Why Tesla shares are up on a market down day

What happened

You’re here (TSLA 0.51%) beat estimates with its second-quarter earnings report, and the stock soared yesterday. After closing nearly 10% higher on Thursday, Tesla shares extend those gains on Friday amid a falling market. While the Nasdaq Compound was down 1.9% at 1 p.m. ET, Tesla shares were up 1.4% at that time.

So what

Tesla earned $1.95 per share for the quarter on sales of $16.9 billion. While that figure is down from first-quarter revenue of $18.8 billion, it still represents a 42% year-over-year jump. And the top and bottom results exceeded analysts’ expectations of $1.81 per share and $16.5 billion, respectively. Investors already knew the second quarter was tough, with COVID-19 delays at its Shanghai factory and supply chain issues hampering the ramp-up of its two new factories. But Tesla’s initial forecast of 50% annual production growth remains achievable, boosting investor confidence after the stock fell more than 30% since the report began.

Now what

While Tesla’s operating margin of 14.6% fell sequentially, it was still comfortably above the prior year period. One of the challenges Tesla struggled to overcome during the quarter was the continued supply chain disruptions. On the conference call with investors, CEO Elon Musk remarked that “it’s been kind of supply chain hell for a number of years.”

The company ended the quarter with $18.9 billion in cash, cash equivalents and marketable securities. The cash position increased with over $600 million of free cash flow. This is the sign of a healthy business. And while some are noting a shrinking market share as competitors ramp up new EV launches, the market is growing at such a rapid pace that Tesla still appears to be on track to meet its production growth target. for 2022. This helps explain why investors jumped into the stock after yesterday’s report and continued that buying today.

Howard Smith has no position in the stocks mentioned. The Motley Fool holds positions and endorses Tesla. The Motley Fool has a disclosure policy.