Morgan Stanley: Is Tesla finally getting its mojo back?

Tesla (NASDAQ:TSLA) reported a smaller-than-expected 5% drop in vehicle deliveries for the second quarter on Tuesday, as price cuts and incentives helped offset cooling demand.

The company delivered 443,956 vehicles in the three months ending June 30, which is 4.8% lower than the same period last year but up 14.8% from the previous quarter. This figure also exceeded the consensus estimate of 437,812.

"While this is one of the first and only positive auto surprises of the year for Tesla, we still believe matching last year’s delivery number would be difficult to achieve,” Morgan Stanley (NYSE:MS) analysts commented.

“Tesla would have to grow 2H deliveries by around 6% YoY to hold volume flat,” they added.

Tesla delivered 33,000 more units than it produced in 2Q, leading to a 7-day reduction in the supply of inventory on a full calendar day basis. This reduction in inventory substantially offsets the increase seen in 1Q.

"At an average transaction price (ATP) of $45k/unit this, by itself, drives a $1.5bn working capital inflow during the quarter – higher than the $600mm tailwind we have expected,” analysts continued. “Our 2Q forecast for $0.9bn FCF burn looks incrementally more conservative following this print."

But a standout from Tesla's update is the all-time record high stationary storage number of 9.4 GWh for 2Q, which is nearly double Morgan Stanley’s forecast, analysts highlighted.

As generative AI acceleration drives a multigenerational increase in energy demand, electricity generation, and data center investment, analysts believe investors will start paying more attention to Tesla Energy, which they value at $36 per Tesla share, or $130 billion.

Analysts said the business is “uniquely positioned to benefit from investment in the US electric grid accelerated by the AI boom.”

Just over two weeks ago, Morgan Stanley indicated its clients were bracing for shareholders to reject Elon Musk’s 2018 compensation package, potentially leading to changes in management and strategy amidst months of negative news.

Now, the Wall Street firm’s clients are beginning to ask about positive catalysts for Tesla's 2Q results and beyond, prompting the question, "Is Tesla getting its mojo back?"