Tesla’s financial results and stock market response
The issue with Tesla lies in its ambition often clashing with its capability to detail its aspirations precisely.
The difficulty was evident Tuesday afternoon when the company’s second-quarter earnings fell short of expectations, even though they achieved record revenue.
Subsequently, CEO Elon Musk was ambiguous regarding the timeline for the actualization of major products.
The outcome: Tesla’s stock, which fell by 2% to 6.38 during regular trading hours, decreased by .83, or almost 8%, after hours to 7.25.
Should the price of 7.25 remain consistent on Wednesday, the shares would see an 11.4% decline from their closing price of 6.56 on July 16. Although this price wasn’t an all-time high, it marked the peak of a rally that elevated the stock by 85% from its 52-week low of 8.80, which occurred on April 22.
On Tuesday, Tesla was the poorest performer among the Magnificent Seven group of stocks. Amazon.com led the Mag 7, rising by 2.1% to 6.41.
Tesla’s stock dropped as Musk acknowledged that the anticipated release dates for new products would be delayed and provided unclear information on other matters.
- The launch of the Robotaxi has been rescheduled from its initial date of August 8 to October 10. Musk confirmed the revised date earlier and reiterated this information during the earnings call on Tuesday.
- The initial rollouts of its Optimus industrial robots could occur by late 2024, though 2025 seems more probable.
Tesla announced earnings of 42 cents per share for the second quarter, a decrease from 78 cents per share in the same period of 2023, and falling short of the consensus estimate of 46 cents by four cents.
Revenue was $0.5 billion, representing a 2.3% increase from the previous year’s $0.9 billion.
The shares briefly fell to a low of 9.95 as investors appeared taken aback by a 2 million restructuring expense associated with layoffs announced earlier in 2024.
The charge increased the magnitude of the earnings shortfall. Excluding that charge, the adjusted earnings were 66 cents per share, which exceeded the estimate but was still 27% lower than the previous year.
Another problem: Tesla’s gross profit margin fell to 14.6%, marking its lowest level in five years.
The news was positive: Vehicle deliveries in the second quarter surpassed expectations, and the dispute regarding Musk’s substantial compensation package has been resolved.
Musk’s bold vision and postponed product releases
Musk’s ambitious vision for Tesla is undeniably groundbreaking, but it frequently encounters challenges in implementation and market expectations. His expansive plans envision a future devoid of petroleum-powered vehicles, with electric vehicles equipped with full self-driving capabilities taking their place. This vision also includes a scenario where urban transport is dominated by Robotaxis managed by a Tesla-operated AI network, providing rides at lower costs compared to personal vehicles or public transit.
The timeline for these innovations is still unclear. The Robotaxi, originally set to debut on August 8, has been delayed until October 10. Likewise, the introduction of Optimus industrial robots, which Musk suggested could happen by the end of 2024, now appears more probable for 2025. These postponements have fostered investor doubt and led to a decline in Tesla’s stock value.
Although there have been obstacles, Musk continues to be positive about the future potential of these initiatives. He imagines a future where Tesla’s Robotaxi network could produce trillions of dollars in income, with some figures reaching into the trillions mentioned during earnings discussions. Nevertheless, this optimism is balanced by the practical challenges of regulatory approval, especially in the U.S., where Musk expects the approval process to take longer compared to Europe and China.
For Australian investors, the main point is striking a balance between Musk’s ambitious vision and the practical difficulties of bringing these innovations to market. Although there is potential for substantial returns, the journey to achieving these gains is riddled with uncertainties and delays. As always, a careful approach, based on a comprehensive understanding of both the opportunities and risks, is recommended when contemplating investments in Tesla.
