One of the worst performing stocks in recent months is Tesla (NASDAQ:TSLA). Shares of the electric vehicle manufacturer fell mostly due to the drama over CEO Elon Musk’s acquisition of Twitter, while shares of the electric vehicle manufacturer fell heavily. a slowdown in demand for the company’s vehicles. On Monday, Tesla announced 4th quarter production and delivery figuresand the numbers are unlikely to alleviate these selling concerns in the near term.
New records are now expected to be announced each quarter as Tesla continues to ramp up increased production in Fremont and Shanghai, as well as new factories in Germany and Texas. By early 2022, some of the company’s biggest backers had hoped the name would deliver more than half a million vehicles in the last quarter of the year. These expectations were gradually lowered due to COVID issues in China and slower-than-expected production increases. Tesla announced new records for both production and deliveries, as seen below.
The first thing you’ll notice is that production significantly outpaced deliveries for the second consecutive quarter. Management attributed this to the “continued transition towards a more even regional mix of vehicle structures” that led to more transitional vehicles at the end of the period. In early 2019, Musk said that Tesla would soon correct the delivery spike that resulted in a large number of deliveries late in the quarter. Despite many opportunities to reschedule vehicle productions at production sites, this hasn’t really happened in the last three years. As a result, the company has produced more than 56,500 vehicles since it delivered in the second half of 2022. This will only help raise concerns about sluggish demand.
This was the second quarter where Tesla’s reported delivery figure was slightly below estimates. In the chart below, you can see how street forecasts basically stayed at 430,000 for most of the fourth quarter. In late December, Tesla investor relations posted the usual company-compiled estimate of just under 418,000 vehicles. While that number is slightly below the street’s level just a few weeks ago, the actual figure is almost 13,000 units short.
The delivery result is even more disappointing when you consider a few key items. First, the company’s CFO guided “just under 50% growth” for the full year in 2010. 3rd quarter earnings report, itself was a guidance cut, with Tesla only coming in at just over 40% for 2022. Secondly, there are lots of promotions to increase demand during Q4. In the US, Tesla pushed a $3,750 loan late in the quarter, which eventually doubled with the gift of 10,000 free supercharger miles. In China, numerous promotions were detailed during the quarter, and these came even after prices were lowered earlier in the quarter. Some other promotions even went into effect to help in countries with lower volume sales, but apparently they weren’t enough. Tesla started 2023 with an offer another set of incentives in China to offset the elimination of that country’s EV subsidy.
I’ll be very curious to see Tesla’s per-vehicle automotive revenues when we get Q4 results in about three weeks (including leases and loans), especially given all the discounts out there. A lower sales mix of Model S and X vehicles will provide a small headwind to this average price figure, as well as an increase in the percentage of leased vehicles over the third quarter of 2022. Deferred fully autonomous driving revenue deferred for years, which should offset some of this sequential average revenue per vehicle losses.
The key figure analysts will likely focus on for Q4 will be gross margins. Tesla management has talked about inflationary pressures in past conference calls, and the discounts are certainly not going to help. The ongoing production ramps at the Berlin and Austin plants should improve the margins for these plants, but more production in Europe that has slashed sales of Chinese-made vehicles and the Shanghai plant’s closure for a week or so in December may be a minor boost. darling going on Monday’s broadcast, analysts were waiting $1.24 in non-GAAP EPS for Q4, compared to $1.05 seen in Q3. Given that they’ve dropped over a billion dollars since the end of October, as seen below, I’ll be watching to see how far revenue estimates drop.
As for Tesla stock, this news has certainly not been pleasant for those looking for a short-term recovery. Tesla finished last week at around $123, just $15 above its last multi-year low, after surging above $300 in late September. A great report could send the shares back to the 50-day moving average, which is currently just under $180 but is declining by the day, but gains in the near-term seem limited at the moment. This average price target the street price was $248 on Monday, down from $336 about eight months ago, but we may see more target deductions on underdelivery.
In the end, Tesla missed its delivery forecasts for the second quarter in a row by a wide margin. Management will talk about regional builds but has been talking about eliminating the end-of-quarter delivery increase for years and still hasn’t done much about it. Bears will cite weak sales as well as a slew of promotional activities, with production largely outstripping deliveries in the second half of 2022. Now we’ll likely see analyst forecasts and price target cuts coming, and I don’t expect stocks to rebound substantially before gains unless the overall market starts the new year on a good rally.
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