Tesla Analysts Weigh In On Huge Deliveries Miss

Tesla, Inc. TSLA crashed more than 9 percent Thursday after the company reported first-quarter auto deliveries well below Wall Street expectations.

Tesla reported 50,900 Model 3 deliveries in the first quarter, missing consensus analyst estimates of 52,450. Total deliveries of 63,000 missed Wall Street estimates of 76,000 vehicles by more than 15 percent. Tesla also warned investors that fewer first-quarter deliveries will negatively impact first-quarter earnings. Tesla reiterated its previous guidance for between 360,000 and 400,000 total deliveries in 2019.

Several analysts have weighed in on Tesla’s disappointing numbers and the stock’s steep drop. Here’s a sampling of what they’ve had to say.

Surprisingly Weak Numbers

JPM Securities analyst Joseph Osha said Model X and Model S delivery numbers were surprisingly weak.

“The composition of the 63,000 unit result is surprising, however, insofar as the Model 3 outcome was not too far off consensus, while the decline in S/X shipments was considerably more dramatic,” Osha wrote in a note.

Tigress Financial analyst Ivan Feinseth said the 31-percent quarterly decline in deliveries is disappointing, but the company is valued more on its technology and data.

“For investors willing to withstand the valuation and volatility I I would look to be a buyer on any pullback close to $260 a share with potential gains into the low $300 range,” Feinseth wrote.

Wedbush analyst Daniel Ives said the Model 3 numbers were a silver lining for Tesla bulls.

“The important bright spot that the bulls could hang their hat on is the all-important Model 3 number was within the area code of Street expectations and will be front and center this morning as slightly ‘better than feared,’” Ives wrote.

Demand Concerns

Bank of America analyst John Murphy said production capacity isn't Tesla’s biggest problem.

“Given its single manufacturing US plant, but many global end markets, TSLA noted production may continue to exceed deliveries, which could prove to be an ongoing challenge, in our view, along with possibly more material logistic issues,” Murphy wrote.

Gene Munster said underlying demand is all that really matters for Tesla.

“While 2019 will be a challenge for the company, we continue to believe long-term investors will be rewarded,” Munster wrote.

Barclays analyst Brian Johnson said the Model S/X miss is clear evidence of Model 3 cannibalization.

"Despite price cutting efforts that we had thought would boost Model 3 deliveries to 58k in 1Q, deliveries came in below consensus and close to the bear 50k estimates, with no evidence that the demand air pocket stabilizes in 2Q (leaving the Perma bulls likely to argue that it may just take a few quarters to kick start a new wave of organic demand)," Johnson wrote.

Next Catalyst

Morgan Stanley analyst Adam Jonas said the focus now shifts back to how much cash Tesla has on hand.

“While there are any number of moving pieces in working capital and ABL borrowing, we believe tonight’s delivery announcement could, by itself, be worth a further several hundred million of cash consumption in the quarter,” Jonas wrote.

Baird analyst Ben Kallo said the next potential catalyst for Tesla will be its upcoming investor day event on April 19.

“The company announced it will provide a deep dive on the its self-driving technology and road map, following significant progress on autonomous driving software and hardware,” Kallo wrote.

Ratings And Price Targets

• Morgan Stanley has an Equal-Weight rating and $260 target.
• JMP has a Market Outperform rating with a price target lowered from $394 to $374.
• Bank of America has an Underperform rating and $225 target.
• Baird has an Outperform rating and $465 target.
• Wedbush has an Outperform rating with a price target lowered from $390 to $365.
• Barclays has an Underperform rating and $192 target.
• Canaccord Genuity has a Buy rating and lowered the price target from $450 to $391.

Shares traded down 8.3 percent at $267.75 at time of publication.

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Photo courtesy of Tesla.