Tesla’s After-Hours Share Dip Due to Disappointing Earnings Call.
Following the closing bell, Tesla released its earnings report, revealing a remarkable milestone in quarterly revenue. However, reduced profit margins attributed to strategic price cuts and incentives offered during the period impacted the company’s earnings. Initially, the stock price remained relatively stable after the earnings report’s release.
However, during the subsequent earnings call, concerns began to arise as CEO Elon Musk and other executives needed to provide precise specifications and start-of-delivery dates for two highly anticipated vehicles: the Cybertruck and a robotaxi-ready vehicle.
This lack of concrete information left investors uncertain about the company’s near-term prospects and potential revenue streams from these upcoming products.
Furthermore, during the earnings call, Musk and other executives disclosed that vehicle production is expected to experience slowdowns during the third quarter due to scheduled factory shutdowns aimed at implementing improvements and upgrades.
The announcement of a potential reduction in production output during the upcoming quarter added to investors’ worries and contributed to a decline in market confidence.
As a result of these developments and the uncertainty surrounding the company’s plans and production outlook, Tesla’s stock price experienced a decline of approximately 5% in after-hours trading.
The disappointing earnings call and the lack of specific details on product releases and production forecasts have contributed to this adverse market sentiment, leaving investors seeking more clarity and concrete assurances from the electric vehicle manufacturer.
Tesla’s performance in comparison to expectations is as follows:
- Revenue: The company reported $24.93 billion in revenue, surpassing the Refinitiv estimate of $24.47 billion.
- Earnings: Tesla’s adjusted earnings were 91 cents per share, outperforming the Refinitiv expectation of 82 cents per share.
- Net Income (GAAP): The company achieved a net income of $2.70 billion, reflecting a 20% increase compared to the previous year.
- Operating Income: Tesla’s operating income for the quarter was $2.40 billion, indicating a 3% decline from the same quarter in the previous year.
In comparison to previous periods, Tesla’s financial results show notable growth. In the first quarter of 2023, the company recorded a net income of $2.51 billion from $23.33 billion in revenue. During the same quarter last year, Tesla reported a net income of $2.27 billion, generated from $16.93 billion in revenue.
During the earnings call, CEO Elon Musk stated that the company’s goal remains to achieve 1.8 million vehicle deliveries for the entire year. However, he also noted that production in the third quarter is expected to experience a slight decrease due to scheduled summer shutdowns for significant factory upgrades.
At the beginning of this month, Tesla released its second-quarter report, revealing 466,140 vehicle deliveries, surpassing Wall Street’s expectations. Additionally, the company reported producing 479,700 electric vehicles during the same period. It’s worth noting that deliveries are considered the closest approximation of sales that Tesla provides.
The higher-than-expected deliveries were partially driven by incentives and discounts offered by the company. However, this surge in deliveries also contributed to a decline in operating margins, which stood at 9.6%, marking the lowest figure reported in at least the last five quarters. The total gross margin also experienced a decrease, reaching 18.2%, the lowest value for the same period.
Tesla addressed the lower margins observed during the second quarter in its shareholder presentation, attributing them to reduced average sales prices due to the mix and pricing of the cars sold. Furthermore, the company pointed to the cost associated with ramping up production of battery cells it designed in-house, specifically the 4680 cells, as one of the factors impacting its margins.
In terms of revenue, Tesla’s core automotive business witnessed a substantial 46% year-over-year increase, reaching $21.27 billion. Sequentially, this revenue showed a 6.5% growth.
Additionally, revenue from the energy generation and storage segment, which includes solar installations and backup batteries, surged by 74% year-over-year, amounting to $1.51 billion.
With an increasing number of Tesla vehicles on the road, the company’s “services and other” revenue, which encompasses fees for out-of-warranty vehicle repairs and other services, also saw significant growth, rising by 47% to $2.15 billion.
During the earnings call, Elon Musk, the CEO of Tesla, was hesitant to predict whether investors could expect the automotive gross margins to stabilize or improve shortly after price cuts and factory improvements.
He emphasized that short-term variations in gross margin and profitability are relatively minor compared to the company’s long-term vision, particularly highlighting the potential impact of autonomy on these financial metrics.
Tesla’s research and development costs rose to $943 million during the quarter, as the company remains committed to leading in AI development. They have already begun production of their Dojo “training computers,” aimed at advancing AI machine learning and computer vision.
In a significant achievement, Tesla’s Model Y crossover became the best-selling vehicle worldwide in the first quarter of 2023.
Regarding the much-anticipated Cybertruck, Tesla confirmed that the “factory tooling” is progressing as planned. However, the company has only produced “release candidate” builds so far, potentially disappointing eager fans waiting for the start of deliveries since its initial promotion by Elon Musk in 2019.
Musk explained that the Cybertruck would incorporate numerous new technologies, comprising 10,000 unique parts and processes. While the ramp-up prediction remains challenging, Tesla plans to manufacture the Cybertruck in high volume next year, with deliveries commencing this year.
Tesla is investing heavily in Dojo, a supercomputer designed for AI machine learning and computer vision training purposes. The company collects video clips and data from its customers and company vehicles to enhance existing software and develop new features for its driver assistance systems.
Musk acknowledged that despite earlier promises, Tesla has faced criticism for not delivering a fully self-driving car. However, he expressed confidence that by the end of the year, Tesla’s self-driving technology would surpass human capabilities. The focus is primarily on developing self-driving tech for the U.S. market.
From a more futuristic perspective, Musk spoke about the possibility of combining Neuralink brain implants with robotic arms or legs manufactured by Tesla. This vision aims to provide competent cyborg bodies for amputees, akin to the “Six Million Dollar Man” concept, but at a much more accessible cost, jokingly referred to as the “Sixteen-Thousand-Dollar Man.”
