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Tesla Stock Plummets After Mixed Q2 Results

Tesla (TSLA) stock tumbled over 11% on Wednesday following a mixed second-quarter earnings report released late Tuesday.

Despite beating revenue expectations with $25.05 billion, surpassing the $24.63 billion anticipated, the company’s adjusted profits fell short at $0.52 per share compared to the expected $0.60. This marks the fourth consecutive quarter Tesla has missed EPS expectations, raising concerns among investors.

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Tesla's price-cutting strategy, aimed at boosting demand, has significantly impacted its margins. Automotive gross margin slid to 14.6%, down from 27.9% in Q2 2022. CEO Elon Musk remains focused on volume growth over margins, betting on future profits from software and full self-driving technology. However, until these become major revenue contributors, this strategy continues to strain profitability.
Production and Delivery Challenges
Tesla delivered 443,956 vehicles globally in Q2, exceeding the Bloomberg consensus of 439,302 but reflecting a 5% year-over-year decline. This is despite aggressive price cuts meant to stimulate demand, particularly in the competitive Chinese market. The demand for Tesla’s vehicles appears to be waning, as evidenced by the decline in deliveries compared to last year.

The company's future growth catalysts have also been met with delays. The much-anticipated robotaxi, initially set for an August reveal, has been postponed to October. This delay is part of a broader pattern, reminiscent of the Cybertruck's postponed production from 2021. With Tesla's growth rate expected to slow significantly in 2024, these delays are causing unease among investors.

Bright Spots in Energy and New Models
Amid the challenges, Tesla's Energy Generation and Storage business has shown impressive growth. Revenue from this segment doubled year-over-year to $3.0 billion, with a record energy storage deployment of 9.4 GWh. This performance has been a bright spot, helping Tesla avoid consecutive quarterly revenue declines for the first time.

Tesla reaffirmed its plans to start production of a new, more affordable EV model in the first half of 2025. This vehicle is expected to utilize both the current and next-generation platforms, potentially broadening Tesla’s market reach. The company also plans to ramp up investments in AI initiatives, aiming to solidify its position in the autonomous vehicle market.

Market Reaction and Future Outlook
Tesla shares have faced significant volatility this year. After recovering from a more than 40% drop earlier, the stock is now down over 12% year-to-date following the Q2 earnings report. The company’s acknowledgment that vehicle growth in 2024 will be notably lower than the 38% achieved in 2023 has added to investor concerns.

Despite these challenges, analysts remain cautiously optimistic. Many believe that the debut of a cheaper EV and advancements in autonomous driving could spur a new wave of growth for Tesla. However, with mounting competition from Chinese automakers like BYD, NIO (NIO), Li Auto (LI), and XPeng (XPEV), the road ahead remains challenging. As Tesla navigates these hurdles, the focus will be on its ability to deliver on its ambitious plans and maintain its position in the evolving automotive landscape.


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