Needham reiterated a Hold rating on Tesla (NASDAQ:TSLA) after the electric vehicle giant posted its 2Q production and delivery numbers, beating consensus estimates by about 5%.
Over the past year, the growth in TSLA's production capacity has surpassed the growth in vehicle deliveries. As a result, there have been several rounds of price cuts throughout the year, with the most significant reductions occurring in early Q1. According to Needham, TSLA's inventory is still expanding, albeit at a slower pace. They consider this a mildly positive development, but they believe that additional confirmation (a lack of price cuts) is necessary to solidify this view.
Analysts wrote in a note, “Most encouragingly for TSLA bulls, inventories are growing at a slower pace by our math, helping modestly lower the likelihood of further aggressive price cuts. However, uncertainty isn't fully resolved as inventories still grew on an absolute basis. It's likely bulls feel more comfortable that a margin trough is near, while bears are likely to remain unconvinced; we don't view the Q2 numbers as enough to declare victory for either side.”
According to Needham, the headlines surrounding the initial production and launch of Tesla's Cybertruck are seen as a victory for bullish investors. This is because early adopters of the Cybertruck are likely to be enthusiastic supporters of TSLA, making them more inclined to overlook any minor production delays or negative reviews compared to the critical scrutiny they might receive from Tesla's retail investor base.
Analysts expect the Cybertruck to be a niche vehicle, but given the size of the reservation book and high purchase intent, TSLA won't have to win over new consumers soon, so they think that bears expressing a "short the launch" thesis will likely struggle to gain traction in the near term.
Needham sees a move to a NACS connector standard away from CCS, along with Tesla's decision to open up its charging network to other automakers, as a negative. They believe that by doing so Tesla is “opting to lower the drawbridge itself” vs. forcing drivers of non-TSLA vehicles to endure a lower quality charging experience.
Analysts consider the move as highly unlikely from a competition perspective that TSLA is allowed to dominate US EV Charging. Even if Needham doubles their revenue estimates for Tesla's Services and other segments in 2026, the EPS estimates would only increase by 1% due to the low gross margin nature of this business.
Shares of TSLA are down 0.38% in pre-market trading on Wednesday.