Tesla Analyst: Seasonality Makes Spike In Q4 Deliveries Unlikely

Tesla Inc TSLA shares fell over 7% Friday despite reporting third-quarter deliveries that came in ahead of the consensus estimate.

An analyst at Needham looked at what may have triggered the negative investor reaction — and what's in store for the electric vehicle manufacturer in the fourth quarter.

The Tesla Analyst: Rajvindra Gill has an Underperform rating on Tesla shares.

The Tesla Thesis: Tesla's third-quarter delivery number of 139,600, though it beat the Street estimate of 136,200, was well below Needham's high-end estimate of 150,600, Gill said in a Monday note.

The company has not confirmed its full-year delivery target of 500,000, the analyst said.

With production of 145,000 vehicles exceeding the number of deliveries in the third quarter, Tesla will likely face additional pressure on sell-through in the fourth quarter, he said. 

To hit the company's fiscal year 2020 delivery guidance of 500,000, it has to ship 181,000 units, or grow shipments by 30% quarter-over-quarter, Gill said.

This necessitates a steep ramp in the fourth quarter that's unsupported by historical seasonality, the analyst said. 

"The avg. and median seasonality for 4Q deliveries going back 4- years is +9% Q/Q and +14% Q/Q, respectively, making a 30% Q/Q increase unprecedented historically and hence unlikely, as we see it," he said. 

In the near-term, Gill said Tesla faces margin pressure due to an unfavorable mix shift to Model 3 and aggressive pricing pressure, specifically in China.

After peaking in September 2017, the company's automotive gross margin has trended down, the analyst said, adding that further margin pressure is ahead. 

To reflect the lower-than-expected deliveries and lower ASP given the higher mix of Model 3s, Needham lowered its third-quarter and fourth-quarter estimates for Tesla.

TSLA Price Action: At last check, Tesla shares were rising 1.88% to $422.91. 

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Photo courtesy of Tesla.