Tesla beat the Street with second-quarter earnings of 91 cents a share, but the electric vehicle maker’s shares were little changed in after-hours trading.
In the absence of reaction, E.V. That doesn’t mean things have gotten easier for the leader.
New car prices and profit margins fell again. A decline was expected, but it is more difficult to sell electric cars in 2023 than in 2022. Tesla’s (ticker: TSLA ) results highlight the difficulty the entire auto industry faces in moving electric vehicles as the number of models swells and inventories rise along with interest rates. “We’re in turbulent times,” CEO Elon Musk said on the company’s earnings conference call.
Tesla reported Q2 operating income of $2.4 billion on sales of $24.9 billion. Wall Street had expected an operating profit of $2.7 billion, earnings per share of 80 cents and sales of $24.2 billion.
Gross profit margins in the auto business came in at 18.1%, excluding regulatory credit sales, compared to 18.8% in the first quarter of 2023. Wall Street had expected margins to fall between 18% and 19%. This is not surprising.
Advertisement – Scroll to continue
First-quarter gross margins fell 11 percentage points year over year amid steep price cuts implemented by Tesla as early as 2023.
Operating profit margins fell below 10% for the first time since the first quarter of 2021. Operating profit margin for the second quarter of 2022 was 14.6%. Lower vehicle prices, higher costs of battery production and a weaker US dollar have contributed to the decline in margins.
The average price of a Tesla vehicle came in above $45,000 in the second quarter, down a touch from the first quarter, and down from nearly $56,000 in the second quarter of 2022.
Advertisement – Scroll to continue
Lower profits aren’t the best news, but the results are still solid. CFRA analyst Garrett Nelson called the release “unsocial” in a report Wednesday. He rates the stock a buy and has a $325 price target on the stock.
Investors, at least initially, agree with that sentiment. Tesla shares were up and down in after-hours trading shortly after the numbers were released. Shares closed down 0.7% at $291.26 in regular trading, while the S&P 500 rose 0.2%. The Nasdaq composite is flat.
The lack of stock price reaction is a surprise. Tesla shares have moved up or down an average of 7.5% over the past decade. A slight reaction to earnings after Tesla reported fourth-quarter 2018 numbers was down 0.6%.
Advertisement – Scroll to continue
Tesla’s price cuts are a “pain near a long-term profitable strategic move,” Wedbush analyst Dan Ives wrote in a recent report. They worked. Blocks flew. Tesla delivered about 423,000 vehicles in the first quarter and 466,000 vehicles in the second quarter. Both are a feat when reported.
Deliveries in the first half of 2023 totaled 889,015 units, up about 57% from the previous year.
“Right now it’s about margins tanking, no more price cuts, and steady demand with some Model 3 and Y updates likely on the horizon following the drumroll for the Cybertruck later this year,” Ives added.
Tesla produced the first Cybertruck over the weekend at its plant in Austin, Texas. The next expansion of Tesla’s product line and the pace at which Tesla ramps up production will be important for investors in the second half of the year.
“The Cybertruck has a lot of new technology,” Musk said on the conference call, adding that Tesla will begin mass production of the truck by 2024.
Cybertruck is entering the crowded market for electric trucks. Ford Motor (F) and Rivian Automotive
Advertisement – Scroll to continue
(RIVN) now sells pickups. General Motors (GM) expects to deliver its all-electric Chevy Silverado to commercial customers in the coming weeks.
Through Wednesday trading, Tesla stock has added 137% year to date. Deals with other automakers opening up supercharging networks to non-Tesla EVs and optimism about businesses related to artificial intelligence have helped the stock recently. Tesla is using AI to train its autonomous-driving features.
The lack of stock market reaction may indicate Tesla’s results are threading the needle. Investors will have to wait and see what happens on Thursday.
Write to Al Root at [email protected]
