The turbulent macroeconomic conditions amid interest rate hikes and high inflation continue to pound stock markets and the recent selloff erased several millions of shareholder value. But the fall in prices has made many stocks affordable to more investors, and Tesla, Inc. (NASDAQ: TSLA) is one of them.
After recovering from a near-one-year low, Tesla’s shares got a major boost following this week’s positive earnings report. There is enough reason to believe the stock is back on the growth path and is probably heading for a new high. But there are other factors to consider before buying TSLA — the company’s upcoming 3-for-1 stock split would be an important event as far as investors are concerned.
Spin-off
Currently, speculation is rife about the effects of the split, which is expected to make the otherwise expensive stock accessible to smaller investors. Also, post-split, Tesla’s employees will have more flexibility in managing their equity. While market watchers are divided in their recommendations, the majority of them are bullish on the stock that is estimated to grow in single-digit this year.
Tesla Q2 2022 Earnings Conference Call Transcript
Despite a prolonged plant closure in Shanghai, Tesla’s top line performed well in the most recent quarter, almost matching the previous period. Interestingly, production bounced back strongly and hit a record high in June. That, combined with equally strong production numbers at Fermont, points to a record-breaking second half. TSLA has gained 30% since the beginning of the year but traded below the long-term average in the past few months.
Strong Earnings
Ever since it achieved sustainable profitability a couple of years ago, Tesla maintained solid bottom line numbers that topped expectations in almost every quarter. In the second quarter, adjusted earnings grew a whopping 57% even as revenues jumped to about $17 billion. The company maintained a strong automotive gross margin of 27.9%, which is broadly in line with the prior-year number.
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The management expects continued growth in vehicle delivery during the remainder of the year. It looks to expand manufacturing capacity to achieve the goal of 50% average annual growth in vehicle deliveries over a ‘multiyear horizon.’
From Tesla’s Q2 2022 earnings conference call:
“The past few years have been quite a few force majeures and it’s been kind of supply chain hell for several years. Credit to our awesome Tesla supply chain team for overcoming entirely difficult challenges and huge thanks to the Tesla Shanghai factory team who sacrificed a lot to get the factory back up and running in June and achieve a record output. So, also making good progress with the production ramp with Berlin. We achieved an important milestone of 1,000 cars a week in June.”
TSLA traded higher on Friday afternoon, extending the post-earnings gains, but stayed well below the record highs of November 2021.