What happened
Shares of Tesla (TSLA 1.50%) have fallen 9% this week as of 11:45 a.m. ET Friday, according to data provided by S&P Global Market Intelligence, largely driven by the market's response yesterday to the electric vehicle maker's second-quarter results. While Tesla's quarter was technically better than expected, investors appear to be recoiling after management commentary raised concerns over a combination of margin headwinds and modest delays in scaling up production of the company's upcoming Cybertruck.
So what
To be clear, Tesla's headline numbers were strong; revenue climbed 47% year over year (YOY) to $24.9 billion, handily outpacing estimates of $24.7 billion. Adjusted earnings of $0.91 per share also rose 20% YOY, well ahead of the $0.82 per share analysts were modeling. Tesla's top-line growth was largely driven by record quarterly deliveries, leading to a 46% increase in automotive revenue. Meanwhile, energy generation & storage revenue soared 74% to just over $1.5 billion, and services & other revenue jumped 47% to $2.15 billion.
However, with revenue growth significantly outpacing earnings growth and operating margin at 9.6% -- down from 11.4% last quarter and 14.6% in the year-ago period -- it's obvious that recent price cuts are weighing on Tesla's profitability. And while the company confirmed that "Cybertruck factory tooling [is] on track," management also vaguely noted that Tesla is still producing only RC (release candidate) builds of the cutting-edge pickup at its Texas plant, leading some to speculate that it might not be able to meet its stated goal of beginning volume production early next year.
Now what
"We are excited that we were able to achieve such results given the macroeconomic environment we are currently in," Tesla management added. "We are focusing on cost reduction, new product development that will enable future growth, investments in R&D, better vehicle financing options, continuous product improvement and generation of free cash flow."
Shares of Tesla are still up nearly 150% year to date even after today's post-earnings drop, so perhaps today's red tape is more a case of short-term traders taking profits off the table than anything else. In my view as a long-term shareholder, Tesla's bull thesis remains firmly intact. If management is able to deliver on its goal of continuing to reduce costs while fostering R&D to drive future growth and maximize free cash flow generation, I suspect today's pull-back will be little more than a blip in Tesla's long-term story.
