Key point
- Tesla’s Q2 financials surpass expectations with a 20% YoY jump in adjusted EPS, but lower average selling prices (ASPs) lead to a 4.2% after-hours drop in TSLA stock.
- Margins continue to be impacted by the company’s strategy of lowering ASPs to drive higher volumes, resulting in consistent declines in gross and operating margins.
- Wall Street analysts maintain a positive outlook on TSLA stock, highlighting its leadership in the EV industry, although near-term margin headwinds may be a concern if further price cuts occur.
Electric vehicle (EV) titan, Tesla, announced stronger-than-expected second-quarter financials with a remarkable 20% year-over-year increase in adjusted EPS. However, the company’s aggressive strategy of lowering average selling prices (ASPs) to boost volumes took a toll on its margins, leading to a 4.2% drop in TSLA stock after hours.
Tesla’s gross and operating margins have been steadily declining in recent quarters, with Q2 gross margins falling 682 basis points YoY and 110 basis points sequentially. CEO Elon Musk hinted at potential further price cuts, which could further squeeze margins in the short term. Despite this, Musk remains confident in Tesla’s long-term prospects, emphasizing the significance of autonomy in recouping margins.
Analysts, too, share optimism on Tesla’s future. Wall Street remains unfazed by Q2 results, with analysts maintaining Buy recommendations on TSLA stock. Despite near-term margin concerns, they highlight Tesla’s global EV leadership and strong market position. However, the recent rally in TSLA stock might limit its short-term upside potential.
| Metric | Q2 Performance |
|---|---|
| Adjusted EPS Growth (YoY) | 20% |
| After-Hours TSLA Stock Drop | 4.2% |
| Gross Margin Decline (YoY) | 682 basis points |
| Gross Margin Decline (Sequential) | 110 basis points |
| Operating Margin Decline (YoY) | 493 basis points |
| Analysts’ Average Price Target | $252.08 |
| Upside Potential from Current Level | 13.45% |