Tesla
had quite a day on Monday. There was a lot of news for investors to digest, none of it particularly good. Wall Street doesn’t seem too concerned, however. Analysts are focused on something else.
Monday was a busy day. In the morning, Tesla (ticker: TSLA) announced third-quarter deliveries of about 430,000 vehicles, some 25,000 fewer than Wall Street expected.
Rivian Automotive
(RIVN) announced deliveries a little later. It sold 15,564 units in the third quarter, better than the 14,000 Wall Street was projecting. After that,
BYD
(1211.Hong Kong), China’s largest EV maker, reported September numbers. It produced more battery-electric vehicles in the third quarter than Tesla. It’s the first quarter ever in which that has happened.
Investors shrugged at all of that. Tesla stock finished up about 0.5%. The starting point mattered. Tesla stock is down about 10% over the past three months, underperforming the S&P 500—which is roughly flat over the same span.
Wall Street doesn’t seem that worried, either. “Eyes on the prize,” wrote Canaccord analyst George Gianarikas in a Monday report. He is looking past the weak number believing demand is “relatively healthy for Tesla despite a wobbly auto market and some price cuts this quarter.” Gianarikas expects demand for the coming Cybertruck and updated Model 3 sedan to boost sales.
He rates shares Buy and has a $293 price target for the stock. Wedbush analyst Dan Ives rates shares Buy and has a $350 price target for the stock.
“Nothing to write home about, [a] better day ahead,” wrote Ives Monday. “Even when factoring in the shutdowns with no rose-colored glasses Tesla clearly missed Street estimates this quarter with bulls left disappointed, although we see better days ahead for 4Q and 2024.”
Shutdowns mattered. Tesla made roughly 40,000 cars a week around the world in the third quarter. Taking one or two weeks down can easily cost the company tens of thousands of units. That explains the miss, but it doesn’t explain why no one on Wall Street saw 430,000 deliveries. The lowest estimate on FactSet was about 438,000 units. The highest estimate was more than 500,000 units.
“Encouraging signs on demand,” wrote New Street Research analyst Pierre Ferragu in a Monday report. Tesla maintained its full-year sales guidance for 1.8 million units, implying at least 475,000 units sold in the fourth quarter. “Reduced inventory and maintained full-year guide, along with very limited price cuts imply underlying demand, while probably still brittle, is stabilizing,” added Ferragu.
He rates shares Buy and has a $350 price target.
Baird analyst Ben Kallo rates shares Buy. His price target is $300 a share.
Kallo focused on the company’s maintained full-year guidance. “The primary bear thesis during Q3 [has] been around building inventory and faltering demand in the weakening macro environment,” wrote Kallo Monday.
“We view the deliveries exceeding production as alleviating some concerns regarding inventory. We continue to believe Tesla is best positioned among auto [makers] to weather the economic headwinds of higher interest rates and a weakening consumer,” he added.
RBC analyst Tom Narayan wasn’t as willing to write off a weaker-than-expected third quarter. “Short delivery times imply that deliveries match underlying demand. Tesla cut prices on S/X with one month to go in the quarter, yet deliveries for these models were particularly weak,” he wrote Monday.
Tesla delivered about 16,000 Model S and X vehicles in the quarter, down from about 19,000 units in the second quarter and about 19,000 units in the third quarter of 2022. Falling deliveries aren’t great, but the S and X are higher-priced vehicles that account for a small portion of Tesla’s overall demand.
Narayan rates share Buy. His price target is $305 a share.
Those are all Buy-rated analysts. J.P. Morgan analyst Ryan Brinkman rates shares Sell. He raised his price target to $135 from $120 a share Tuesday. He isn’t so sanguine about the delivery miss.
“Bullish investors will say that there remains no demand problem, that sales were limited in 3Q by lower supply as the company took manufacturing downtime for factory upgrade,” wrote Brinkiman Tuesday.
He still thinks deliveries should have been better, aided by the existing inventory Tesla had on the ground. “Attributing the softness to higher interest rates or lower consumer confidence also does not sufficiently explain the issue, in our view, as industrywide sales and production have tracked [better-than-expected].”
For now, it appears Brinkman is in the minority on Wall Street.
Tesla stock was down 1.1% in premarket trading Tuesday, while
S&P 500
and
Nasdaq Composite
futures were down 0.3% and 0.5%, respectively. Coming into Tuesday trading, Tesla stock is up about 104% so far this year, but is off about 10% over the past three months.
Write to Al Root at [email protected]
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