Tesla Analysts: While Short Of Expectations, Q3 Delivery Number Is Pretty Good

Tesla Inc. TSLA overpromised rather than underperformed, sell-side analysts said after its Wednesday deliveries announcement, with several noting the company continues to deliver more vehicles each quarter and is largely keeping its growth story on track.

The electric carmaker came up short of analyst expectations for cars delivered in the third quarter, but still set a record delivery number that got lost amid CEO Elon Musk’s overpromising, analysts said.

Investors focused on the bad news, selling the stock off more than 5%. One analyst did lower their rating, but several said the underlying numbers still look good.

The Analysts

Wedbush analyst Daniel Ives maintained a Neutral rating on Tesla with a $220 price target on the stock.

JMP Securities analyst Joseph Osha lowered the rating from Market Outperform to Market Perform.

Morgan Stanley’s Adam Jonas continues to have an Equal-weight rating on Tesla with a $230 price target.

The Takeaways

Tesla said Wednesday that it delivered 97,000 vehicles in the third quarter, which set a record and beat the second-quarter figure.

The problem: Musk had said in an internal email that the company might be able to hit 100,000 vehicles for the quarter.

While much of the attention fell on the high threshold set by Musk, the actual delivery figure “was an impressive feat,” Wedbush's Ives wrote after the print.

Total deliveries were not only up quarter-over-quarter, but the key Model 3 delivery number of 79,600 beat the Street estimate and "remains the linchpin of the Tesla growth story," the analyst said. 

“In our opinion this was an impressive delivery number for Tesla overall that should be viewed as a positive step in the right direction.”

Organic Demand Still Strong

Venture capital firm Loup Ventures also found the substance of the news impressive.

Loup’s Gene Munster and Will Thompson said the 16% year-over-year delivery increase over a tough 2018 third-quarter comp was solid, and liked that most orders came from people without previous reservations.

“All signs point to the fact that organic demand, which is the crux of the bull/bear debate, is intact,” they said. 

JMP's Osha, who downgraded the stock, did wonder whether demand growth for Tesla cars might be leveling off.

While expecting better, the analyst said the delivery data didn’t miss consensus estimates by much.

"We believe TSLA could have manufactured more should it have chosen to, and the manufacturing activity suggests to us the company is positioning itself for a solid but not dramatic Q4."

Now, the Tesla story returns to look-ahead mode, focused on the full-year delivery target.

Morgan Stanley's Jonas said Tesla will need to deliver 105,000 units to meet the low end of its 360,000 to 400,000 full-year delivery target. The Street expectation for the final quarter is just under that number at 104,300.

Price Action

Tesla shares were trading down 6.12% Thursday at $228.24 at the time of publication. 

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Photo courtesy of Tesla.