Tesla Q2 results: Pro expects AI to drive gross margins ‘above 50%’

Shares of Tesla Inc (NASDAQ: TSLA) are slightly down in extended hours after the EV giant said its margins were hit again in the second quarter.

Tesla stock down on weakness in margins

Excluding regulatory credits, its car business saw a sequential decline of 70 basis points in gross profit margin to 18.1% – near the lower end of Street expectations. Still, Tasha Keeney of ARK Invest said today on CNBC’s “Fast Money”:

Longer term, gross margins could be above 50% (five-year forecast). That’s not just driven by EVs. It’s driven by AI. Tesla is one of the most important AI stocks at this very moment.

Tesla Inc attributed the weakness in margins primarily to price cuts its implemented earlier this year.

A weaker U.S. dollar and higher costs related to battery production were among other factors that weighed on margins in its recently concluded quarter.

Is Tesla ahead of rivals in autonomous vehicles?

A Tesla, on average, costed about $45,000 in the second quarter versus $56,000 a year ago, as per the shareholder deck.

Keeney does expect auto margins to eventually improve as well but is focused more on autonomy as a key driver of strong margins over the long term.

Tesla is averaging over 2 million miles per day at this point in full self-driving. They have a data advantage that is unparalleled in this industry. It’ll be extremely hard for anyone to catch up.

The electric vehicles behemoth topped Street expectations for production and deliveries in Q2 as Invezz reported here. At writing, Tesla stock is up more than 150% for the year.

Tesla Q2 financial highlights

• Earned $2.7 billion versus the year-ago $2.3 billion
• Per-share earnings also increased from 65 cents to 78 cents
• Adjusted EPS printed at 91 cents as per the press release
• Revenue climbed 47% year-over-year to $24.9 billion
• Consensus was 80 cents a share on $24.2 billion revenue

What does Cybertruck mean for Tesla stock?

On Wednesday, the Nasdaq-listed firm reiterated its commitment to producing 1.8 million EVs in 2023. In the current quarter, though, factory updates will likely result in slightly lower production, as per CEO Elon Musk.

Earlier this week, Tesla Inc confirmed that it has built the first Cybertruck at Giga Texas. Explaining what it means for the stock, Deepwater’s Gene Munster said today on CNBC’s “Fast Money”:

Cybertruck is a big deal. Ford is acknowledging they’re worried about this vehicle. It’s like nectar for growth investors. I think the stock goes up when Cybertruck comes out.