Through the first seven months of 2024, the S&P 500 and Nasdaq Composite indexes generated total returns of 18% and 17%, respectively. It's certainly been a fantastic year for stock market investors thus far.
However, not all companies have been as fortunate to produce positive gains for their shareholders. Top electric vehicle (EV) maker Tesla (NASDAQ: TSLA) falls into the losing category, as the stock tanked 7% from the start of 2024 through the end of July.
Should you remain bullish and buy the dip?
Another uninspiring quarter
Tesla has earned a reputation for dominating the global EV market, a position that resulted from impressive growth over the past decade, thanks to an expanding product lineup and bolstered manufacturing capabilities. But of late, the business has been going through a difficult rough patch.
The struggles continued in the most recent quarter. During Q2 2024 (ended June 30), Tesla reported revenue of $25.5 billion, which was up 2% year over year. This came in ahead of Wall Street's forecast, but it was hardly anything to write home about. Even worse, Tesla's automotive revenue marked a 7% decline compared to Q2 2023.
It wasn't all bad news, however. Tesla said that energy generation and storage revenue surged 100% to $3 billion, with profits in the segment hitting a record. The company released a new version of its full self-driving (FSD) software. Tesla plans to introduce a more affordable car model next year. And it's expanding production and utility of its humanoid robot.
Just a car company
Tesla offers customers five car models today, a lineup that includes the S, X, 3, Y, and Cybertruck. And in the latest quarter, 78% of total company revenue came from the sale of automobiles. This is an auto manufacturer, as the financial data clearly indicates.
However, Elon Musk doesn't see it this way. "We should be thought of as an AI or robotics company," he said on the Q1 2024 earnings call. To be fair, this has a tiny sliver of truth to it. Tesla did make $600 million in AI-related investments in the second quarter. It's working on FSD technology, making it a leader in the space. And it has developed a humanoid robot called Optimus.
But as of this moment, those tech-focused ambitions don't drive financial performance. Tesla still makes and sells vehicles, which is what impacts its results today.
We're seeing that even a well-known brand like Tesla isn't immune from the negative factors in the economy and industry. Higher interest rates continue to dampen consumer interest in buying new EVs. And intense competition means Tesla's pricing power has diminished, which has hurt margins in the past couple years.
Maybe one day Tesla will be able to launch a worldwide fleet of robotaxis that brings in huge revenue and profits. Or maybe Tesla can become a dominant clean energy enterprise, helping to transition the globe from fossil fuels to sustainable power. Or perhaps Tesla's humanoid robots not only support Tesla's own manufacturing in a big way, but they find themselves in the factories of other companies. This sounds exciting, but it's anyone's guess if or when it will become a reality.
Steep valuation
Looking at Tesla's current operations will make investors believe that the stock is unquestionably overvalued. It trades at a price-to-earnings ratio of 60.4. That's about twice the multiple of the tech-heavy Nasdaq-100 index . This remains a story stock that has allure thanks primarily to its founder and CEO's ability to drum up huge interest from investors.
In my opinion, Tesla doesn't look like a smart buying opportunity, even though its shares trade 48% off their November 2021 peak. By having a more critical perspective of the business and the stock, you might feel the same way.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy .
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