Tesla (NASDAQ:TSLA) stock fell more than 7% in premarket trading Wednesday after its Q2 report revealed mixed results, with earnings falling short of expectations amid weaker margins and declining EV sales.
For the quarter, Tesla posted adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion, missing Wall Street's estimates of $0.61 per share but surpassing the expected revenue of $24.33 billion.
The bottom line was impacted by a decrease in automotive sales to $18.53 billion from $20.42 billion a year ago, alongside lower-than-expected margins due to EV price cuts, restructuring charges, and AI investment costs.
Gross margins excluding credits, a closely watched metric, dropped to 14.7% in Q2 from 18.1% the previous year, below analysts' projections of 16.3%. Tesla delivered 443,956 EVs in the quarter, a 5% decline from the same period last year.
However, the company's energy storage business saw significant growth, deploying 9.4 gigawatts in Q2, a 158% increase year-over-year.
Looking forward, Tesla warned that vehicle volume growth might be slower than in 2023 as it focuses on launching next-generation vehicles and other products.
Analysts comment on Tesla stock after Q2 report
Following the release of Tesla’s much-anticipated Q2 earnings print, a number of analysts voiced their initial reactions.
Citi: “We expect modest pressure on the shares as the Q2 auto margin & NT outlook commentary offset some of the momentum gained from the Q2 delivery beat. We’re trimming estimates and taking our price target to $258 from $274—maintain Neutral. Tactically, if consensus were to sufficiently come down post Q2 and the stock were to meaningfully pullback, we think the setup into October improves, particularly if upcoming FSD updates also show clear progress.”
Analysts at Piper Sandler raised their price target on Tesla stock following the report, reflecting their focus on the EV maker’s long-term story.
“TSLA's after-hours weakness (-7.5%) likely reflects an unexpectedly large q/q decline in automotive gross margin, and indeed, few metrics have more impact on near-term results,” they wrote.
“But for our part, we're with Elon: in the grand scheme, this topic matters little. Comments on full self-driving (FSD) software were unabashedly positive, and as demonstrated by our 50% price target increase, bullish tweaks to the FSD forecast can easily overwhelm all other considerations,” Piper Sandler added.
Morgan Stanley (NYSE:MS): “We think this quarter’s stock reaction will come down to the tone and content of the analyst conference call which we expect to may help set the stage for a Master Plan 4 unveil later this year.”
Wells Fargo (NYSE:WFC): “We expect the stock to trade down. TSLA's Q2 earnings result was low quality; missing even with EV credit help (can be lumpy), although this was offset with restructuring. Auto GM also missed even with higher-than-expected sales. Additionally, the press release revealed little incremental 'razzle-dazzle', though we expect mgmt to talk up FSD safety improvements, Robotaxi launch, Optimus, & more on the call.”
Jefferies: “Q2 results mostly confirmed the growing importance of storage and a return to +ve FCF on modest WC reversal and reduced capex but also as record ZEV income. Auto ASPs continued to drift but unit COGS stabilized. Clean EBIT margin improved 90bps from Q1 to 5.4% on storage contribution and crushed opex but, in our view, do not support meaningful upgrades to current consensus.”