By any measure, Tesla Inc's (NASDAQ:TSLA) latest quarterly results were bleak. A steep drop in revenue, plunging profits and no firm growth guidance for the year left investors bracing for impact.
Yet in a twist of market logic, the shares climbed in after-hours trading – a sign of just how much optimism is now pinned on one thing: Elon Musk getting back to work.
For UK investors with stakes in global equity funds or ETFs tracking the so-called “Magnificent Seven” (Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla), the health of this high-octane group matters. Tesla’s outsized volatility has often been a drag.
But Wedbush Securities reckons a reset could be underway.
In a note released after the earnings, the brokerage described the investor call as a “turning point”. Musk signalled he would scale back his political engagements and return to running Tesla full-time, a move Wedbush believes was essential to stabilising sentiment after months of damage.
Turning point
Tesla reported adjusted earnings per share of 27 cents, well below Wall Street’s 39-cent estimate. Revenue dropped 9% year-on-year to $19.34 billion, driven by a 20% slide in automotive sales.
The EV maker delivered 336,681 vehicles in the quarter, down from over 377,000 a year ago. Its energy business, which includes battery storage and solar, rose 67% but still missed forecasts.
Margins shrank. Gross margin came in at 16.3%, while the all-important automotive margin (excluding regulatory credits) fell to 12.5%, dragged down by lower prices and sales incentives. Without a $595 million boost from environmental credits, the core car business would have swung to a loss.
'Ugly' results
Wedbush, which upgraded its price target from $315 to $350, emphasised that while the results were ugly, Musk’s renewed focus on the company could mark a shift.
The note suggested the CEO appeared “dialled in” on the call, a rare occurrence in recent quarters. Musk promised to scale back his involvement with DOGE, a controversial Trump-aligned initiative, and spend most of his time at Tesla.
The firm acknowledged that not all the reputational damage could be undone, particularly in Europe and among ESG-conscious investors. But the pivot away from politics was viewed as an essential first step in rebuilding confidence.
Looking ahead, the focus is on Tesla’s next-gen products: Autonomous driving, robotaxis and humanoid robots. Wedbush expects these initiatives to become central to the company’s long-term growth.
Key milestones include the pilot launch of unsupervised full self-driving in Austin this June, and a lower-cost model due in 2025.
Improving fundamentals?
The brokerage also flagged improving fundamentals for the second half of the year. The refreshed Model Y is expected to boost deliveries, and production should stabilise after a rocky start caused by factory retooling.
There’s also hope Tesla can regain lost ground in China, where it has fallen behind cheaper rivals like BYD.
Risks remain. Wedbush cited ongoing tariff volatility, softening demand, and potential capital needs as reasons for caution. But it believes Tesla’s strong balance sheet – with nearly $37 billion in cash – gives it firepower to navigate a bumpy ride.
For UK retail investors and institutional holders alike, Tesla remains a high-risk, high-reward bet. It is the only pure-play EV stock among the tech-heavy Magnificent Seven, and its influence on passive portfolios is substantial.
Any recovery in sentiment could ripple across broader indices, just as its recent slump has been a drag.
The bottom line? Wedbush argues Tesla’s biggest asset is back in the driving seat. Now it’s up to Musk to deliver on that promise.
Wall Street seems to agree. After hours, the shares were up 4.6% and look set to build on those gains with the stock indicated to open 6.9% higher.