Tesla (D.S.L.A) reported better-than-expected second-quarter financials late Wednesday, although vehicle price cuts and discounts have kept gross margins below the 20% “floor” Tesla has targeted in the past. TSLA shares fell early Thursday.
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Tesla Q2 profit rose 20% to 91 cents a share, with revenue up 47% to $24.93 billion. Analysts expect profit to rise 4% to 80 cents a share, on total revenue of $24.22 billion, up 43% from last year.
Meanwhile, total gross profit rose 7% to $4.53 billion. Gross margins declined to 18.2% from 19.3% in Q1 and decreased by 682 basis points from last year. Auto gross margins excluding regulatory credits and leases were 18.1% from 18.3%.
That’s below the 20% gross margin “floor” that Tesla had previously targeted. Many analysts raised alarm bells on gross margins ahead of earnings.
“The short-term variations in gross margins and profitability are really small compared to the long-term picture,” Chief Executive Elon Musk told investors on Wednesday.
“Autonomy is going to make all these numbers look funny,” he added during the Q2 earnings call.
Tesla shares fell 4.3% in premarket trading early Thursday. The losses started during Wednesday’s earnings call. During regular trading on Wednesday, TSLA fell 0.7% to 291.26.
Analysts focus on margins
Wedbush analyst Daniel Ives, a longtime Tesla bull, said there is a lot of focus on auto gross margins “to see the impact of the price cuts and what that means for margins going forward.”
The Wedbush analyst said he expected auto gross margins to be around 17.5%. However, Ives added gross margins “should move backward (upward) in the coming quarters and toward the 20% level by 2024.”
On Tuesday, Morgan Stanley analyst Adam Jonas joined the chorus of analysts saying that margins are top of mind. A Morgan Stanley analyst said he sees estimates for Tesla’s Q2 gross margin of 16% to 20%.
Ahead of earnings, Cathie Wood sold off her company’s Tesla shares in consecutive sessions, unloading more than 73,000 shares this week ahead of the EV giant’s second-quarter financial report on Wednesday.
Cyberdrug sends Tesla stock soaring
Tesla announced in its Q2 financials that the Cybertruck is “on track to begin initial production at the Gigafactory Texas later this year.” However, the EV company said it is “testing Cybertruck vehicles around the world for final certification and validation.”
The company also said it is continuing to “progress” on its next-generation platform.
“We can’t wait to start delivering it later this year,” Musk told investors Wednesday, referring to the Cyberdrug.
Over the weekend, Tesla tweeted a photo of the first Tesla Cybertruck produced at its Austin plant. Tesla stock responded on Monday, rising 3.2% to 290.38.
Morgan Stanley analyst Adam Jonas wrote Tuesday that “now that the first cyberdrug has rolled off the line in Texas, let the fun begin.”
Shares of DSLA rose 2.5% last week to 281.38, hitting a new 2023 intraday high on Friday. Tesla is up 136% in 2023. Shares are working on a 313.80 buy point from a deep consolidation through late September. MarketSmith analysis.
Tesla Stock: Global Delivery Record
DSLA posted record global deliveries in early July — as price cuts, tax credits and rebates spurred demand that exceeded Wall Street forecasts.
Tesla deliveries rose to 466,140 in the second quarter, surpassing Q1’s record 422,875 and Q4’s 405,278. Model 3 and Y deliveries reached 446,915 in Q2. Model S and X deliveries rose to 19,225. Production capacity reached 479,700, once again exceeding supplies, despite Tesla limiting production below capacity.
Tesla’s global vehicle inventory was 16 days at the end of the second quarter, up one day in a row and up 300% from last year.
The company aims to produce 1.8 million more vehicles by 2023, Musk said Wednesday during the Q2 earnings call. Musk is now continuing to lower the 2 million production figure he used at the end of Q4.
However, Musk said third-quarter production will be “down a bit” due to summer shutdowns for factory improvements.
On April 19, Tesla reported a big first-quarter revenue drop, while earnings missed views. Profit margins for the global EV company fell below 20% in the first part of 2023 as the company implemented an aggressive price-cutting strategy.
The EV company’s total gross profit came in at $4.5 billion in Q1. Tesla’s gross profit margin was 19.3%, up from 23.8% in the fourth quarter and 29.1% a year earlier.
Tesla stock ranks third on IBD Automobile Manufacturers Industry Group. It has a composite rating of 98 out of 99. Tesla has a relative strength rating of 96 and its EPS rating is 93 out of 99.
Follow Kit Norton on Twitter @kidnorton For added security.
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