Tesla briefly lost its $1 trillion market capitalization on Friday as shares extended losses following a disappointing second-quarter earnings report, underscoring investor concerns over the electric vehicle maker’s profitability and the growing scrutiny surrounding CEO Elon Musk’s long-term vision.
Tesla stock fell as much as 3.65% during Friday’s session to an intraday low of $308, reducing the company’s market value to approximately $996.1 billion.
The shares later recovered enough to push Tesla’s valuation back above the $1 trillion mark, although the stock remained under pressure after Thursday’s steep post-earnings decline.
The latest move follows a 14% plunge after the company’s quarterly results, as investors reacted to weaker-than-expected profits despite stronger vehicle deliveries and rising revenue.
Earnings miss shifts focus to Musk’s long-term narrative
Tesla reported second-quarter operating profit of $398 million, down from $923 million a year earlier and well below Wall Street’s expectation of $1.7 billion, according to FactSet.
The company sold around 480,000 vehicles during the quarter, up 25% year over year and roughly 80,000 more than analysts had projected.
However, weaker pricing, an unfavorable vehicle mix, lower regulatory credit sales, rising costs and higher research spending weighed heavily on profitability.
For many investors, the earnings miss itself was less significant than growing questions about whether Musk can continue to justify Tesla’s premium valuation through future growth initiatives.
During the earnings call, Musk reiterated his long-term ambitions for Tesla, highlighting continued growth in robotaxis and humanoid robots while introducing the idea of the Megapod, a modular artificial intelligence data center built with Tesla hardware.
“We’re working on what we believe is the most ambitious buildout of advanced infrastructure manufacturing capacity ever in history,” he said.
Despite the earnings disappointment, Wall Street analysts largely maintained their ratings on the stock.
According to FactSet, the average analyst price target declined by only $8 to $392.
Analysts broadly characterized Tesla’s elevated spending as part of a broader transition toward autonomous driving, robotics and AI infrastructure.
RBC analyst Tom Narayan maintained optimism around Tesla’s robotaxi and humanoid robot opportunities while stating that nothing is “fundamentally wrong with the business.”
Valuation debate intensifies as Ark Invest buys the dip
Tesla’s valuation continues to stand apart from traditional automakers.
The company trades at roughly 175 times projected 2026 earnings, compared with an average multiple of about 24 times for the rest of the Magnificent Seven, according to the provided data.
Bill Birmingham, managing director at Rex Shares, said in a Barron’s report that the valuation reflects investors’ focus on future software and autonomous technologies rather than current vehicle sales.
“The valuation is already saying that investors are paying less attention to vehicle deliveries and more attention to whether high-margin software, autonomy, power, and eventually robot revenue arrive quickly enough to offset structurally lower auto margins,” he added.
Canaccord analyst George Gianarikas also maintained a Buy rating, although he reduced his price target by $40 to $410 following the earnings release.
“We have walked this Tesla tightrope before,” says Canaccord analyst George Gianarikas. “History has taught us, betting against Elon Musk is usually a fool’s errand.”
Meanwhile, Cathie Wood’s Ark Investment Management used the selloff to increase its Tesla exposure.
According to the firm’s daily trading disclosures, Ark purchased approximately $51.2 million worth of Tesla shares across four exchange-traded funds following the earnings release.
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