Introduction
Tesla (NASDAQ: TSLA) is gearing up to report its earnings for the second quarter of 2025, and the anticipation surrounding the announcement is palpable. With Elon Musk returning to his role as CEO with renewed dedication, Wall Street firm Wedbush is optimistic about the company’s trajectory. However, it also identifies several pressing concerns that the electric vehicle (EV) manufacturer must address moving forward.
Dan Ives, Wedbush's lead analyst on Tesla, has maintained a bullish view on the stock, despite Musk’s previous distractions with political matters. The billionaire entrepreneur's recent statements indicate a shift back to his intense work ethic, as he mentioned on Twitter about sleeping in his office and committing to a rigorous schedule.
Musk's Return to Focus
Elon Musk's re-engagement with Tesla comes at a crucial time when the company faces increased competition in the EV market and potential legislative challenges. In a tweet dated July 20, 2025, Musk expressed his commitment, stating, "Back to working 7 days a week and sleeping in the office if my little kids are away." This comment reflects a stark contrast to his recent focus on other ventures, including his political pursuits.
Wedbush’s Ives acknowledges this renewed energy from Musk but emphasizes that the company must confront specific issues during its upcoming earnings call. Investors are keen to hear how Tesla plans to navigate the loss of the EV tax credit due to recent legislative changes, which Ives refers to as a significant headwind.
Concerns Over EV Tax Credit Loss
One of the critical issues for Tesla is the impact of losing the EV tax credits as outlined in the recent Beltway Bill. Ives points out that this development may diminish Tesla's competitive advantage within the EV landscape, making it essential for the company to provide guidance on how it plans to address this challenge.
"Clearly, losing the EV tax credits will be a headwind to Tesla and competitors in the EV landscape looking ahead, and this cash cow will become less of the story in 2026," Ives explained in a note to investors.
As the market adjusts to this new reality, the company’s free cash flow (FCF) may also be affected, and stakeholders will be closely watching for updates during the earnings call.
Anticipated Recovery in Deliveries
Despite the challenges, Wedbush remains optimistic about Tesla's recovery trajectory in the second half of 2025. Ives anticipates a rebound in global deliveries, particularly driven by improvements in the Chinese market, where the updated Model Y has started to see increased demand after months of decline.
"Tesla saw a rebound in June with sales increasing for the first time in eight months, reflecting higher demand for its updated Model Y as deliveries in the region are starting to slowly turn a corner," Ives noted. The company’s ability to meet rising demand, especially in China, is critical to its growth story. With the Model Y refresh acting as a catalyst, Tesla's production ramp-up in Shanghai is a positive sign for investors.
Autonomous Driving Potential
Furthermore, Ives and the Wedbush team believe that Tesla's advancements in autonomous driving technology could unlock significant value for the company, estimating that this could be worth upwards of $1 trillion. As Tesla continues to expand its presence in Austin and other territories, the potential for autonomy to enhance the company's valuation remains a focal point for investors.
While competition within the EV market continues to grow, with low-cost models entering from companies like BYD, Nio, and Xpeng, Tesla's recent updates and production capabilities may help maintain its market leadership.
Looking Ahead: The Future of Tesla
As Tesla prepares to report its earnings tomorrow at market close, the company is at a crossroads. With Wedbush maintaining its ‘Outperform’ rating and a price target of $500, the focus will be on how the company articulates its strategy in light of the recent challenges. Investors will be eager to hear how Musk and his team plan to navigate the evolving landscape of the EV market while ensuring sustained growth.
In conclusion, while Tesla faces significant hurdles, particularly with the loss of tax credits and increased competition, there is a strong belief that under Musk’s leadership, the company is poised for a recovery and continued growth. The upcoming earnings call is set to provide crucial insights into Tesla’s strategic direction and the measures it will take to address these concerns.
