Tesla Inc TSLA crashed 9 percent in pre-market trading after announcing first-quarter deliveries softer than forecasts.
What Happened
Plagued by new challenges, including expansion into global markets, Tesla had only delivered half its quarterly targets by March 21. It closed the quarter with about 63,000 deliveries, representing a 110-percent year-over-year increase but a 31-percent sequential decline. The Street had modeled for 75,000 deliveries.
The figure included about 50,900 Model 3s (short of 52,450 forecasts) and 12,100 Model S and Xs.
"Tesla's 1Q19 vehicle production & deliveries report was substantially worse than expected," JPMorgan analyst Ryan Brinkman wrote in a note.
Why The Miss Is Important
The second quarter will absorb many of the missed deliveries, including 10,600 vehicles in transit at the quarter’s close. That doesn’t bode well for the near-term bottom line.
“Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted,” Tesla wrote in its release. “Even so, we ended the quarter with sufficient cash on hand.”
What Analysts Are Saying
Analysts weren’t necessarily caught off guard by the miss. Loup Ventures managing partner Gene Munster expected logistics issues in the newly penetrated China and Europe markets. But he hadn’t expected the distribution of declines.
“The magnitude of the S and X miss was a surprise,” Munster wrote in a blog. “We attribute the shortfall to allocating resources away from S and X toward Model 3 production, and, separately, it may be an indication that the sweet spot of demand is shifting to the lower-priced Model 3.”
Tesla’s strategy doesn’t appear to have been artfully executed.
“The reallocation of S and X production resources to Model 3 appears to have been inefficient,” Munster wrote. “The company produced 11,000 (44% quarter-over-quarter) fewer S and X vehicles and only produced 1,556 (2.5% quarter-over-quarter) more Model 3s.”
What About Sales And Production?
Tesla still found reason to celebrate the start of 2019.
“In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up,” the company wrote in the press release. “Inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2-3 months.”
Production numbers struck 77,100 vehicles, including 62,950 Model 3s and 14,150 Model S and Xs.
Looking Forward
Management reaffirmed guidance of 360,000 to 400,000 deliveries in 2019.
“This is an aggressive target, given the low end of the range (360,000) implies an average of 99,000 deliveries per quarter compared to this quarter’s 63,000 and 91,000 in Dec-18,” Munster wrote.
Munster forecasted a “bumpy year” for the automaker, particularly as federal tax credits drop at the end of the second quarter. Still, he believes immediate challenges will have little long-term impact and, contrary to peers, anticipates no capital raise in the June quarter — although “we believe raising money would be the right strategic move long-term.”
Tesla's stock traded around $263.77 per share at time of publication, down 9.6 percent.
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