Tesla Beats Shipment Estimates, But PacCrest Is Worried About Margins

Tesla Motors Inc TSLA reported its Q3 deliveries at 24,500, well ahead of the consensus and the estimate.

Pacific Crest’s Brad Erickson believes the unit volume outperformance was a definite positive and would “reinforce any bullish thesis looking for a better-than-expected Model 3 ramp next year.” However, the analyst expressed concern regarding the dilutive gross margin impact due to the incremental volume.

“Given the estimated 930 bps gross margin hit on the lowest-end Model S SKU, we need more confidence in the gross margin moving into Model 3 before getting more constructive on TSLA,” Erickson mentioned.

Related Link: Tesla Displayed 'Phenomenal Execution' On All Fronts

The upside during Q3 was driven by Model S, while Model X deliveries came in below the estimate. Tesla reiterated its delivery guidance for H2 of 50,000 units.

Model S

However, Erickson pointed out that recent checks indicated that the 60 kWh Model played an important role in driving the unit volume outperformance, especially with Tesla converting Model 3 reservation holders into buyers of Model S through its recently launched two-year leasing program.

In addition, based on the checks, the analyst believes that “Model X delivery in the U.S. is currently running around five-to-six weeks. Prior to the car being launched, our checks and other third-party estimates indicated a backlog of over 30,000 reservations.”

However, it's unclear whether those other orders failed to convert, were changed to Model S or simple cancelled.

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