Tesla’s (TSLA) Q2 report likely to reflect softening EV demand

Tesla Inc. (NASDAQ: TSLA) had a weak start to the fiscal year, reporting lower sales and profit for the first quarter. Anticipating the weakness to extend into the remainder of the year, the EV giant issued cautious full-year guidance even as EV adoption moderates globally. The company is preparing to reveal its second-quarter numbers on Tuesday, July 23, at 4:10 pm ET.

The Stock

After slipping to a one-year low in mid-April, Tesla’s stock made a steady recovery and maintained the momentum ahead of the earnings. Currently, it is trading about 12% below last year’s levels. The stock got a major boost early this month after the company reported better-than-expected delivery and production numbers for the second quarter.

When the Austin-headquartered carmaker announces second-quarter results on July 23, after the closing bell, the market will be looking for earnings of $0.62 per share, excluding special items. That is lower than the $0.91/share profit the company earned in the prior-year period. The cautious forecast reflects an estimated 1% decrease in June-quarter revenues to $24.72 billion.

Challenges

Tesla’s not-so-impressive financial performance this year is attributable to the continuing slowdown in EV adoption and the shift to plug-in hybrids. While the company sees this trend reversing and ultimately electric vehicles dominating the market, the road ahead looks bumpy due to growing competition from Chinese EV makers and the unfavorable demand-supply scenario. Meanwhile, Tesla is betting big on its robotaxi project to drive long-term growth, with the prototype scheduled to be unveiled in October.

Tesla’s CEO Elon Musk said at the Q1 earnings call, “We’ve updated our future vehicle lineup to accelerate the launch of new models ahead, previously mentioned start of production in the second half of 2025. So, we expect it to be more like the early 2025, if not late this year. These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms, and we’ll be able to produce on the same manufacturing lines as our current vehicle lineup.”

Q1 Miss

In the first three months of fiscal 2024, adjusted earnings dropped to $0.45 per share from $0.85 per share a year earlier. Unadjusted net income was $1.13 billion or $0.34 per share in the March quarter, compared to $2.51 billion or $0.73 per share in the corresponding period of 2023. Earnings fell short of analysts’ estimates, marking the third miss in a row. The bottom-line performance was negatively impacted by a 9% revenue drop to $21.30 billion. The top line also missed estimates, continuing the recent trend. The company produced 433,371 vehicles in Q1 and delivered 386,810 units.

After paring a part of the recent gains in the past few sessions, TSLA regained strength and traded higher throughout Thursday’s session. The last closing price is well above the long-term average.