Another Quarter, Another Miss for Tesla

Missing delivery estimates has become synonymous with Tesla (TSLA). The company has made it a habit to underperform. Tesla recently reported that it delivered 14,370 vehicles in Q2, widely missing the forecast of 17,000 units.

Tesla blamed the extreme production ramp in Q2 for falling short of the forecast and said, “the high mix of customer-ordered vehicles still on trucks and ships at the end of the quarter, Tesla Q2 deliveries were lower than anticipated at 14,370 vehicles, consisting of 9,745 Model S and 4,625 Model X."

It is obvious to everyone that Tesla makes great products, but the company’s business model is unsustainable, at least for now.

If any other publicly listed company missed estimates as often as Tesla and as widely as Tesla, they would have been destroyed by the Market. However, for some reason, be is the Elon Musk hype or something else, Tesla’s shares continue to trade at an undeserved premium. This trend, however, will not last long.

Just last month, it was reported that Tesla was producing more than 2,000 cars per week during regular production weeks and surpassed the 2,000 vehicles mark a few weeks ago. Assuming that Tesla hit the 2,000 mark in the second month of Q2, Tesla should have produced at least 20,000 cars in the latest reported quarter.

However, Tesla only produced about 16,900 cars (14,370 delivered plus 5,150 in transit minus the ones in transit 2,165 in Q1). Going by the numbers, Tesla’s deliveries for the quarter were about 40% lower than the reported production speed.

Tesla blamed the extreme production ramp up for the failure to meet its estimates. However, going by the numbers above, I don’t think the ramp up could’ve held the company’s deliveries back by such an extent.

The only possible explanation that I could think of is that the hype of Model 3, which is a lot cheaper than the Model S, has cannibalized the latter’s demand. A few weeks ago, I penned down an article claiming that the Model 3 will cannibalize Tesla’s due to the fact that it is a great product as is being offered at half the price of that of the Model S.

With the company missing on estimates yet again, I expect Tesla to continue heading lower. Moreover, if Tesla acquires SolarCity, the stock could fall at an even faster rate. I would recommend investors to short the stock or buy put options going forward.

Published on Jul 5, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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