Tesla Earnings Jump 20%; Elon Musk Says ‘Autonomy’ Will Make Sliding Margins ‘Look Silly’

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Tesla (TSLA) reported better-than-expected second-quarter financials late Wednesday, even as vehicle price cuts and discounts kept gross margins below the 20% “floor” Tesla has targeted in the past. TSLA shares dropped in late trading after closing down slightly.

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Tesla reported Q2 profits growing 20% to 91 cents per share while revenue increased 47% to $24.93 billion. Analysts expected profits to edge up around 4% to 80 cents per share with revenue totaling $24.22 billion, up 43% compared with last year.

Meanwhile, total gross profit grew 7% to $4.53 billion. Total gross margins came in at 18.2%, down from 19.3% in Q1 and a decline of 682 basis points vs. last year. Auto gross margins, excluding regulatory credits and leases, came in at 18.1%, down from 18.3% in Q1.

That is below the 20% gross margin “floor” Tesla previously targeted. Ahead of earnings, a slew of analysts rang warning bells on gross margins.

“The short term variances in gross margins and profitability really are minor relative to the long term picture,” Chief Executive Elon Musk told investors Wednesday.

“Autonomy will make all of these numbers look silly,” he added during the Q2 earnings call.

Tesla stock fell 4% late Wednesday, with the losses coming during the earnings call. During regular market trade, TSLA fell 0.7% to 291.26.

Analysts Focus On Margins

Wedbush analyst Daniel Ives, a longtime Tesla bull, said the big focus is on auto gross margins “to gauge the impact of the price cuts and what this means for margins going forward.”

The Wedbush analyst wrote he expected auto gross margins to be around 17.5%. However, Ives added gross margins “should ramp back (up) over the coming quarters and back toward the 20% level heading into 2024.”

On Tuesday, Morgan Stanley analyst Adam Jonas joined the chorus of analysts saying margins are top of mind. The Morgan Stanley analyst said he had seen estimates as low as 16% to as high as 20% for Tesla’s Q2 gross margin.

Ahead of earnings, Cathie Wood sold off tranches of her firm’s Tesla stock holdings in consecutive sessions, unloading more than 73,000 shares this week before the EV giant reported second-quarter financials Wednesday.

Cybertruck Sends Tesla Stock Higher

Tesla reported in its Q2 financials the Cybertruck “remains on track to begin initial production later this year at Gigafactory Texas.” However, the EV giant added it is “testing Cybertruck vehicles around the world for final certification and validation.”

The company also said it continues to “make progress” on its next generation platform.

“We can’t wait to start delivering it later this year,” Musk told investors Wednesday, referring to the Cybertruck.

Over the weekend, Tesla tweeted a photo of the first Tesla Cybertruck made at its Austin plant. Tesla stock responded Monday, jumping 3.2% to 290.38.

Morgan Stanley analyst Adam Jonas wrote Tuesday “now that the first Cybertruck has rolled off the line in Texas, the fun can start.”

TSLA stock rose 2.5% last week to 281.38, hitting a fresh 2023 intraday high Friday. Tesla is up 136% in 2023. Shares are working on a 313.80 buy point from a deep consolidation going back to late September, according to MarketSmith analysis.

Tesla Stock: Global Deliveries Record

TSLA reported record global deliveries in early July — as price cuts, tax credits and discounts propelled demand well above Wall Street forecasts.

Tesla deliveries ran to 466,140 in the second quarter, sprinting past Q1’s record 422,875 and Q4’s 405,278. Model 3 and Y deliveries hit 446,915 in Q2. Model S and X deliveries picked up to 19,225. Production hit 479,700, exceeding deliveries once again, even with Tesla curbing output below capacity.

Tesla’s global vehicle inventory was 16 days at the end of the second quarter, up one day sequentially and a 300% increase vs. last year.

Musk said Wednesday during the Q2 earnings call that the company is still targeting production of 1.8 million vehicles in 2023. Musk has now consistently downplayed the 2 million production number he used at the end of Q4.

However, Musk added that third-quarter production will likely “be a little down” due to summer shutdowns for factory upgrades.

On April 19, Tesla reported a big first-quarter earnings decline while revenue missed views. Profit margins for the global EV giant fell below 20% as the company executed an aggressive price-slashing strategy in the first part of 2023.

The EV company’s total gross profit came in at $4.5 billion in Q1. Tesla’s gross profit margin was 19.3%, down from 23.8% in the fourth quarter and 29.1% a year earlier.

Tesla stock ranks third in IBD’s automaker industry group. It has a 98 Composite Rating out of 99. Tesla has a 96 Relative Strength Rating and its EPS Rating is 93 out of 99.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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