla’s operating nett was disconnected the charts, prompting him to rise his full-year net targets for 2021 and 2022.

Jonas rates shares Buy and has a $900 terms people for the stock. Credit Suisse expert Dan Levy isn’t arsenic bullish. He rates stock Hold and has an $800 terms target.

Still, Levy praised nett margins too, but raised different issue, too China, which mightiness beryllium weighing connected shares: accumulation delays. The Cybertruck won’t apt beryllium successful buyers’ driveways until aboriginal 2022, a small aboriginal than expected. That’s a bequest of the planetary semiconductor shortage that is roiling planetary automotive production. TE Connectivity (TEL) CEO Terrence Curtain told Barron’s precocious that the spot shortage chopped planetary car accumulation by astir 5 cardinal units successful the archetypal fractional of 2021.

Tesla isn’t immune to that issue. “We were capable to substitute alternate chips and past constitute the [software] successful a substance of weeks,” explained Musk connected the league call. “It’s not conscionable a substance of swapping retired a chip. You besides person to rewrite the software. So it was an incredibly aggravated effort of uncovering caller chips, penning caller firmware, integrating with the vehicle, and investigating successful bid to support production.”

With the shortage lingering, it seems investors privation thing else, too net and Wall Street endorsements, to nonstop shares retired of their caller scope and backmost supra $700.

There are a fewer imaginable catalysts to ticker for. New accumulation from Tesla’s Berlin and Austin, Texas, facilities volition travel astir twelvemonth end. Another imaginable catalyst could beryllium the Biden medication adding acquisition inducement for EVs. The timing of that, however, is unknown.

Write to Al Root astatine allen.root@dowjones.com

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