How Tesla was like most other companies in Q2
Tesla's quarterly results echoed what many other companies have been communicating in recent weeks.
Why it matters: The electric vehicle company has been one of the hottest growth stories of the last few years, with its stock decoupling from the rest of the market as it made shareholders and its CEO Elon Musk billions of dollars wealthier.
- Despite its characteristics as a secular growth company, Tesla has delivered performance similar to more cyclical companies.
By the numbers: Tesla's record Q2 results included adjusted earnings of $1.45 per share, beating expectations for $0.94 per share. It joins the roughly 88% of companies that have beaten expectations so far.
- The company cited “additional supply chain costs,” just like numerous other companies and execs sounding the alarm on inflation.
- And yet, profit margins are expanding. Tesla reported an operating margin of 11.0% in Q2, up from 5.7% in the prior quarter and 5.4% last year. This is in line with a recent NABE survey that revealed widespread expectations for fatter margins despite higher costs.
- Tesla’s inventory has gotten much tighter, shrinking to just nine days' worth of supply, down from 17 days of supply a year ago. Tight inventory levels have plagued industries ranging from housing to clothing to fast food.
Yes, but: Tesla’s got a massive amount of bitcoin on its books, and during the quarter, it reported a $23 million impairment charge due to its lower value.
- There’s no disputing that this is an unusual item that you won’t see in most earnings announcements.
The bottom line: Investors seeking to spice up their portfolios with volatile growth plays like Tesla should understand that it’s not easy to find a stock that’s totally shielded from forces affecting all businesses.