Tesla’s second quarter earnings were announced after the close on July 23rd. A restructuring charge, higher research and administrative costs made the bottom line appear worse than it seems. Other segments in the Tesla ecosystem are starting to take up more slack and add to the overall business.
Revenue was $25.5 billion up 19% sequentially and 2% year over year. Gross margin was 18% up sequentially but slightly lower from Q2 2023. Operating profit, where the R&D and restructuring charge are recorded was $1.6 billion up 37% from last quarter but down 33% from last year. The bottom line was nearly $1.5 billion up 31% sequentially but down 45% year over year.
Tesla Quarterly Revenue
The nine quarter income statement bar chart shows the top line has been growing by 4.7% as well as gross profits by 87 basis points. Operating profit is down 4.7% since Q2 2022 and net income by 4.6%.
Tesla Vehicle Production
Lets look at electric vehicle production. The Model 3/Y saw almost 387 thousand new units in Q2 down 6.3% quarterly and 16% year over year though overall growth has been 5.3%. Their other models in contrast have been adding 15.5% from last quarter, 24.5% year over year and up 4.5% overall. Total production was 24,255 units.
Operating lease vehicles were slightly lower to 171 thousand cars down 1% from Q1. Year over year was up 2% and nine quarter growth by 3%.
Tesla Energy Storage and Revenue
Storage deployed is one of the other operations producing a profit for Tesla. Total deployed storage jumped to 9,400 megawatts this quarter. Better by 130% sequentially, 157% from Q2 2023 and growing 26.5% overall. The line in red is the revenue from that business at $3 billion growing 15% from Q2 2022. It comprises almost 12% of total Tesla revenue.
Tesla locations in blue continues its steady growth to 1,286. Improved by 2% from Q1 2024, 20% from last year and 5% overall. The mobile service fleet dropped by 1 to 1,896 down the last 2 quarters.
Tesla Supercharger Stations and Connectors
Supercharger stations, the red line, continues its growth to 6,473. Connectors have a similar growth pattern up to 59,596. Each are growing by around 5.6 to 5.7%
Tesla Fundamental Valuations
Let’s look at some fundamental valuations. Earnings per share was $0.42 better sequentially but lower from last year. Without the $622 million restructuring charge adjusted earnings are $0.60. Tesla’s PE is 69.4 with the S&P 500 at 29. PEG ratio is negative as earnings growth is negative. Sales per share were $27.38 that’s a 9 times price to sales ratio. Book value is $19.09 better both quarterly and annually. Price to book value is 12.9 times. Tesla has $8.83 per share with the company trading at 28 times cash. The leverage ratios have debt at 0.05. Tesla did add more than $2.5 billion this quarter to its long term debt. Debt to equity was 0.08. Tesla has lots of room to borrow more if needed. Interest coverage is almost 19 times. Low debt means a good interest coverage. Liquidity ratios also look good with current at 1.9, quick 1.2 and cash 1.1.
Tesla’s return on assets is 11% and Return on equity is 18.6%. Return on capital employed is 7.8%. In Q4 2023 Tesla received a tax credit of over $5 billion distorting our return on invested capital metric. If we back it out though RIOC is 8.2%.
Tesla had an operating cash flow of $3.6 billion. An investing outflow of $3.3 billion. Financing inflow of $2.5 billion primarily from the long term debt they issued as mentioned earlier. Leaving them with a free cash flow of $15.4 billion. This is a 56 multiple to price.
Tesla doesn’t pay a dividend. The enterprise value of Tesla is $832 billion. Giving us multiple of 8.7 times revenue, 72 times EBITDA, 126 times EBIT and 55 times free cash flow. A little bit expensive we think.
Tesla Rating
The Key takeaways from the Pro side cash at $30 billion will keep the business moving forward. The other segments continue to expand diversifying earnings. Tesla has low debt and we like their ecosystem that supports the up take of electric cars in general. GM and Ford using Tesla’s supercharger network add to the long-term strength of the industry.
On the Con side we like to see better gross margins though they did improve. The market is becoming competitive at home and in China adding to margin pressures. The PE and Enterprise value ratios seem a little expensive. The US tariffs on EVs might hurt sales for Tesla in China. Lithium is difficult to extract. It requires a lot of water, takes time to yield and damages the environment.
That being said we give Tesla a neutral rating. We have no exposure to this company.