Tesla Earnings Deep Dive (9.7% drop!)

Thursday, Tesla stock took a big hit after their earnings report shook some investors. The main concerns are tightening margins and a warning that Q3 production could be down slightly, but let’s take a look at the numbers.

Financials and production

• Tesla's Q2 gross margins were 18.2%, below analyst expectations of 18.8%.
  
• The company's operating margin fell under 10% to 9.6%, nearly 5% lower than a year ago.
  
• Tesla maintains its target of 1.8 million vehicle deliveries for the year.
  
• Tesla's Q2 revenue was reported at $24.9 billion, surpassing the expected $24.51 billion.
  
• The company's adjusted EPS was $0.91, exceeding the anticipated $0.81.
  
• Tesla's Q2 revenue showed a minor gain from Q1 and a 45% increase from a year ago.
  
• The company reported an adjusted net income of $3.1 billion, more than the predicted $2.87 billion and Q1's $2.9 billion.
  
• Analyst predictions put Tesla's 2023 production between 1.7 million to 2 million vehicles, which would account for 2%-2.5% of global light vehicle market share, or 17.5%-25% of the global EV market.
  
• Tesla's total gross profit for Q2 2023 was slightly above $4.5 billion, marking a 7% increase from Q2 2022.
  
• Tesla vehicle production and deliveries surged by 86% and 83% respectively, in Q2 2023 compared to Q2 2022.
  
• The "net cash provided by operating activities" rose to $3.065 billion, a 30% increase from Q2 2022.
  
• Capital expenditures rose by 19% from Q2 2022, reaching $2.060 billion.
  
• Tesla's free cash flow was $1.005 billion, marking a 62% increase from Q2 2022, while cash, cash equivalents, and investments hit a record $23.075 billion, a 22% increase year-over-year.
  
• Tesla reported strong sales and revenues for Q2 2023, building 479,700 EVs and delivering 466,140, bringing in $21.3 billion in revenue, a 46% YoY increase.
  
• Tesla's solar panel and battery storage business saw the largest increase, growing 74% YoY to $1.5 billion, despite fewer GWh of storage deployed for Q2 vs Q1 2023. The 3.7 GWh deployment represents a 222% YoY increase.
  
• Growth in the EV sector is projected to continue at a 23.6% CAGR through 2025, while ICE growth is predicted to remain flat.
  

Musk comments

• CEO Elon Musk hinted that Q3 production might drop slightly due to factory upgrades during summer shutdowns.
  
• Musk stated that sacrificing margins to produce more vehicles is sensible in the long term.
  

Self Driving

• The company is in early talks with a major OEM for licensing its full-self driving (FSD) software.
  
• Despite past overstatements, Elon Musk promises a functional Full Self-Driving (FSD) system by the end of 2023.
  
• Musk claimed that another automaker is in early discussions with Tesla to license the controversial FSD system for its own vehicles.
  

Cybertruck

• Tesla is installing Cybertruck equipment at its gigafactory in Austin, Texas, with production and customer deliveries to commence "later this year."
  
• Musk warned of challenges in ramping up production of new models but claimed Cybertruck deliveries would begin in 2023, with deliveries at scale commencing the following year.
  
• Musk declared that demand for the Cybertruck is extremely high.
  
• Tesla currently has nearly 50,000 Supercharger connectors and over 5,000 stations worldwide.
  

Stock performance

• Tesla stock (TSLA) fell 9.7% on Thursday, the worst single-day loss since April.
  
• Tesla's stock had rallied over 130% this year prior to earnings.
  
• Wedbush analyst Dan Ives increased his price target to $350 for the stock.
  
• Analysts generally perceived the report and earnings call as lacking major surprises and performing better than expected.
  
• Tesla remains one of the biggest long holdings for many investment firms, with strong delivery numbers affirming its position.
  
• Tesla holds a significant market lead in the U.S., despite facing competition in China.
  

Technicals

• Tesla was oversold on RSI prior to earnings
  
• We had seen RSI divergence in Tesla, with lower highs on RSI as the stock price reached higher highs
  
• The NASDAQ has been rallying alongside Tesla and also saw a strong move down on Thursday, suggesting the possibility of short-term top for both.