Morningstar maintained its $450 fair value estimate for Tesla, Inc. (TSLA) on Tuesday following the electric vehicle maker's second-quarter (Q2) earnings report, calling the post-earnings pullback a buying opportunity despite Tesla's negative free cash flow of $1.09 billion and rising capital expenditures. Tesla shares slipped 2% in premarket trading on Tuesday after falling 1% on Monday, extending a four-day losing streak that pushed the stock into technically oversold territory with a 14-day relative strength index (RSI) of 27.34—below the commonly watched 30 threshold and the lowest level since March 2025. The selloff followed Tesla's Q2 results showing adjusted earnings per share of $0.33, missing the $0.54 consensus estimate, while operating income fell 57% year over year to $398 million and operating margin narrowed to 1.4% as the company ramped spending on AI, Robotaxi, Optimus, and manufacturing investments. Morningstar Chief U.S. Market Strategist Dave Sekera stated the results were "really no surprise" and said the stock is "looking very attractive" at current levels, trading at a 30% discount to the firm's fair value estimate. The analyst commentary comes as Tesla navigates increased capital expenditures—which climbed to $5.79 billion in Q2—and faces mixed Wall Street reactions centered on whether the company can convert heavy spending into tangible progress in autonomous driving and robotics.
Morningstar Maintains $450 Fair Value Estimate for Tesla
Morningstar kept its $450 fair value estimate unchanged after Tesla's Q2 results, implying a 46% upside from current levels. Morningstar Chief U.S. Market Strategist Dave Sekera said the quarter did not change the firm's long-term thesis. Sekera said the results were "really no surprise" to the firm, which had already expected higher deliveries to support revenue growth alongside an increase in capex.
Tesla's spending on new facilities, including expansions to vehicle and battery production, came in somewhat higher than Morningstar had anticipated. "As far as where the stock is trading today, it is looking very attractive," Sekera said. Morningstar rated Tesla four stars, and Sekera said the shares were trading at a 30% discount to the firm's $450 fair value estimate.
Sekera pointed to Tesla's history of swinging above and below Morningstar's assessment of intrinsic value. After trading at elevated levels toward the end of 2025, Sekera said the latest decline has taken the shares back to the downside of that cycle. For investors interested in Tesla, "now looks like a good time" to dollar-cost average into the selloff, he said. For those who have wanted to own the stock but stayed on the sidelines, Sekera said: "now's a good time maybe to start getting involved."
Tesla Q2 Operating Income Falls 57% as Margin Narrows to 1.4%
Tesla reported adjusted earnings of $0.33 per share in Q2, below the $0.54 consensus estimate, while revenue of $28.24 billion beat expectations. Operating income fell 57% year over year to $398 million, and operating margin narrowed to 1.4%. Capital expenditures climbed to $5.79 billion, pushing free cash flow to negative $1.09 billion, Tesla's first negative reading in two years.
The profitability decline came as Tesla ramped spending across Robotaxi, Cybercab, Optimus, AI compute, chips, solar manufacturing and factory capacity. Musk said the company should be "spending on Capex as fast as we can without it being too wasteful." Tesla expects 2026 capex to exceed $25 billion, while Deepwater's Gene Munster sees another $25 billion in 2027, above Wall Street's roughly $21 billion estimate.
Wall Street Analysts Issue Mixed Reactions on Tesla Capex Strategy
Post-earnings analyst action on TSLA was mixed but centered on the same issue: whether Tesla can convert heavy spending into tangible progress. Mizuho and Cantor are optimistic on Tesla's longer-term AI, robotics and autonomy opportunity, while Roth highlighted TeraFab's importance to Optimus.
Morgan Stanley said the capex cycle is necessary but raises the bar for visible Robotaxi and Optimus milestones. Truist and Canaccord were more cautious, pointing to weaker margins, negative free cash flow and increasingly expensive long-term bets.
Retail Sentiment on Stocktwits Turns Bearish Amid Message Volume Surge
On Stocktwits, retail sentiment for TSLA slipped to 'bearish' from 'neutral' levels a day ago amid a 237% jump in 24-hour message volumes. One user said, "$TSLA this seems to be holding 306 will need to retest 312 and 318." Another bearish user said, "$TSLA The fun thing about the 200 on the weekly - currently about 283 - is that SP more often than not will dive below it versus bouncing off it. Often significantly."
So far this year, Tesla's stock has lagged its "Magnificent Seven" peers, making it the group's worst performer, down about 31%.
FAQ
What did Morningstar say about Tesla stock after Q2 earnings?
Morningstar maintained its $450 fair value estimate for Tesla following Q2 earnings, with Chief U.S. Market Strategist Dave Sekera stating the stock is "looking very attractive" at current levels. The firm rated Tesla four stars and said the shares were trading at a 30% discount to the $450 fair value estimate, implying a 46% upside. Sekera said the Q2 results were "really no surprise" and did not change the firm's long-term thesis, calling the post-earnings pullback a buying opportunity for investors.
Why did Tesla report negative free cash flow in Q2?
Tesla reported negative free cash flow of $1.09 billion in Q2 as capital expenditures climbed to $5.79 billion, marking the company's first negative free cash flow reading in two years. The increase in spending came as Tesla ramped investments across Robotaxi, Cybercab, Optimus, AI compute, chips, solar manufacturing and factory capacity. Tesla expects 2026 capex to exceed $25 billion, with Deepwater's Gene Munster projecting another $25 billion in 2027.
How did Tesla's Q2 profitability compare to expectations?
Tesla reported adjusted earnings of $0.33 per share in Q2, missing the $0.54 consensus estimate. Operating income fell 57% year over year to $398 million, while operating margin narrowed to 1.4%. Revenue of $28.24 billion beat expectations. The 14-day relative strength index (RSI) for Tesla stock fell to 27.34 on Monday, marking the lowest level since March 2025 and below the commonly watched 30 threshold that indicates technically oversold conditions.
