Why Shares of Tesla Are Surging Today

Key Points

• Tesla's stock struggled yesterday after a tough earnings report.

• CEO Elon Musk continued to tout the robotaxi business.

• Musk said Tesla's robotaxi fleet should be able to cover a significant portion of the U.S. by year end.

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One day after its stock fell due to poor second-quarter earnings results, shares of Tesla (NASDAQ: TSLA) rebounded and traded nearly 3.6% higher, as of 2:03 p.m. ET today, on renewed optimism about the company's emerging robotaxi business.

Get ready, San Francisco

Tesla's stock fell over 8% yesterday after the company reported second-quarter earnings that showed revenue fell 12% year over year and operating income came in 25% lower than expected. Investors knew a rough quarter was in the works earlier this month after the company reported that second-quarter deliveries declined 14% year over year.

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CEO Elon Musk also hinted at a "few rough quarters" ahead, especially with the sale of regulatory credits expected to continue to fall due to President Donald Trump's One Big Beautiful Bill Act. However, on the company's earnings call, Musk said that Tesla is planning to roll out more affordable electric vehicles for the public by the fourth quarter of the year.

Musk also said that Tesla expects to grow Tesla's robotaxi network rapidly in the back half of the year, with half of the U.S. population able to access it by the end of 2025. I'm not sure how many investors believed that to be possible after the call, but there seems to be more optimism today after a report from Business Insider said Tesla will launch robotaxis in San Francisco this weekend.

Citing an internal memo, Business Insider reported that select Tesla owners will be invited to participate in the launch and will pay for the rides. The launch will be geofenced.

The valuation is still high

Tesla still seems far away from having its robotaxi fleet cover half of the U.S. population, especially with driverless vehicles that don't require some form of human supervision.

I could certainly end up being wrong about this, but Tesla's sky-high valuation seems to imply huge success with robotaxis, despite still being in the early innings. For this reason, I continue to avoid the stock.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.