Following a nuclear-like run-up in Tesla (TSLA) stock, investors are facing another big moment with second quarter earnings on tap after the bell on Wednesday.
Charging deals with legacy automakers, a massive run-up in AI related stocks that roped Tesla in, and strong production and delivery numbers for Q2 pulled Tesla stock higher, and led to analyst after analyst pulling their price targets higher. This weekend’s news that Giga Austin built its first production Cybertruck gave the stock a boost on Monday.
Over the last three months, Tesla stock has jumped a whopping 58%, adding over $100 in share price for investors riding the boom. With that in mind, Wall Street is expecting Tesla to report top-line revenue of $24.56 billion, and adjusted EPS of $0.82. That revenue figure would represent a slight gain from Q1, but a massive 45% from a year ago.
In terms of profitability, Tesla is expected to report adjusted net income of $2.89 billion, slightly less Q1’s $2.9 billion, but nearly $300 million more than a year ago.
Earlier this month Tesla reported Q2 global production of 479,700 units, with deliveries of 466,140. The delivery figure easily topped Wall Street consensus estimates of 448,599 units, as well as the prior quarter’s total of 422,875. Both production and delivery totals for the second quarter were all-time records for Tesla.
Concerns about demand in Q1 seem to have been addressed by Tesla’s strong delivery numbers for Q2. Aside from growing volume and product updates on vehicles like the Cybertruck and upcoming gen-3 platform, in the near term analysts are also laser-focused on gross margin.
“We believe the line in the sand is Auto GM (ex credits) of ~17.5% with [Q2] being the trough quarter for Tesla GM that should ramp back over the coming quarters and back towards the 20% level heading into 2024,” Wedbush analyst Dan Ives wrote in a note to investors on Monday. Tesla reported auto GM (gross margin) of 19% in Q1, and GAAP gross margin of 19.3%, down from Q4’s 24%.
Steep price cuts in Q1 took their toll on Tesla’s margins last quarter, but analysts like Ives and others believe Q2 likely be the “trough” for Tesla’s margin dip.
“We join a consensus view that Q2 will be a trough in auto gross margin,” Jefferies analyst Philippe Houchois wrote last week, adding that the Jefferies team noted a “shift” in valuation drivers, notably based on Tesla’s lead in AI-based self-driving software. The themes of gross margin bottoming and the realization that AI was fueling Tesla’s recent run-up were also noted by both Goldman Sachs and Morgan Stanley, though those banks as well as Jefferies feel that a re-rating of the stock on those themes is unwarranted at this time.
Houchois believes product refreshes, like the much-rumored Model 3 “Highland” version, and Tesla’s small share overall of the mid-size car segment means there’s still room to grow despite price cuts.
Looking further ahead to the post-earnings conference call, investors and analysts will be waiting to hear more on Cybertruck production and whether first deliveries are still slated for end of Q3 and any new information on product refreshes. Possible concern over the Cybertruck’s nearing production may have prompted Ford to slash prices on Monday for its F-150 Lighting EV.
Also in focus will be Tesla’s expansion plans in countries like India and France, where the company has had recent discussions with local governments. In addition, the Wall Street Journal reported this week that Tesla was seeking to double the footprint of its Giga Berlin plant.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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Source: https://finance.yahoo.com/news/tesla-q2-earnings-150020138.html