Why Tesla's Q1 Deliveries Beat Isn't Enough To Impress Long-Term Bear Gordon Johnson

Tesla Inc’s TSLA analyst-estimate-beating Q1 delivery numbers have left GLJ Research’s Gordon Johnson less than impressed.

The Tesla Analyst: Johnson maintained his Sell rating on the Elon Musk-led company’s stock and valued the shares at $67 exiting 2022.

The Tesla Thesis: Johnson admitted that the automaker beat GLJ’s estimates by 13,000 cars as it delivered 184,800 vehicles in the first quarter of 2021. The analyst said that GLJ had “incorrectly” cut their delivery estimates from Tesla from 188,000 to 171,600 units. 

Johnson said in a note that comparing Q1 2021 with the same period in 2020 is “irrelevant” and the proper comparison is rather with Q4 2020. He said that majority of Tesla analysts are either overreacting to Tesla’s Q1 delivery numbers or misunderstanding them.

The GLJ analyst said Tesla has a growing demand problem. Johnson highlighted the fact that the automaker was “barely” producing any cars in China in Q1 2020 and price cuts of approximately $8,500 for Model 3 Standard Range and $24,100 for Model Y Long Range had not yet been made. 

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“More specifically, the ONLY quarter where TSLA had fully cut the prices for its cars in China and had full production in China was 4Q20, where the company sold 180.6K cars; so, the ONLY thing that matters for TSLA in 1Q21, and going forward, in our view, is sequential growth,” wrote Johnson. 

As per the analyst, the growing volumes of 2% in Q1 on a quarter-over-quarter basis “is not a good thing.”

Johnson said that Tesla’s growth prospects in large car markets around the world have peaked out and there is “no more low-hanging fruit.”

“This is not a company with a production problem; this is a company with a DEMAND PROBLEM,” wrote Johnson. 

The analyst finally questioned the margins that Tesla enjoys on its various vehicles and how it affects the company’s bottom line. He assumed an average margin on a Model 3/Y vehicle to be nearly $4,000. On Model S/X, Johnson worked out the margin to be approximately $20,000.

Extrapolating these numbers, he pointed out that Tesla sold 16,900 fewer Model S/X cars in Q1 2021 compared with the preceding quarter, which means it had $321.1 million less in profit. Johnson said Tesla sold 211,300 more Model 3/Y cars in the period, which means  $84.52 million more in profit. 
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“So, net-net, the mix in the quarter, on cars sold alone, looks set to negatively impact TSLA’s bottom-line by -$236.580mn, meaning, barring credit sales, they will likely lose money again in 1Q21,” as per Johnson.

Finally, as per Johnson while Tesla’s growth potential has declined materially more competition from rivals such as Ford Motor Company F, Volkswagen AG VWAGY, and General Motors Company GM is expected this year.

The views are in contrast with those of Wedbush analyst Daniel Ives, who dubbed the Q1 deliveries report as a "drop the mic" moment. 

Loup Ventures' Gene Munster too expressed a view that even if Tesla had missed street estimates on Q1 deliveries, it wouldn't be a cause for alarm.

Price Action: Tesla shares closed 0.93% lower at $661.75 on Thursday.