By Senad Karaahmetovic
Shares of Tesla (NASDAQ:TSLA) are up more than 2% in premarket trading Thursday after the carmaker reported better-than-expected Q2 2022 EPS, although automotive gross margins came in weaker compared to last year.
The carmaker reported adjusted EPS of $2.27, topping the consensus estimates of $1.81, according to Refinitiv. Revenue came in at $16.93 billion, slightly below the expected $17.1 billion. Tesla said $14.6 billion came from automotive revenues, while $1.47 billion and $866 million came from Tesla’s services and energy business, respectively.
The electric vehicle (EV) maker reported $344 million in automotive regulatory credits revenue in the quarter, down 3% from the same quarter last year. The company reported an automotive gross margin of 27.9%, compared to 32.9% in the previous quarter and 28.4% in the year-ago period. Red-hot inflation levels and intensifying competition for battery cells weighed on Tesla’s automotive gross margins.
During Tesla’s earnings call Wednesday, CEO Elon Musk said production at the company’s new plant outside Berlin rose to more than 1,000 EVs per week in June. The billionaire also expects Tesla’s new Austin-based factory to exceed the 1,000 per week production milestone over the coming months.
The world’s largest EV company also revealed it has sold 75% of its Bitcoin holdings at the end of Q2, securing $936 million in cash.
A Morgan Stanley analyst said the results were “stronger than expected” regarding revenue and margins. He remains constructive on Tesla stock as he believes the robust demand will continue to outstrip supply issues.
“We are prepared for near-term margin headwinds due to (new) challenges with ramping new production, particularly in Berlin… What matters to the stock from here through year-end? (a) China re-opening momentum and (b) Austin/Berlin ramp execution, (c) input inflation vs. pricing actions and impact on margin,” he told clients in a note.
A Goldman Sachs) analyst said Q2 results “met investors expectations,” which is enough for him to reiterate a Buy rating and a $1,000 per share price target.
“We believe that the combination of improving production volumes (on new factory ramps and easing semi constraints) and solid pricing will help auto deliveries and non-GAAP auto gross margins to trend higher in the coming quarters,” he wrote in a research note.
A Mizuho analyst hiked the price target on Tesla stock to $1,175 from the prior $1,150 after a “good” quarter.
“We continue to see solid production ramp, profitability and execution, EVs growing at a ~30%+ 10Y CAGR and with TSLA reiterating its long-term ~50% delivery CAGR target. We believe in the medium-term, investor concerns revolve around a potential consumer slowdown into 4Q22 (though CEO Elon Musk noted not seeing a slowdown yet, with Model Y-LR lead times extending into C23E),” he said in a client note.