Tesla reported impressive Q2, 2021 earnings. The company beat analyst estimates by far. The most important thing about the Q2 earnings was regulatory credits income. Tesla has, for a long time, been criticized for heavily relying on regulatory credits. This time around, though, these credits represented a modest percentage of 3% of total revenue.
Nevertheless, the stock hasn’t moved much. At first, the stock saw an uptick of about 2% in after-hours trading but has since lost those gains.
Here’s a summary of Tesla’s Q2, 2021 earnings and what to look out for in the next half of 2021.
In This Article
Revenue
Tesla’s revenue came in at $11.96 billion, a beat of about $500 million. Moreover, it represents a 98% growth year over year and a 15% growth quarter over quarter.
In addition to great delivery numbers, the excellent performance was also driven by better-than-expected figures from Tesla’s energy business.
Profitability
Tesla reported a net income(GAAP) of $1.1 billion compared to analyst consensus of $553 million. That’s a monstrous 50% beat. The net income is a tremendous 998% increase compared to the same quarter last year.
Margins
Automotive gross margin, without regulatory credits, was an impressive 25.8%. Such margin is unheard of in the automotive industry, and the best Tesla has achieved so far. Of course, it was yet another beat, with consensus standing at 23.1%.
Future outlook
Given the stock market’s reaction to Tesla’s Q2 earnings report, it seems that investors are still worried about what the second half of 2021 holds for Tesla, even though the company beat all expectations. According to Piper Sandler, Q3 and Q4 performance greatly rely on the supply chain.
However, if there’s one thing the Q2 results have shown is that Tesla has a fundamentally strong business. Tesla has shown immense resilience over this past quarter. For instance, the company made phenomenal profits despite chip shortages and supply issues. They were agile enough to develop their own microcontrollers that helped navigate the supply shortages. Better yet, we know that supply issues and chip shortages are temporary. When these challenges go away, what’s left is the resilient and robust business that Tesla has proved to have this past quarter.
Furthermore, Tesla achieved a 28% margin notwithstanding minimal sales of the Model S and X, which are their high margin vehicles. Considering model S/X production is gradually resuming this quarter and Tesla can produce between 10,000 and 20,000 of them, Tesla is geared up to attain staggering performance in the second half of 2021.
Tesla is still targeting a 50% annual growth in vehicle production. During their earnings call, Tesla said that their battery suppliers have signaled that production capacity could double by 2022. This is good news for Tesla’s energy business as well.
Tesla also recently unveiled an exciting high-margin product, the FSD subscription, priced at $199 per month. While still in its inception stage, its revenues in the next five years are very promising.
News about Tesla opening up its supercharger network has spread like wildfire, revealing diverse opinions from Tesla owners and investors. Goldman Sachs estimates that opening up the charging network to other EVs could be a $25 billion opportunity for Tesla. Tesla currently has a network of about 25K chargers installed. The anticipated infrastructure bill could provide funds to help expand the network. If the number of chargers is increased to 500K, Goldman Sachs’ calculations estimate annual revenue of up to $25 billion from charging services alone.
There’re still concerns about the stock being expensive with an unjustifiable forward PE. However, Tesla gigafactories in Texas and Berlin that are due to be completed in 2022 could turn this around.
Should you Buy Tesla?
My opinion about Tesla stock remains solid. The company is set to become one of the most valuable companies – if not the most valuable – in the next decade. So while others are pessimistic about the stock just because it’s seen a little beating recently, I am still bullish on Tesla and loading up every time I can.
As long as you’re on the ride for the long haul, any price under $700 is a bargain, in my opinion. A few years from now, there will be two types of investors: those who wish they bought Tesla stock and those who wish they bought more. Which one will you be?
Disclaimer: None of this is meant to be construed as financial advice, it’s for educational purposes only. Links may include affiliate referrals and I may receive compensation from partnering websites. The content is accurate as of the posting date but may not be accurate in the future.
