Tesla Is On Track To Have Its Best Quarterly Sales Ever

Tesla Inc. is preparing to release its second-quarter earnings after market close next Wednesday, attracting significant attention as analysts anticipate another strong performance from the electric vehicle (EV) manufacturer.

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Earlier this month, Tesla reported second-quarter deliveries of 466,000 vehicles, surpassing the expectations of Wall Street analysts. Bill Selesky, an analyst at Argus Research, initially projected deliveries of around 450,000 vehicles for the quarter. He believes that strong demand may result in an upside to their second-quarter earnings forecast. Additionally, Selesky expects that price discounts during the quarter were relatively minimal, unlike the heavier discounts observed in the first quarter, potentially indicating a fading trend of "price wars" among EV manufacturers.

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Based on the first-half results to date, Selesky expressed confidence that Tesla has the potential to surpass its production target of 1.8 million units and reaffirmed a positive outlook for the company over the next 12 months. Analysts surveyed by FactSet anticipate Tesla to report second-quarter sales of $24.32 billion, a significant increase compared to second-quarter 2022 sales of $16.9 billion, matching the high-water sales mark achieved in the fourth quarter. Adjusted earnings of 79 cents per share are projected for the quarter, compared to 76 cents per share in the second quarter of 2022.

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While competition in the EV sector is expected to intensify in the short-term, Selesky believes that Tesla will continue to establish itself as the industry leader for an extended period. Another positive aspect highlighted by Brian Mulberry, a portfolio manager at Zacks Investment Management, is Tesla's decreasing debt level. Mulberry stated that Tesla's net long-term debt and finance leases decreased from $1.6 billion at the end of 2022 to $1.27 billion as of March 2023. This reduction in leverage provides the company with financial flexibility to seize growth opportunities.

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However, Mulberry noted potential risks for Tesla, including increasing research and development spending, capital expenses, and rising competition. Tesla is expected to continue investing in expanding capacity, scaling up battery production, and improving its Supercharger infrastructure, which will likely contribute to rising expenses and put pressure on near-term operating margins. Mulberry also emphasized the rising competition from legacy automakers and emerging companies such as Rivian Automotive Inc., NIO, XPeng, and Li Auto Inc., who are gaining market share in the EV space.

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Tesla recently announced partnerships with other automakers, including Ford Motor Co. and General Motors Co., granting access to Tesla's Supercharger network for owners of their EVs. Despite these challenges and potential headwinds, Tesla's market position remains dominant. However, Mulberry cautioned that the company's market share may shrink as competition intensifies, particularly in China, where local EV manufacturers like NIO, XPeng, and Li Auto are experiencing substantial growth and expanding into international markets.

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Following the earnings release, Tesla has scheduled an analyst call, which will be webcasted for investors and analysts to gain further insights into the company's performance. Year-to-date, Tesla's stock has surged by 117%, significantly outperforming the broader market, as the S&P 500 index has seen gains of approximately 15% during the same period.

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