Tesla (TSLA 267.01, -24.80, -8.50%) shares are tumbling this morning after the
company reported disappointing first quarter delivery results last night.
The primary focus was on deliveries of the mass-market Model 3, which came in at 50,900. Estimates were closer to 55,000.
Tesla had said that deliveries would fall sequentially (from 63,359 in the fourth quarter) as the company started shipping to Europe and China. Tesla said 10,600 vehicles were in transit to customers globally at the end of the first quarter as delivering vehicles worldwide from the Bay Area in California presents logistical challenges. The company can't recognize revenue for vehicles until customers take delivery.
The other issue during the quarter came from the fact that the US Federal tax credit for electric vehicles was cut in half to $3,750 starting on January 1, which pulled demand forward into the fourth quarter of 2018. Tesla cut prices at the beginning of the year in response but has since raised prices on its EVs other than the base level $35,000 Model 3 to protect margins.
As a result, deliveries of the Model S and Model X fell 44% yr/yr combined.
Tesla warned about first quarter financial results due to the lower than expected deliveries and pricing adjustments. Tesla previously said every quarter after Q1 would be profitable and cash flow positive. The weak deliveries figures indicate that top and bottom-line estimates for the first quarter are too high.
The company did say inventory of the Model 3 was exceptionally low. Tesla also reaffirmed guidance for FY19 deliveries up 45-65% to 360,000-400,000, which now seems like an even loftier goal.
All told, this report stokes demand fears that were already prevalent during the first quarter.
The stock has traded in a range between $260-380/share for two years now. Some 30 mln shares are sold short (recently quoted at ~24% of the float).
For the first time ever, the demand argument from Bears has some substance. Model 3 sales would seemingly have a long runway for growth, but the demand profile is uncertain as EV competition starts to pick up.
Later today, a Federal judge in New York will hear arguments from the SEC that Elon Musk should be held in contempt of court for violating a settlement agreement regarding unsupervised tweets of material information. This stock is not for the faint of heart.
Tesla will host an Autonomy Investor Day on April 19 to provide a deep dive into its self-driving technology and road map. Along with Elon Musk himself, Tesla's bold lead in autonomous driving serves as a strong marketing tool.
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