Tesla drops 4% after record deliveries fail to ease spending fears

Tesla reported record quarterly deliveries but shares slid 4% after hours, erasing $71 billion in market value on concerns over CEO Elon Musk's spending.

"The results validate our long-term strategy, but the market is focused on near-term capital allocation," Morgan Stanley analysts led by Adam Jonas said in a note, maintaining their overweight rating and $417 price target.

Adjusted earnings per share came in at $0.33 for the second quarter, missing the $0.51 consensus estimate compiled by Visible Alpha. Free cash flow turned negative at $1.09 billion, reflecting what Musk has described as more than $25 billion in planned capital expenditures for the year across Tesla's six factories producing vehicles, batteries and robots. The company did not disclose quarterly revenue or vehicle delivery figures in its preliminary release.

The selloff underscores a shift in investor focus from operational milestones to capital allocation discipline. Tesla's price-to-earnings ratio of 343 times compares with a five-year median of 107 times, according to GuruFocus data, suggesting the stock already priced in perfection before the miss. Insider sales totaling $12.4 million over the past three months add to the caution. Shares have declined 17% year to date. Investors will watch the full earnings call on July 23 for updated margin data and delivery guidance for the second half of the year.

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