Tesla is starting to feel less like an EV company that uses AI and more like an AI company that also offers EVs.

And right now, it’s not doing a great job at being either.

Shares of Tesla plunged 12.33% on Wednesday after the carmaker missed earnings estimates for the fourth quarter in a row.

Tesla’s profits fell 45% in the second quarter, largely due to struggling EV sales, which fell 4.8% year over year. Tesla reported $1.5 billion in profits, a dramatic decline from the $2.7 billion it reported in the second quarter of 2023. Earnings per share came in at $0.52, 16% lower than the $0.62 analysts expected and well below the $0.91 EPS Tesla reported in the same quarter last year.

But its revenue came in at $25.5 billion, which was up slightly from the $24.9 billion it reported in the second quarter of last year, and beat expectations of $24.7 billion.

The disappointing earnings underscore a rough year for Tesla’s car business. The company’s sales growth has been steadily declining, and competition from cheaper Chinese brands has cut into the firm’s market share, especially since Tesla has delayed rolling out a cheaper EV model. Tesla’s share of EV sales in the US fell below 50% for the first time ever in the second quarter.

This disastrous report comes on the heels of the company already implementing a number of measures to mitigate losses, including layoffs and cutting prices on products.

Musk also recently disappointed investors by announcing that Tesla was delaying a highly anticipated event to unveil its driverless taxi in August all the way back to October.

Elon eyes AI

Investors hoping to hear a clear plan to resuscitate Tesla’s EV sales from Musk were left disappointed during today’s earnings call. Instead, Musk laid out a future in which Tesla was chiefly an AI company, with its robotaxi and robot business front and center. But the timeline in which these products will be rolled out and making money for Tesla is unclear.

Musk appears ready to put his money where his mouth is regardless of profitability. The CEO posted a poll on his other beleaguered passion project, X, to ask users if he should invest $5 billion into xAI, his newest startup.

As per usual with Tesla, the extent to which you buy into Elon’s vision board determines whether you’re a Tesla bull or bear. For example, Tesla bull and Wedbush analyst Dan Ives maintains his “outperform” rating on the carmaker. “Tesla is a robotics and AI play and we believe potential investments into the xAI company under Musk could also be in the future and a smart move,” he wrote in a note today.

But UBS’s Joseph Spak referenced the same AI play as evidence to reiterate his “sell” rating on the stock, arguing that “any payoff” from Tesla’s AI investments would be seen further down the line.

One positive source of income for the company over the second quarter was its sale of environmental regulatory credits, which helps rivals meet emission standards. Tesla sold $890 million worth of these credits in the quarter, three times the amount it sold in the second quarter of 2023.—LB

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US homes have never been more expensive, with yesterday’s National Association of Realtors report noting that the average American home now costs $426,900.

The report also showed that home sales declined for a fourth straight month, with would-be homebuyers scared off by high price tags, high mortgage rates, and low supply. In spite of this, a new report from Redfin by Lily Katz highlighted how home sellers are doing their best to entice buyers, with nearly 1 in every 5 home sellers cutting prices in June.

But that still hasn’t helped the market pick up steam — in fact, the Redfin report also revealed that about 15% of the home purchase agreements signed in June were canceled, further illustrating just how sluggish the market is right now.

🟢 What’s up

• Enphase Energy gained 12.80% despite missing earnings estimates as investors cheered management’s very positive forecast for the solar company’s future.
• AT&T phoned in a 5.22% pop after reporting a stronger than expected increase in its number of wireless subscribers, a key metric its competitor Verizon recently missed on.
• Mattel rose yet another 9.80% as takeover rumors continue to swirl, with reports that rival toy maker Hasbro could place a competing bid.
• Seagate Technology jumped 4.02% thanks to a strong earnings report from the hardware maker.

What’s down

• Visa slid 4.01% after missing analyst estimates for revenue thanks to slower consumer spending.
• AMC Entertainment Holdings fell 7.68% after the company tried to get ahead of bad news and released preliminary earnings that impressed nobody.
• Vertiv Holdings sank 13.64% despite beating earnings estimates, with investors seemingly worried about the AI play’s sky-high valuation.
• General Dynamics stumbled 3.32% thanks to fewer deliveries of its high-end jets last quarter.
• Lamb Weston dropped like a hot potato, plunging 28.24% after the frozen food supplier announced earnings well below expectations and forecast a terrible second half of the year.

Shoppers cutting back on champagne, luxury bag, and jewelry spending might not rank very high on the list of problems in the world, but for LVMH, the luxury conglomerate that owns brands like Dom Pérignon, Dior, and Louis Vuitton, declining sales are causing a freefall in its stock price.

Shares of LVMH dropped 3% by the end of the day Wednesday after the company reported disappointing sales growth over the second quarter, mainly due to falling demand in China. The nation’s struggling economy, along with a government crackdown on social media accounts flouting wealth in the country, have been driving the drop in luxury sales there.

The firm reported $22.7 billion in sales for the second quarter, which came in under the $23.4 billion that analysts were expecting. Sales in Asia, excluding Japan, dropped 14% in the second quarter from the same period last year.

Sales in Japan, however, increased 57% over the second quarter—ironically due to visiting Chinese shoppers.

The company sold 15% fewer Champagne bottles in the first half of the year, compared to the same period over 2023, with LVMH CFO Jean-Jacques Guiony blaming the decline on a lack of celebratory spirit worldwide.

The poor earnings results for LVMH cap off an already tough year for the luxury brand. Shares of LVMH are down 25% over the last 12 months.

Other luxury brands also fell on Wednesday, as they face the same demand pressure as the over 75 brands housed under the LVMH umbrella. Shares of Burberry, Prada, and Kering all fell in Wednesday trading.

Hopefully for LVMH, we’ll all have more to celebrate soon. –LB

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• 1 in 5 members of Gen X will need housing support during retirement, according to a new study highlighting the serious problems the next generation of retirees are going to face.
• The British monarchy is partially funded by profits from the Crown Estates, a real estate portfolio whose profits rose 148% this year.
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Tomorrow’s big report is the advance real GDP in Q2—not a perfect encapsulation of how the US economy is doing, but still a comprehensive one. Last quarter’s final reading showed a quarter-over-quarter decline, with Q1’s 1.4% growth falling well below Q4 2023’s 3.4% growth. The slowdown was led by the manufacturing industry, while the services industry and government spending provided support.

Economists expect GDP to grow 1.9% in this initial reading—better than last quarter, but still a slowdown from the same quarter in 2023.

On deck for earnings tomorrow, we’ve got healthcare in the morning and footwear in the evening.

Before the open

• AstraZeneca (AZN) is in growth mode, with management making some audacious promises in previous earnings calls that the company will become the leader in cancer treatments. Getting there is going to cost a lot, so shareholders will be paying close attention to the company’s R&D spending, its bottom line, and the oncology pipeline this quarter. Consensus: EPS $1.20, $12.75 billion in revenue.
• AbbVie (ABBV) is under the spotlight for a few reasons this quarter. First, former COO Rob Michael took over as CEO earlier this month, and analysts will want to learn more about his plans for the company. They’ll also be paying close attention to how the company is filling the void left by Humira, after the key product’s patent expired last year. Consensus: $2.96 EPS, $14.02 billion in revenue.

After the close

• Deckers Outdoor (DECK) is up nearly 30% in 2024, but it’s been a bumpy road to get there. An analyst downgrade a few weeks back sent the stock reeling, and shareholders will want to learn more about the company’s HOKA and UGG brand sales to see if the downgrade was warranted. The problem may also lie in the share price, which, for a consumer discretionary company in this economy, is starting to look a bit overvalued. Consensus: $3.36 EPS, $805.02 million in revenue.
• Skechers (SKX) is up a measly 5% in 2024, despite its previous earnings report, which illustrated strong earnings growth. But shares have sunk since then as consumer spending has continued to cool, and Skechers will need to prove it can still sell in such an environment. Wall Street has confidence in the stock: The average analyst price target is 18% higher than where shares trade today. Consensus: $0.94 EPS, $2.23 billion in revenue.