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Tesla outperforms second quarter earnings, but automotive margins are falling; Shares gain after closing time| Investor’s Business Daily

Tesla outperforms second quarter earnings, but automotive margins are falling;  Shares gain after closing time|  Investor's Business Daily

Tesla (TSLA) reported better-than-expected second-quarter results late Wednesday, even as the electric vehicle manufacturer faced plant closures in Shanghai and supply shortages. Tesla shares rose in active trading.




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Tesla announced on July 2 that it had delivered 254,695 vehicles in the second quarter, roughly in line with Wall Street’s lowered estimates. Wedbush analyst Dan Ives estimates that about 70,000 were wiped out in the quarter with the Tesla plant in Shanghai shut down for two months due to Covid restrictions.

Analysts at FactSet expect shipments to pick up in the second half of 2022, with chip supply slowly increasing. Wall Street sees Tesla overtake 1.4 million units by the end of the year. Of course, no one is really sure how Chinese officials might deal with another wave of Covid.

Ives also notes that “while the Giga Berlin and Austin plants are in significant ramp mode, this represents a significant expansion of production capacity for 2023 and beyond.”

However, fears of a recession and increasing competition from US automakers and Chinese and European rivals could limit Tesla’s growth.

Nevertheless, based on reservation orders worldwide for Model Ys, Ives says the demand for Tesla vehicles still exceeds the supply by about 15% to 20%.

Meanwhile, Tesla fired employees from its San Mateo office, which employed just 276 employees. Tesla CEO Elon Musk said the company planned to cut about 10% of wages.

Tesla earnings

estimates: Analysts expected Tesla to earn $1.81 per share, up 25% from the same period last year. Revenue is forecast to grow 38% year over year to $16,539 billion.

ResultsTesla reported adjusted earnings are up 57% to $2.27 per share. Revenue grew 42% year over year to $16.934 billion, of which $344 million came from regulatory credits.

Gross margins in the automotive sector were 27.9% compared to 32.9% in the previous quarter.

The presentation of the company deck pointed to a depreciation of Bitcoin, but did not provide details. It said by the end of the second quarter it had converted about 75% of its Bitcoin purchases to fiat currency, adding $936 million in cash to its balance sheet.

Without the Bitcoin sale, Tesla would have been cash flow negative. Tesla’s cash, cash equivalents and short-term marketable securities rose $902 million sequentially to $18.9 billion, primarily driven by free cash flow of $621 million, partially offset by debt servicing of $402 million.

Tesla stock

Tesla shares rose 0.3% in overnight action after initially rising 4%. Shares rose 0.8% today to 742.50 in regular stock market trading. TSLA stocks are trading above the 50-day/10-week falling moving average, according to MarketSmith.

Tesla stock is about 40% below its all-time high of $1,243.49. The relative strength rating is only 38 out of the best 99 possible, while the EPS rating is 80.

Among US-based automakers with growing EV options, General engines (GM) is up 1.1%, and Ford (f) won 1.3%.

EV startup Rivian (RIVN) 3.2% added and Lucid (LCID) climbed 4.5%.

China-based rivals Nioz (NIO) rose 0.6%, BYD (BYDDF) fell 2.6%, Li Auto (LI) decreased by 3.3% and xpeng (XPEV) lost 3.9%.


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AI Chief Departure, Twitter Drama

In an earnings call with investors, Musk was asked how the departure of AI chief Andrej Karpathy would affect Tesla’s timeline for Full Self Driving (FSD). Musk said, “Obviously, since Andrej was writing all the code, things have ground to a halt.” However, he added that Tesla had “a team of 120 people in our AI group who are extremely talented” who would keep the project on track.

Tesla’s Autopilot software has been in the crosshairs of federal regulators as it investigates several crashes where Autopilot software appeared to be enabled when Teslas crashed into stationary emergency vehicles.

Meanwhile, Musk is likely headed for a lengthy lawsuit with Twitter after he pulled out of the deal to buy the social media company for $44 billion.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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