What To Make Of Tesla's Mixed Q3 Deliveries

Shares of Tesla Inc TSLA were trading lower by more than 2 percent early Tuesday morning after the company attributed worse than expected Model 3 deliveries in the third quarter to "manufacturing bottleneck issues."

Bernstein's Toni Sacconaghi maintains a Market Perform rating on Tesla's stock with a $265 price target, noting that Tesla's Model 3 production levels of 260 units and 220 delivered were in fact "worse than the most pessimistic whisper numbers." Tesla's CEO Elon Musk promised the Street in early July it will be able to deliver "over 1,500 units" in September alone.

Tesla's issues, unfortunately, reinforce ongoing concerns surrounding any margin ramp moving forward, Sacconaghi commented in a research report.

Tesla also failed to provide any details on what exactly where the manufacturing issues and any forecast for the fourth quarter, Sacconaghi noted. As such, it is reasonable to question if Tesla can still achieve its goal of producing 5,000 Model 3 sedans per week in December.

Meanwhile, Tesla's Model S and Model X deliveries of 25,890 came in better than expected but the company's fourth-quarter guidance of nearly 27,000 units looks "ambitious," the analyst added. After all, the quarter's better than expected performance may have come from "aggressive" promotions, the discontinuation of the lowest-end Model S and publicity from the Model 3 launch.

"On net, Tesla's Q3 production and deliveries report raised more questions than answers, particularly about Model 3's ramp and underlying demand for S, X," Sacconaghi concluded.

Bottom line, the case for owning Tesla's stock is based on the success of the not only the Model 3 but the company's ability to ramp production and earn a profit on the car.

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