Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.

Key Morningstar Metrics for Tesla

• Fair Value Estimate: USD 250.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

Tesla TSLA reported second-quarter deliveries of 384,122 vehicles, a 13% decline versus the second quarter of 2024. Tesla shares were up 5% in premarket trading on the news.

Why it matters: A second straight quarter of declining year-over-year deliveries is in line with our forecast for deliveries to decline in 2025. Through the first half of the year, Tesla’s deliveries were down 13%.

• The result also supports our view that Tesla’s current product lineup is at market saturation. We don’t think Tesla will see meaningful deliveries growth without a new lower-cost vehicle aimed at the affordable market.

The bottom line: We maintain our USD 250 fair value estimate for narrow-moat Tesla. We view shares as overvalued, with the stock trading in 2-star territory.

• In our view, Tesla’s stock continues to reflect optimism for the rollout of the company’s robotaxi business and prices in a successful full product launch next year, in line with management’s guidance.
• We agree that robotaxi deserves a higher valuation than new vehicle launches. In our model, we value the robotaxi business higher than the valuation from new vehicle launches.

Coming up: Tesla plans to release its earnings on July 23. We hope to hear an update on robotaxi testing and the exact steps to a full launch. We also hope to hear an update on the new affordable vehicle, which management said would launch this year.

• The robotaxi is in testing, but we view safety precautions—including employees riding in the vehicles, the geofenced testing area, and invite-only access—as signs Tesla is still in the early stages. This supports our view that Tesla won’t see a full robotaxi launch until 2028.
• We define a full launch as when anyone in the Austin, Texas, area can download the robotaxi application and take an un-geofenced ride with no Tesla employee in the vehicle. This is consistent with management’s long-term vision for the robotaxi product.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.