EV (electric vehicle) titan Tesla (NASDAQ:TSLA) delivered stronger-than-expected second-quarter financials. Moreover, its adjusted EPS jumped 20% year-over-year. However, lower ASPs (average selling prices) took a toll on its margins, leading to a 4.2% drop in TSLA stock after hours. Nonetheless, Wall Street analysts remain unfazed by Q2 results and continue to have the same opinion on TSLA stock following the earnings announcement.
Margins to Remain Pressured in Short Term
Tesla lowered its ASPs to accelerate volumes. The strategy weighed on the company’s industry-leading margins. Tesla’s gross and operating margins have experienced a consistent decline in the past several quarters. In Q2, GAAP gross margins fell 682 basis points year-over-year. Meanwhile, it declined by 110 basis points sequentially.
Further, TSLA’s operating margin fell 493 basis points year-over-year as the company’s emphasis on price cuts to drive volume growth continued to eat into the automotive margin. READ MORE