Tesla (TSLAShares have slumped since second-quarter financials on July 19, as investor concerns about falling gross margins appear to outweigh the global electric-car giant’s battering earnings and revenue numbers.
Meanwhile, Tesla announced on August 7 that Chief Financial Officer Zachary Kirkhorn would be stepping down from his position. The EV giant announced in federal filings that Vaibhav Taneja took over from Kirkhorn on August 4. Taneja will now serve as Chief Financial Officer in addition to his current role as Chief Accounting Officer.
“During his tenure, Tesla experienced tremendous expansion and growth,” the company wrote in the SEC filing. “Tesla thanks Mr. Kirkhorn for his great contributions.”
Kerhorn joined Tesla in 2010 and became CFO in 2019. He will remain at Tesla through the end of the year to “support a smooth transition,” according to the company.
On Aug. 8, Bernstein analyst Tony Sacconaghi told investors that Kirkhorn’s exit was “difficult to spin positively.”
Sacconaghi added that Tesla is “obviously a demanding place, and it’s hard to work for Elon.” However, the analyst noted, “It doesn’t sound like investors need to run for the hills, but Kirkhorn has clearly made a personal decision that the tussle just isn’t worth it.”
The executive changes come after Tesla reported second-quarter profit growth of 20% to 91 cents a share, while revenue increased 47% to $24.93 billion. Analysts expected earnings to rise about 4% to 80 cents per share on total revenue of $24.22 billion, up 43% from last year.
Tesla’s total gross profit grew 7% to $4.53 billion in the second quarter. Meanwhile, gross gross margins posted 18.2%, down from 19.3% in the first quarter and a 682 basis point decline year-over-year. Automotive gross margins, excluding regulatory approvals and leases, were 18.1%, down from 18.3% in the first quarter.
That’s less than the 20% gross margin that Tesla previously targeted. Before the earnings, a slew of analysts rang warning bells on gross margins.
“The short-term differences in gross margins and profitability are really slight compared to the long-term picture,” CEO Elon Musk told investors during the second quarter earnings call.
“The autonomy would make all these numbers look ridiculous,” he added.
Stock declines after earnings
However, on July 20, the TSLA fell 9.7% to 262.90, falling below the 21-day line but only giving up July’s gains.
Ahead of the earnings, Cathy Wood sold tranches of her Tesla stock stakes in successive sessions, offloading more than 73,000 shares before the EV giant reported its second-quarter financial data.
Adam Jonas, an analyst at Morgan Stanley, wrote on July 24 that he expects gross margins for Tesla cars for the full year to remain less than 20% through 2025.
Wood sold another 20,700 shares of Tesla stock on July 25 for $5.49 million, based on the closing price of 265.28.
Since mid-June, Wood’s Ark has sold about 883,00 shares of Tesla and not bought any.
Tesla Stock & Musk
There is never a dull moment for Tesla and Musk, as the two are closely linked. Since Musk acquired Twitter on Oct. 28, and bought the social media platform for $44 billion, some Tesla stock bulls have long worried that Musk’s focus on Twitter, along with negative interest, is weighing on Tesla stock.
Musk appeared to assuage those concerns when he named Linda Iaccarino, the head of advertising at NBCUniversal, as the new CEO of X Corp. , formerly known as Twitter. The Tesla chief added that Yaccarino will focus on business operations while working on new product and technology design.
Wedbush analyst Daniel Ives writes that the news ends some of the “risk of distraction around the Tesla story.”
With TSLA stock tumbling after earnings, the most important question for investors is always, when is the right time to buy or sell Tesla stock.
Tesla and Musk are betting big on Cybertruck and autonomous vehicle technology, along with potential tailwinds from the Inflation Reduction Act (IRA).
Tesla A Monster Stock for much of its history
Musk has, almost single-handedly, turned the auto industry on its head, essentially forcing it onto the electric car train.
This is why Tesla has been such a massive stock throughout most of its history, especially during its stratospheric run from mid-2019 to late 2021. The stock hit a bear market low of 101.84 on Jan. 6, but bounced back until first-quarter earnings.
On April 19, Tesla reported a significant drop in first-quarter earnings while revenue missed sights. The global electric car giant’s profit margins also fell below 20% as the company implemented an aggressive price-cutting strategy in the early part of 2023.
Tesla reported a 24% increase in revenue to $23.33 billion with EPS of 85 cents, down 20% compared to 2022.
Gross profit for the EV company was $4.5 billion, with Tesla gross margin at 19.3%, down from 23.8% in the fourth quarter and 29.1% a year earlier.
Tesla’s global price cut strategy
Tesla cut prices worldwide several times in 2023, starting in January and running through April. The only exception is China, where Tesla cut prices significantly in late October before cuts in early January.
On April 14, Tesla lowered prices in several European markets. Tesla also lowered the prices of its electric cars in Israel and Singapore in order to boost demand, extending a global discount push that began in China in January.
The global electric vehicle manufacturer also cut prices in the United States and Europe on January 13, and then cut European prices again in early March.
Tesla Stock: Betting on self-driving vehicles and the e-truck
Musk has long touted Tesla’s fully self-driving (FSD) technology and the potential value it brings to the brand.
Tesla’s CEO told investors during its first-quarter earnings that “the value of an autonomous vehicle is enormous.”
Musk also stressed that the improvements in the FSD beta are “really very exciting.”
“The trend is very clear toward full autonomy, and I hesitate to say this, but I think we’re going to do it this year,” Musk said, referring to self-driving vehicles.
Meanwhile, Musk confirmed that the Cybertruck delivery event will take place later in 2023.
Tesla stated in its second-quarter financial statements that the Cybertruck “remains on track to begin initial production later this year at its Gigafactory Texas.” However, the EV giant added that it is “testing Cybertruck vehicles around the world for final certification and validation.”
“We can’t wait to start delivering it later this year,” Musk told investors Wednesday, referring to the Cybertruck.
On July 15, Tesla tweeted a photo of Tesla’s first ever Cybertruck built at its Austin factory. Tesla stock responded, jumping 3.2%.
The company also said it continues to “make progress” on its next-generation platform. Since Tesla’s investor day in early March, the company has been mostly silent about its next-generation car, which will be produced at its new factory in Mexico. At the annual meeting of shareholders, Tesla unveiled the silhouette of the car.
The long-awaited semi-truck was unveiled
In early December, Tesla unveiled its long-awaited pickup truck, the 18-Wheel Long-Range Electric Cargo Truck, five years after it was first announced. However, in March, Tesla ordered a voluntary recall of 35 semi-trucks due to a parking brake issue.
Tesla has begun delivering half of its long-distance trucks to… PepsiCo (PEP) in December. Moreover, Musk has indicated that there are plans to build a freight network for long-haul trucks.
Musk did not say how much the 18-wheeler would cost. Semi-capable of traveling an estimated 500 miles per charge. Tesla says it can accelerate from zero to 60 in 20 seconds. The company expects to increase production over the next year and aims to deliver 50,000 units in 2024.
Prior to the recall, PepsiCo planned to deploy 36 Tesla semi-trucks, with 15 in Modesto and 21 in Sacramento.
PepsiCo placed its order for 100 EVs when the first half of 2017 was announced.
Tesla is currently under investigation by the National Highway Traffic Safety Administration for possible seat belt malfunctions. Regulators are also investigating the EV giant about steering wheel issues and driver assistance concerns.
Do you buy Tesla Stock?
After a slump in second-quarter earnings, the TSLA index fell more than 7% in August.
On August 7, Tesla stock fell to a low of 242.76 after news that Tesla’s chief financial officer was stepping down, but closed down less than 1%, at 251.45. However, TSLA closed below the 50-day line for the first time since May.
A decisive move above the 50-day line, which could involve at least a clearing of the 21-day line, could provide an early entry.
Tesla stock ranks third in IBD Automotive Group. It has a composite rating of 98 out of 99. Tesla has a 91 relative strength rating and its EPS rating is 94 out of 99.
The market situation is showing an “uptrend under pressure”. Tesla stock is not a buy at the moment.
Please follow Kit Norton on Twitter @tweet for more coverage.
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