Tesla's Second-Quarter Earnings Report: What to Expect

Tesla, the electric vehicle (EV) giant, is set to release its highly anticipated second-quarter earnings report. With the company's stock surging in recent months, all eyes are on the numbers, particularly the profit margins from Tesla's automotive business.

Market Performance

It's no secret that expectations are sky-high. Tesla's stock (ticker: TSLA) has soared an impressive 138% year-to-date and 62% over the past three months as of Wednesday trading.

Market Influencers

Several factors have contributed to this upward trajectory. Firstly, Tesla has struck deals with other auto manufacturers, allowing non-Tesla EVs access to its supercharging network. Additionally, optimism surrounding Tesla's artificial intelligence ventures has also bolstered investor confidence. The company leverages AI technology to enhance its autonomous driving capabilities.

Wall Street Projections

According to FactSet, Wall Street analysts are predicting operating income of $2.7 billion, earnings per share of 80 cents, and sales of $24.2 billion for this quarter. Comparatively, Tesla reported operating income of $2.7 billion, earnings per share of 85 cents, and sales of $23.3 billion in the first quarter of 2023. In the second quarter of 2022, the company generated operating income of $2.5 billion, earnings per share of 76 cents, and sales of $16.9 billion.

Profit Margins: The Ultimate Focus

While absolute sales and earnings figures are crucial, profit margins hold equal significance. In the first quarter, Tesla recorded a gross-profit margin of approximately 19%, excluding regulatory credit sales, representing a decline from the 30% margin reported in the first quarter of 2022. This decrease can be attributed to substantial price cuts implemented in early January. Analysts are currently estimating automotive gross-profit margins of around 18% to 19% for the second quarter, excluding credit sales.

As Tesla prepares to reveal its Q2 results, the market eagerly awaits the numbers that will undoubtedly shape the company's trajectory in the coming months.

Tesla Optimistic About Profit Margins in the Second Half of 2023

Investors in Tesla can expect positive news regarding profit margins in the second half of 2023, according to recent statements from Tesla management. During an earnings conference call scheduled for 5:30 p.m. Eastern time, investors will be provided with insights into the company's expected improvements.

Tesla's recent price cuts, which were seen as a strategic move for long-term gains, are believed to have been successful thus far. Analyst Dan Ives from Wedbush expressed confidence in this strategy, stating that the focus now is on maintaining strong profit margins without further price cuts. Additionally, Ives anticipates potential Model 3 and Y refreshes on the horizon, followed by the highly anticipated Cybertruck later this year.

Looking at the financials, it is expected that automotive profit margins will see a significant boost in the second half of the year, with a projected increase of a couple of percentage points compared to the second quarter. Ives rates Tesla stock as a Buy with a price target of $300. On the other hand, Wells Fargo analyst Colin Langan rates Tesla stock as Hold with a price target of $265.

Langan, however, raises concerns about automotive gross-profit margins falling below 18% and suggests that more price cuts might be necessary to sustain volume growth in the second half of the year. It's worth noting that Tesla achieved a record delivery of approximately 466,000 vehicles in the second quarter, surpassing the 423,000 delivered in the first quarter.

In premarket trading on Wednesday, Tesla stock remained unchanged, while S&P 500 and Nasdaq Composite futures experienced a slight increase of about 0.1%.