Profit Margins Tighten Amid Price Cuts
Tesla (NASDAQ: TSLA) shares saw a decline in premarket trading Thursday following CEO Elon Musk's intimation that more price cuts might be on the horizon this year. These potential reductions come even as the electric vehicle manufacturer grapples with shrinking margins due to its ongoing price wars.
Analysts' Expectations Vs Reality: Tesla's Q2 Financial Report
Despite the pressure on its margins, Tesla's Q2 earnings report showed promising figures. The company reported an EPS of $0.91 on revenue of $24.93 billion, outperforming the EPS of $0.79 and revenue of $24.29B projected by analysts on Investing.com. This optimistic performance comes despite a year-over-year fall of 6.82% in gross margins excluding credits, sliding to 18.2%. The figure still exceeded analysts' estimates of a drop to 16.9%.
Optimistic Outlook Post Price Cuts
Investment firm Wedbush sees a silver lining in Tesla's financial dynamics, suggesting a trend towards stabilization in the coming quarters. "Tesla is witnessing steady demand after price reductions in the U.S. and China, with margins now stabilizing and likely to bottom out over the next 1-2 quarters," the firm noted.
Record-Breaking Quarter Spurs Growth
Tesla's strategic price reductions have paid off in terms of customer acquisition. The company has expanded its user base and scored new clients, reporting an 86% surge in deliveries to 466,140 units—a record-breaking quarter for the company.
Cybertruck Production Underway
Tesla reaffirmed its plans for the debut deliveries of its Cybertruck this year, announcing the commencement of production at its Texas facility earlier in the week. Deutsche Bank projects the company will manage to ship around 2,000 units this year.
Supercharger Network Fuels Tesla Share Growth
Optimism around the demand for Tesla's supercharger network has been a key factor propelling the 169% year-to-date surge in the company's shares. Major automakers, such as Ford Motor Company (NYSE: F), General Motors Company (NYSE: GM), and Mercedes Benz Group (ETR: MBGn), have recently signed agreements to use Tesla's North American Charging Standard. Wedbush recognizes this as a significant monetization opportunity for Tesla's growth narrative.