Tesla stock edges up as Wall Street raises targets ahead of Q2 earnings

Tesla stock traded slightly higher in trading on Tuesday as investors assessed a series of price target increases from Wall Street analysts ahead of the electric vehicle maker's second-quarter earnings report later this month.

TSLA stock rose 0.14% to $395.30 in the session, while the S&P 500 gained 0.37% and the Dow Jones Industrial Average fell 0.13%.

The gains followed updated forecasts from Morgan Stanley, Barclays and Wells Fargo after Tesla reported stronger-than-expected second-quarter vehicle deliveries.

Analysts lift price targets but maintain ratings

Morgan Stanley analyst Andrew Percoco increased his price target on Tesla to $417 from $415 while maintaining a Hold rating.

The analyst expects Tesla's stronger second-quarter deliveries to support quarterly results when the company reports earnings on July 22.

Tesla delivered about 480,000 vehicles during the second quarter, up 25% from a year earlier and well above Wall Street's expectation of 406,000 deliveries.

Barclays analyst Dan Levy also raised his price target to $370 from $360 while keeping a Hold rating on the shares.

Meanwhile, Wells Fargo analyst Colin Langan, one of Tesla's more bearish analysts, increased his target price to $130 from $125 while maintaining a Sell rating.

Langan said stronger deliveries could help Tesla post better-than-expected quarterly earnings but noted that higher costs for memory chips, copper and lithium could pressure profitability.

Despite the target price revisions, none of the analysts changed their overall investment recommendations.

Investors remain focused on Tesla's AI strategy

While analysts adjusted their earnings expectations, investors continue to focus more on Tesla's artificial intelligence ambitions than on near-term financial performance.

The market is looking for updates on the commercialization of AI-powered humanoid robots and further expansion of Tesla's unsupervised robotaxi business rather than simply a quarterly earnings beat.

Tesla's AI initiatives are viewed as a key reason the company continues to trade at a valuation more commonly associated with technology companies than traditional automakers.

The company currently carries a market value of about $1.8 trillion on a fully diluted basis, compared with approximately $250 billion for Toyota Motor, the world's second-most valuable automaker.

Long-term investors see value beyond current earnings

Christopher Tsai, president and chief investment officer of Tsai Capital, argued that investors should evaluate companies based on their long-term value creation rather than near-term earnings.

He said in a MarketWatch interview, “If you look at SpaceX and say, ‘Oh, it’s selling at a crazy multiple,’ you might be making the classical error that these companies are increasingly investing so much now, depressing earnings now, to create more value later.”

Tsai added, “What you really should be thinking about is what’s the base-case scenario, what’s the bear case and what’s the bull case in say, five years. Based on that, you know, and this is how we think about it.”

He also highlighted Tesla's investment in technologies such as Dojo AI and Full Self Driving, saying, “These are really the companies at the forefront, and they’re going to create, in our opinion, so much value, and people are missing that because they’re just focused on the near term.”

At the same time, Tsai acknowledged the uncertainty surrounding AI investments.

He said, “The way we’re approaching this is to first be extremely selective as to what kinds of businesses we’re investing in. And to recognize the probability of success is low.”