Financial Report Preview | Will energy storage business become the "new engine" for Tesla's performance after the slowdown in electric vehicle growth?

According to the Zhītōng Finance APP, Tesla (TSLA.US) is set to announce its second-quarter 2024 earnings after the U.S. market closes on July 23. Analysts expect the company's Q2 revenue to reach $24.7 billion, compared to $24.9 billion in the same period last year, with earnings per share of $0.62, down from $0.91 in the same period last year.

As this electric car company prepares to release its financial report, the full-year expectations for its core automotive business have been lowered, but investors are still weighing the potential upside in artificial intelligence, FSD, robotaxis, energy storage, and the Optimus plan.

It is worth noting that Tesla's earnings per share have fallen short of market expectations for three consecutive quarters. The company's operating profit margin will be closely watched after plummeting to 5.5% in the first quarter, partly due to the decline in electric vehicle prices. With improvements in inventory levels, Tesla is expected to report positive free cash flow.

Automotive Business

Earlier, Tesla released its second-quarter delivery and production data. The data shows that the company delivered 443,956 vehicles in Q2, exceeding the consensus expectation of 439,302 vehicles. The electric car maker stated that it produced 410,831 vehicles in the second quarter. Tesla noted that operational lease vehicles accounted for 2% of deliveries. The delivery volume of Model 3/Y in Q2 was 422,405 vehicles, while other models accounted for 21,551 deliveries.

However, due to competitive pressures, Tesla's U.S. electric vehicle market share in the second quarter fell below the 50% threshold for the first time, dropping to 49.7%. Despite the decline in Tesla's sales, the overall U.S. pure electric vehicle market grew by 11.3% year-on-year in the second quarter, indicating continued demand for electric vehicles in the American consumer market.

In the first quarter, Tesla's automotive business revenue fell by 13% year-on-year to $17.4 billion, with a 9% decrease in delivery volume and a decline in average selling price. This led to a 9% decrease in total revenue to $21.3 billion.

Tesla attributed this to seasonal factors, macroeconomic headwinds, factory shutdowns in Germany, and supply disruptions caused by the Red Sea conflict, but the company mentioned that "the second quarter will be much better."

Energy, FSD, and Robot Business

The stagnation in automotive business growth has shifted more attention to Tesla's other areas In the wave of artificial intelligence, the strong and continuously growing energy demand is a good sign for Tesla's energy business. Data from the first quarter shows that this business accounts for 7% of total revenue. Thanks to energy storage deployment, especially Megapack, the profit margin in the first quarter reached a record high of 24.6%.

According to the latest data, in the second quarter, the company's energy storage product deployment increased to 9.4GWh, setting a company record, more than double the previous largest quarterly deployment, with a year-on-year growth of 157%.

Morgan Stanley currently predicts that by 2028, Tesla's energy business will reach 100GWh in energy storage deployment, three years ahead of the bank's previous forecast for this demand level. Morgan Stanley points out that with the surge in demand for generative artificial intelligence, global energy storage demand is accelerating, and Tesla has the ability to expand its market share in this market.

Morgan Stanley currently values Tesla's energy business at $50 per share, up from the previous $36. This brings the total value of the energy business to $183 billion, significantly higher than the previous valuation of $131 billion.

It is worth noting that the profit margin of Tesla's energy business is already higher than its solar deployment business or automotive business. Moreover, this business is more practical than concepts like Optimus robots or Robotaxi.

As for FSD, analysts hope that the company will quantify the adoption rate of FSD so that they can model the financial impact. Regarding the Optimus business, investors may want to hear about the commercialization timeline.

Barclays analyst Dan Levy and his team believe that with the emergence of software-defined cars, Tesla is clearly leading the global electric vehicle transformation. The positive trajectory of Tesla's sales development is expected to keep it in a favorable position in the long term.

However, Barclays' view is that it is necessary to understand the details of Tesla's grand plan. Levy specifically points out that Tesla's investment philosophy is shifting from growth driven by the automotive manufacturing business to emphasizing autonomous driving cars/artificial intelligence businesses, such as robotaxi. He warned, "While we recognize the disruptive opportunities these businesses may bring, we believe they bring uncertainty to Tesla's future path, making the stock's success dependent on seemingly binary bets."

Earnings Conference Call

In addition to the data on Tesla's earnings report, investors are also very interested in Musk's comments during the earnings conference call.

During the call, investors expect to hear Musk discuss the latest timing of the robotaxi launch event and the public's expectations for low-cost cars. Earlier reports suggested that Tesla had postponed the release of the robotaxi from August to October, with the design team being instructed to redesign certain elements of this rental car Elon Musk responded to the delayed robotaxi launch event by stating that Tesla needs more time to make some design changes to the vehicles. However, Musk did not provide a specific release date.

Discussions about robotaxi may directly shift to Tesla's artificial intelligence capabilities beyond app-based autonomous driving vehicles. Analyst Adam Jonas and his team at Morgan Stanley expect Tesla's "Master Plan" Part 4 to be based on its commercial ambitions in artificial intelligence, robotics, and hybrid computing (including in-car distributed heating and computing), covering areas from the cloud to the edge.

Another key topic of the earnings conference call may be Musk being asked about the U.S. presidential election and his strong support for Trump. In the past, Musk has publicly stated that he would not financially support any candidate. However, with Musk increasingly involved in politics, investors may be concerned about Tesla facing strong opposition.

Ross Gerber from long-term Tesla investor and investment firm Gerber Kawasaki stated that Musk's stance puts him in a moral dilemma, as supporting Trump clearly goes against Gerber's own values. He also mentioned that the Cybertruck he is driving now looks like a MAGA truck