• Tesla stock underperformance
  • Q2 revenues and earnings to top estimates
  • Increased electric vehicle production and deliveries
  • Focus on cost management

Tesla Inc. (NASDAQ: TSLA) will report its second-quarter financial results after market close on July 26, 2021. The earnings report comes at a pivotal moment as the stock has underperformed the overall market after skyrocketing more than 100% last year.

The stock has come under immense pressure characterized by a 24% pullback from all-time highs. Additionally, it is down by about 9% year to date and in dire need of new catalysts if it is to rerate higher.

A strong set of Q2 numbers is needed if investors’ sentiments in the automaker are to edge higher and fuel another bounce back.

Tesla heads into the second quarter earnings session, having established itself as a leader in the electric vehicle space. Solid performance and impressive car design have continued to affirm the automaker’s competitive edge in the industry and the catalyst behind growing auto sales.

Model 3 is the company’s flagship vehicle and first mass-market electric car in North America and Europe. It is also one of the bestsellers. During the recent quarter, the company produced 206,421 vehicles, more than double 82,272 produced the same quarter last year,

Q2 expectations

Wall Street expects the electric vehicle giant to report earnings per share of $0.96 which should be more than double the $0.44 a share reported last year in the same period. In the first quarter, the company posted an EPS of $0.93, representing triple-digit growth from the previous year. It also topped analysts’ estimates of $0.75 a share.

Tesla Inc.stock chart

On the other hand, revenues are expected at $11.22 billion, more than double revenues of $5.18 billion reported in the same quarter last year. In Q1, revenues rose 74% to $10.4 billion but fell short of Wall Street expectations of $10.48 billion.

What to look out for

When the EV giant reports focus will be on production levels which have been a big challenge in the broader auto industry. Chip shortages in recent months have rattled the auto industry forcing some companies to go slow on production.

Amid an unstable supply chain, Tesla’s transition to the new Model S and Model X has been impressive. In the March quarter, the company recorded its highest ever production and delivery levels. The momentum is believed to have continued in the quarter.

Tesla delivered 201,250 units in the second quarter, more than double the 90,650 deliveries last year in the same quarter, and 184,800 in the first quarter. The increase stems from the rising popularity of green vehicles amid changing customer preferences in the aftermath of the pandemic.

Tesla Model 3/Y production

Amid the increased production levels, the focus will also be on the automaker’s cost structure, a key component to generating optimum returns. Management has already affirmed that cost management entailing a reduction in the average cost of vehicles is a top priority. A positive impact can be expected in the Q2 results.

Development projects

In addition to ramping up production and cutting back on costs, the focus will also be on the multiple projects that Tesla is working on that are at the heart of its long-term prospects. The automaker is currently working on projects, key among them being a Gigafactory in Texas expected to ramp up production.

In addition, it is also working on another gigafactory in Germany expected to ramp up production to meet electric vehicle demand in Germany. The automaker is also setting up another production line in Shanghai, China.

The multiple gigafactories together with the proposed rollout of full self-driving subscriptions should be discussed when the company reports

Bottom line

Tesla is poised to report a second-quarter report that will show year over year increase in revenues and earnings. Increased production and deliveries would be key to the company topping estimates. Additionally, the focus will be on the investment towards ramping up production and cutting back on production costs.