Tesla Earning Expectation 7/19 Wed

cyber truck celebration

Tesla is scheduled to announce its second-quarter earnings after the market closes on Wednesday. Investors will be eager to learn more about the long-awaited Cybertruck and the impact of Tesla's price reductions on automotive gross margins.

According to Wall Street estimates, Tesla is projected to generate approximately $24.9 billion in revenue for the quarter, which is almost 50% higher than its sales of $16.9 billion during the same period last year.

Since the beginning of this year, Tesla's stock has surged by 168.62%. On Monday afternoon, it closed at $290.38, buoyed by the news that the first Cybertruck was finally produced over the weekend.

There is still much unknown about the Cybertruck. Tesla recently tweeted about the completion of the first Cybertruck at Giga Austin, sparking both excitement and skepticism. Despite this announcement, Tesla has not provided any additional details about the truck or its production timeline. The Cybertruck, a futuristic pickup truck with an angular stainless-steel body, was initially unveiled in 2019, with production and deliveries initially expected to commence in 2021. However, Tesla has encountered repeated delays due to component shortages.

Following the news of Tesla manufacturing only one Cybertruck, some have accused the company of generating hype, boosting its stock price, and diverting attention from other issues by sharing the news so close to the earnings announcement.

During Wednesday's earnings call, people will be particularly interested in several details: the pricing strategy for the Cybertruck, additional specifications about the vehicle, the commencement of first deliveries, and the timeline for achieving mass production.

Additionally, Tesla's production capacity for the Cybertruck is another crucial piece of information. During Tesla's annual shareholder meeting in May 2023, CEO Elon Musk stated that the company could potentially deliver between 250,000 to 500,000 units per year once production begins. It remains to be seen if Tesla will provide a more specific range.

Analysts from Wells Fargo and Wedbush have predicted that Tesla's automotive gross margins will decline to 17.5% due to the automaker's ongoing price reductions across the United States, Europe, and China. Despite potential margin impacts, these price cuts, combined with the U.S. federal EV tax credits, have seemingly bolstered Tesla's sales over the past two quarters. In Q2, Tesla achieved record-breaking global production and deliveries of 479,999 and 466,140 units, respectively, representing a 10% quarter-over-quarter increase and an 83% year-over-year increase.

While these discounts may have contributed to increased sales, they may also have had an adverse effect on margins, as was observed in the first quarter. During Q1, Tesla's gross margins dipped below 20%, putting pressure on the company's traditionally strong automotive revenue. Operating margins, an area in which Tesla has excelled, also declined from 19.2% in Q1 2022 to 11.4% in Q1 2023. Furthermore, Tesla's net income for the first quarter of $2.51 billion marked a 24% decrease compared to the same period last year.

Some of these losses can be attributed to vehicle discounts, while others are linked to increased production. In Q1, Tesla spent $2 billion on capital expenditures, likely aimed at bolstering capacity in both new and existing manufacturing facilities.

Analysts hold differing opinions regarding concerns about Tesla's stock price. Some argue that Tesla is overhyped and faces increased competition that could erode its market share. On the other hand, others believe Tesla's strategy of pursuing higher volumes at lower margins could pay off in the future, especially if Full Self-Driving (FSD), Tesla's advanced driver assistance system (ADAS), continues to improve and gain wider acceptance. Tesla enthusiasts generally view the company as more than just an automaker, attributing it with qualities ranging from an AI company to a sustainable energy conglomerate.

Lastly, there may be updates on Tesla's Supercharging network. In the past quarter, several automakers and charging companies expressed plans to adopt Tesla's NACS standard for building electric vehicles and charging stations. While revenue from non-Tesla EVs utilizing Tesla's Superchargers is not expected to be significant at this stage, investors may hear updates from Tesla regarding plans to expand the network or expectations for revenue growth in that segment.