Tesla's stock dips after earnings call despite 20% profit jump and record deliveries

Texas-headquartered company's net profit surged to $2.7bn in June quarter but price cuts have squeezed margins

Tesla's revenue during the second quarter jumped 47 per cent to more than $24.9 billion. AFP

Tesla reported a 20 per cent annual jump in second-quarter net profit from the same period a year earlier, despite lower margins and price cuts, with the company delivering a record number of cars.

The company posted a net profit of more than $2.7 billion during the April-June period, marking Tesla's 16th straight profitable quarter and seventh consecutive three-month period with more than $2 billion in profit.

Shares of the company fell 0.71 per cent at the close of trading to $291.26 on Wednesday, giving it a market value of $912.65 billion.

Shares dropped 4.19 per cent in after hours trading as chief executive Elon Musk and other company executives said during an earnings call that vehicle production would slow down during the third quarter due to shutdowns for factory improvements.

The company's shares are up about 169 per cent since the start of the year.

The second quarter was a “record quarter on many levels with our best-ever production and deliveries”, Tesla said.

“We are excited that we were able to achieve such results given the macroeconomic environment we are currently in … the challenges of these uncertain times are not over, but we believe we have the right ingredients for the long-term success of the business through a variety of high-potential projects,” the company said.

"One day it seems like the world economy is falling apart, next day it's fine ... we are in, I would call it, turbulent times," Mr Musk, Tesla's co-founder told analysts on a conference call.

Total revenue during the quarter jumped 47 per cent to more than $24.9 billion, exceeding analysts’ expectations of $24.4 billion. It was 6.8 per cent up on a quarterly basis.

This was the fourth time in a row the company reported $20 billion or more in sales.

The company delivered 466,140 vehicles in the June quarter, up 83 per cent on a yearly basis. Analysts surveyed by Bloomberg had expected Tesla to ship 448,350 cars during the quarter.

The company produced 479,700 vehicles during the period, including 19,489 model S/X cars and 460,211 model 3/Y cars. In the same period last year, it produced 258,580 vehicles.

Last month, Tesla said it was cutting prices of its premium car models in China by more than 4.5 per cent. It has also lowered prices in other markets, including the US and UK, in an effort to gain an advantage over its competition.

“We are focusing on cost reduction, new product development that will enable future growth, investments in R&D [research and development], better vehicle financing options, continuous product improvement and generation of free cash flow,” Tesla said.

The company's operating income decreased 3 per cent yearly to almost $2.4 billion while operating expenses surged 21 per cent to $2.1 billion in the second quarter.

The company said its operating income dipped primarily due to reduced average selling price of vehicles and increase in expenses driven by coming cyber truck and other large projects related to artificial intelligence.

However, it maintained a healthy operating margin at nearly 10 per cent, even with price reductions in the first half of the year.

“This reflects our ongoing cost reduction efforts, the continued production ramp success in Berlin and Texas and the strong performance of our energy and services businesses,” Tesla said.

Thomas Monteiro, senior analyst at Investing.com, a financial markets platform that has offices in the US, China, Spain and South Korea, told The National: “Tesla has demonstrated its remarkable capabilities.

“Despite lower car prices, the company managed to mitigate the already-expected decline in margins, showcasing Elon Musk's adeptness at steering the company through both prosperous and challenging times.

“Overall trajectory of the company remains positive … investors should exercise caution before betting against Tesla, as it continues to exceed expectations and enhance its long-term prospects.”

Tesla's automotive revenue, which constituted more than 85 per cent of company’s total sales in the June quarter, rose 46 per cent year-on-year to almost $21.2 billion, while energy generation and storage revenue rose 74 per cent yearly to more than $1.5 billion.

Services and other streams of revenue reached $2.1 billion, nearly 47 per cent up on an annual basis.

Tesla, which went public in 2010, said its cash, cash equivalents and investments “increased sequentially by $700 million to $23.1 billion” in the second quarter. It was driven mainly by a free cash flow of $1 billion, partially offset by other financing activities, including debt repayments.

The Texas-headquartered company said it was planning to grow production “as quickly as possible” in alignment with the 50 per cent compound annual growth rate. For 2023, Tesla aims to produce about 1.8 million cars.

“We have ample liquidity to fund our product road map, long-term capacity expansion plans and other expenses … we will manage the business such that we maintain a strong balance sheet during this uncertain period,” Tesla said.

Tesla produces its vehicles in Fremont, California; Austin, Texas; Shanghai, China; and Berlin, Germany. The company said it remained on track to begin production of its cyber trucks later this year at its gigafactory in Texas.

In the previous quarter in its energy segment, Tesla’s solar deployments remained flat at 66 megawatts. This was due to a high interest rate environment that is causing postponement of solar purchasing industry-wide, the company said.

Meanwhile, the energy storage deployments increased by 222 per cent year-on-year in the last quarter to 3.7 gigawatt hours.