Teslas Big Bet on Price Cuts a 20 Jump in Net Income Leaves Investors Unconvinced

Tesla’s Big Bet on Price Cuts: A 20% Jump in Net Income Leaves Investors Unconvinced

Elon Musk’s Tesla, Inc. (NASDAQ: TSLA) has reported its latest earnings for the April-June quarter, and the results appear to be a mixed bag.

Good News: Beating Analyst Expectations

The electric vehicle manufacturer surpassed analyst expectations for net income in the April-June quarter. Tesla reported a net income of $2.7 billion, marking a solid 20% increase compared to last year. Earnings per share also saw a healthy rise of 20% to 78 cents when measured by generally accepted accounting principles.

Even Better News: Exceeding Profit Estimates

However, analysts often pay attention to Tesla’s measurement of profit, which excludes stock-based compensation expenses. According to this measure, Tesla’s net income surged to $3.15 billion, or 91 cents per share, significantly surpassing the FactSet analyst estimates of 80 cents per share. Analysts had predicted a decline in profits due to price cuts.

Tesla’s total revenue achieved a 47% increase, reaching $24.93 billion in the quarter.

Record Vehicle Deliveries

Tesla also celebrated strong vehicle delivery figures on July 2, reporting an 83% increase compared to last year. The surge in sales was attributed to several price cuts on its four electric vehicle models. During the April-June period, the company set a new record by selling 466,140 vehicles globally, almost doubling the 254,695 sold during the same time last year. Notably, these sales were of Tesla’s popular Model 3 sedans and Model Y crossover SUVs.

Not All Positive: Profit Margin Concerns

Despite the positive vehicle sales, Tesla’s operating margin fell to 9.6% in the April-June quarter, significantly lower than the 14.6% recorded a year earlier. This decrease raises questions about the company’s ability to maintain healthy profit margins while employing discounting strategies to boost sales.

Market Response

Following the earnings report, Tesla’s shares initially showed little movement, staying around $292, only slightly up from their previous close at $291.26.