Shares of Tesla, Inc. (TSLA) slipped 2% in premarket trading on Tuesday, but Morningstar sees the post-earnings pullback as a buying opportunity despite Tesla’s rising spending and negative free cash flow.
fell 1% on Monday, extending its losing streak to four days. The selloff has also pushed Tesla into technically oversold territory, with its 14-day relative strength index (RSI) falling to 27.34 on Monday, marking its lowest level since March 2025 and below the commonly watched 30 threshold.
Morningstar Sees Tesla Buying Opportunity
Morningstar kept its $450 fair value estimate unchanged after Tesla’s second-quarter (Q2) results, implying a 46% upside from current levels. Morningstar Chief U.S. Market Strategist Dave Sekera said that 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. He 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 Profitability Takes A Hit
The optimism comes as Tesla ramps spending across Robotaxi, Cybercab, Optimus, AI compute, chips, solar manufacturing and factory capacity. 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%. Capex climbed to $5.79 billion, pushing free cash flow to negative $1.09 billion, Tesla’s first negative reading in two years.
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 $21 billion estimate.
Wall Street Weighs Tesla’s Capex Gamble
Post-earnings analyst action on TSLA was mixed but centered on the same issue: whether Tesla can convert heavy spending into tangible progress. Mizuho and Cantor are optimistic on Tesla’s longer-term AI, robotics and autonomy opportunity, while Roth highlighted TeraFab’s importance to Optimus.
Meanwhile, Morgan Stanley said the capex cycle is necessary but raises the bar for visible Robotaxi and Optimus milestones. Truist and Canaccord were more cautious, pointing to weaker margins, negative free cash flow and increasingly expensive long-term bets.
How Do Retail Traders Feel About TSLA?
On Stocktwits, retail sentiment for TSLA slipped to ‘bearish’ from ‘neutral’ levels a day ago amid a 237% jump in 24-hour message volumes.
One user , “$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.”
View this Stocktwits postSo far this year, Tesla's stock has lagged its "Magnificent Seven" peers, making it the group's worst performer, down about 31%.