Tesla Q2 earnings to reflect factory woes, but expansion continues

Tesla's breakneck expansion paused in the second quarter and that likely will drag down earnings, to be posted after the market close Wednesday. But there are fresh signs that the automaker's factory woes in China, Texas and Berlin are on the mend.

Beyond the public drama of CEO Elon Musk attempting to scuttle his $44 billion purchase of Twitter, Tesla appears ready for a big growth phase — if the global economy holds up in the face of supply chain shortages and rising costs, analysts said.

"Despite all the drama and the ups and downs with Mr. Musk, it's worth sticking with it," George Gianarikas, analyst at Canaccord Genuity, said in an interview with CNBC last week. The analyst called Tesla "Apple on steroids" because of the automaker's lead in the electric vehicle race.

Tesla is expected to show a rise in quarterly revenue when it announces results on July 20, Reuters reported. The Austin, Texas, company is expected to report revenue of $17.09 billion for the quarter, a 43 percent increase from $11.96 billion a year earlier, according to the mean estimate from 20 analysts, based on Refinitiv data.

Last month, Musk called the automaker's newly opened auto plants in Berlin and Austin "gigantic money furnaces" that are losing billions of dollars as they ramp up production from zero this year.

But as they pick up speed, and as the automaker's China plant expands, Tesla could post big numbers in the second half.

An analyst who recently initiated coverage of Tesla, William Stein of Truist Financial, said in a mid-July research note: "We believe the company's best days, in terms of volume production, and especially AI [artificial intelligence] innovations, are still down the road."

Musk himself said in a post on Twitter last week that Tesla could lower its ever-increasing vehicle prices if inflation begins to come down from current levels. Tesla has been raising prices for more than a year in response to strong demand and rising material costs.

Tesla's earnings report on Wednesday will be mostly looking backward on a weekslong plant closure in China that significantly cut production there, as well as the slow launches in Texas and Berlin.

The company said in early July that its global deliveries fell 18 percent to 254,695 in the second quarter after two years of gains. But that downturn was compared with the first quarter, not to the year-earlier period. In a year-on-year basis, Tesla's sales were up 27 percent.

Tesla said in the press release that June 2022 "was the highest vehicle production month in Tesla's history" — an indication that China was fully back online and Texas and Berlin were seeing higher volume production.

Tesla has not said if Musk will appear on the earnings call Wednesday, but there are several issues that investors and financial analysts would like to hear about.

Tesla's director of artificial intelligence, Andrej Karpathy, said last week that he is leaving the company after a monthslong sabbatical. The automaker is betting on AI to eventually make its vehicles fully autonomous.

Tesla has also been laying off hundreds of workers after Musk warned last month of an economic downturn.

Reuters reported last week that the company is permanently shutting its office in San Mateo, Calif., and laying off 229 workers. Separately, workers have filed a lawsuit in Texas over layoffs at the company's battery factory in Nevada.

But there was also good news for the EV leader last week: Panasonic announced it will build a battery factory in Kansas to meet growing demand from its clients, including Tesla. Panasonic is a partner with Tesla in the Giga Nevada battery plant.

Musk, or other Tesla officials, could also provide a product update, especially on the Cybertruck, which is expected sometime next year.

In recent earnings calls, Musk has also teased a new humanoid robot, Optimus, and dedicated autonomous taxis without driver controls.