Wedbush analysts emphasize that despite recent margin pressures, Tesla's (NASDAQ:TSLA) future hinges on strong demand in China and the impending rollout of autonomous and AI technologies.
The firm explained that Tesla's mixed results show auto gross margins (excluding credits) missing Street expectations by 200 basis points, primarily due to continued price cuts and average selling price (ASP) pressures.
However, analysts see positive signs in electric vehicle (EV) demand metrics moving into the second half of the year.
"The bull/bear debate on Tesla will rage on today," Wedbush notes, highlighting the divide between short-term margin concerns and long-term growth potential.
Analysts were not expecting significant surprises this quarter and view the current margin weakness as a short-term issue. "The next phase of the Tesla growth story is around autonomous, Robotaxis, and AI playing out for Musk & Co.," they assert.
Tesla CEO Elon Musk announced October 10th as the new Robotaxi Day, marking the start of Tesla's AI journey, which Wedbush values at $1 trillion over the next few years. While Musk anticipates potential rollouts by the end of the year, analysts consider a next-year timeline more realistic, depending on regulatory approval.
Wedbush notes that a significant development is the planned launch of a new sub-$30,000 vehicle in the first half of 2025, expected to drive substantial volumes for Tesla.
Analysts believe that focusing solely on the 200 basis points margin miss and reliance on regulatory credits misses the bigger picture.
"Tesla is a robotics and AI play," they assert, suggesting that potential investments in Musk's xAI company could be a smart move, aligning with the broader AI and Robotaxi strategy to be unveiled in October.
Despite margin challenges, the EV demand story is stabilizing in China, with price cuts mostly concluded, add analysts.
"The mojo is back at Tesla with AI front and center," Wedbush concludes, reiterating their Outperform rating and $300 price target for Tesla.