Tesla shares slide as company misses profit expectations
Tesla's Q2 2024 earnings report presented a mixed bag of results, with adjusted EPS of $0.52 falling short of the consensus estimate of $0.60. However, the company managed to exceed revenue expectations, posting $25.5 billion compared to the forecasted $24.63 billion. The gross margin came in at 18%, slightly above Bloomberg's estimate of 17.4%, indicating some strength in cost management despite the lower EPS.
Shares of TSLA are down approximately 4% in reaction to the news. The stock is testing the 20-day moving average ($236) for support. Shares hit a low of $233 in after hours, which matches the July 12 low of $233. This will set up as key support for the stock as we await the conference call.
One of the highlights was the significant increase in deliveries from the Gigafactory in Shanghai, particularly to markets like South Korea. This contributed to a sequential rebound in vehicle deliveries in Q2, reflecting improved consumer sentiment. However, the company also noted that its vehicle production growth rate for FY24 might be notably lower than the previous year, which could impact overall delivery numbers.
Tesla affirmed that Cybertruck production more than tripled sequentially and is on track to achieve profitability by the end of the year in the U.S. This progress is crucial as the Cybertruck is a key component of Tesla's future growth strategy. The company also highlighted that its new vehicle production plans remain on track, with more affordable models expected to start production in the first half of 2025.
In terms of margins, Tesla's gross margin of 18% was a positive surprise compared to the expected 17.4%. This margin improvement is partly due to the company's focus on cost reduction, including reducing the cost of goods sold per vehicle. However, the capital expenditure came in lower than expected at $2.27 billion versus the estimated $2.54 billion, reflecting careful capital management.
Tesla's energy storage business set a record in Q2 with 9.4 GWh of deployments, signaling robust growth in this segment. The company expects the growth rates of energy storage deployments and revenue in the energy generation and storage business to outpace its automotive business in 2024. This diversification is a positive sign for the company’s long-term sustainability and growth.
The Free Cash Flow (FCF) for Q2 was $1.34 billion, falling short of the estimated $1.92 billion. Despite this, Tesla continues to maintain sufficient liquidity to fund its product roadmap, long-term capacity expansion plans, and other expenses.
The company also mentioned progress in its AI initiatives, including reduced pricing for Full Self-Driving (FSD) in North America and the launch of free trials, which are expected to increase FSD attach rates over time.
Tesla also announced significant developments in its production facilities, including preparations for the Semi factory, which is on track to begin production by the end of 2025 in the U.S. Additionally, the rollout of Powerwall 3 continued successfully, expanding availability to Canada, the U.K., and Germany.
Overall, while Tesla’s Q2 report showed some areas of strength, particularly in revenue and gross margins, the missed EPS and cautious guidance on FY24 vehicle production growth reflect ongoing challenges. The company’s focus on cost reduction, AI advancements, and energy storage growth are positive indicators for its future trajectory, but investor sentiment may be tempered by the lower-than-expected earnings and delivery forecasts.