Earlier this month, Tesla investors got some much-needed good news when the electric vehicle maker reported that it delivered more than 480,000 vehicles in the second quarter.
The 25% year-over-year increase marked Tesla’s best second-quarter performance, topping the 466,140 deliveries it reported in 2023. Tesla reported declining annual deliveries in 2024 and 2025, so any sign that the company is turning that trend around is a good sign.
But while the stock got a boost from the news, the increase was short-lived. The stock is only up 0.6% over the past five days, but over the past four weeks it is down nearly 16% and down more than 42% year to date.
So, Tesla’s second quarter earnings report, scheduled for release on July 22, is pivotal for investors.
While the delivery numbers are promising, investors seem a bit hesitant about the stock heading into the print.
Analysts at Deutsche Bank still have a buy rating and upside price target for the company, but the firm sees three major headwinds the company will have to address before the stock can break out.
Deutsche Bank says Tesla Q2 has 3 weak points
In the past, when Tesla was struggling with deliveries, the company relied on lower prices and increased incentives to boost demand.
Tesla used the same strategy this time around, offering 0.99% APR financing for Model Y in the U.S. from May 10-31. While the strategy has worked in the past and undoubtedly helped push second-quarter deliveries higher, incentives are expensive and eat into profit margins. Deutsche Bank analysts expect the second-quarter results to reflect this reality.
“If we assume 45k units sold in the US took advantage of the promotional rate, at around a $4k upfront rate buy-down cost to the partner bank, this would equate to $180m hit to profit,” DB analysts led by Edison Yu said in a note viewed by TheStreet.
But that’s only one aspect weighing on Tesla’s bottom line.
“Secondly, the company had benefited from a one-time warranty and tariff relief, collectively worth $230 million in 1Q. We estimate that the warranty amount is larger at about $150 million, and an unwind of that will be a QoQ headwind to 2Q,” Yu said. ” Tesla also did not realize any benefit from the prior Supreme Court ruling on IEEPA tariffs; thus, we’re carrying the remaining $80m into 2Q.”
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The final financial headwind DB analysts expect for Tesla heading into next week is the company’s decision to eliminate the option to purchase FSD outright. The firm estimates that decision is worth a $200 million headwind.
Still, despite all of that, Deutsche Bank is maintaining its buy rating and $465 price target on the company, with expectations of a merger with SpaceX down the line helping drive that thesis.
“Increasingly so, we think investors are looking at the high possibility of Tesla combining with SpaceX in the near future (next 1-2 years) and what this move could do to the Tesla stock,” DB said. “We suspect this topic could get air time during the upcoming earnings call, how Elon could choose to operate his two separate entities, and what synergies the combination could drive.”
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Tesla, SpaceX cash burn complicates potential merger
Investor sentiment has improved greatly amid widespread SpaceX merger speculation, BNP Paribas analysts led by James Picariello said in a note viewed by TheStreet. Still, the firm said it is maintaining its underperform rating and $280 price target due to concerns over Tesla’s cash burn over the next two years.
Additionally, the firm said SpaceX’s own cash burn makes it unlikely a merger will happen in the near future.
“We believe a potential SpaceX-Tesla merger is complicated by significant cash burn at both companies and meaningful regulatory risks. SpaceX consensus points to cash burn of $216 billion in ’26E-31E, combined with TSLA’s multi-year burn cycle beginning this quarter and with multiple downside scenarios,” the analysts added.
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“Meanwhile, the need for multi-jurisdiction approvals (involving defense work) and Tesla shareholder support suggests any deal will take time.”
Tesla revealed earlier this year that it is increasing its expected capital expenditure budget this year to an eye-watering $25 billion. BNPP analysts expect the company to average spending up to $23 billion a year through 2030 as it looks to ramp up its Optimus humanoid robot and Robotaxi platforms.
Related: Tesla merger with SpaceX won’t save investors, top analyst says
