Ticker Symbol: TSLA
The largest electric vehicle manufacturer in the world, Tesla Inc, announced its second-quarter results that were largely ahead of Wall Street expectations. Most critically, however, the company stuck to its forward guidance of producing and delivering vehicles with a 50% average annual growth rate. The company also said that it converted approximately 75% of its Bitcoin holdings into fiat currency during the quarter, eliminating a source of risk from its balance sheet. Shares were up 1.5% in extended hours.
Adjusted earnings per share came in at $2.27, ahead of the average analyst estimate of $1.83 per share, and 56.5% ahead of the second quarter of 2021’s adjusted EPS of $1.45. Revenue also beat forecasts of $16.8 billion, up 41% year over year to $16.9 billion. Free cash flow came in slightly below expectations however at $621 million. Furthermore, the closely followed automotive gross margin figure of 27.9% was below last year’s 28.4% but still ahead of the 26.8% expected.
Similarly of note for investors is that the company’s Shanghai plant, which was partially shut down due to COVID-related restrictions in China, did not have a material impact on Tesla’s ability to produce robust results. Management also highlighted that June was the highest vehicle production month in the company’s history, with its California and Shanghai factories producing over 1,000 cars a week. Meanwhile, Tesla also had one of its best quarters in the solar division in a long time, deploying 106 megawatts in the three-month period.
Investors will now turn their attention toward how the company manages its two new plants in Austin Texas, and Berlin, Germany. Additionally, the production of the Model Y with legacy 2170 cells could remain challenging in the foreseeable future. While the company has managed supply chain troubles well so far, especially relative to its bigger auto manufacturing rivals, its ability to drive down costs and manage gross margins could also be pivotal.
Chief Executive Officer Elon Musk said during the earnings call that Tesla should have a record second half of the year. Further, the CEO said that the Texas plant could start producing over 1,000 vehicles per week in the next few months. On the crucial question of the Cybertruck, management said that production has been delayed to the middle of 2023. Tesla will have fierce competition in the pickup category against traditional car manufacturers such as Ford and GM, as well as new entrants Rivian.
The firm also said that it expects inflation to decline in the second half of the year and has already seen prices for certain components declining. In the meantime, Tesla has increased its prices to account for inflation. Management also said that despite the price hikes, demand for the company’s cars is strong and the wait lists for its products remain lengthy.
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