Buy Tesla stock ahead of Q2 earnings: Baird

Baird analysts reiterated an Outperform rating on Tesla (NASDAQ:TSLA) shares, citing a good setup ahead of the electric vehicle (EV) maker’s Q2 earnings report next week.

“We are buyers of the stock ahead of Q2 EPS,” analysts wrote.

Baird’s positive outlook stems from a more stable pricing environment during the quarter, higher revenue from full self-driving, and a significant beat in the Energy Segment as factors supporting a strong quarter.

Baird analysts are particularly keen on the upcoming Robotaxi event, which they think will be a positive catalyst for Tesla stock.

They expect the event to offer greater clarity on the financial impacts of the Robotaxi product and provide a framework for modeling its potential. Analysts believe that Tesla will initially deploy its own Robotaxi fleet in select cities to begin the rollout.

"We think there will be limited revenue in 2025 but think the rollout will be a positive catalyst for the stock,” they said in a note. “We think a broader rollout to consumers is a longer-term offering, but note the speed of improvement in Full-Self Driving is improving at a quicker rate."

Moreover, analysts see the unveiling of Tesla's next-generation platform as a more immediate catalyst for the company’s shares.

They note that the postponement of the event from August 8 to October increases the likelihood of Tesla unveiling a new vehicle or vehicles on this platform, with recent comments by CEO Elon Musk appearing to support this view.

The timing of the unveiling aligns with the planned production start in early 2025. Baird models 25,000 next-generation units in 2025.

The equity research firm expects Tesla to beat Q2 estimates for EPS and corporate gross margin.

Specifically, analysts project the former to come in at $0.62 per share, above the consensus projection of $0.61. Gross margin is seen at 18.5%, compared to the consensus estimate of 17.5%.

Meanwhile, Baird’s Q2 revenue estimate is $23.6 billion, below the $24.3 billion consensus.