Tesla Inc (NASDAQ:TSLA) M-3 Production Target Missed

Tesla Inc (NASDAQ:TSLA) M-3 Production Target Missed

Tesla Inc (NASDAQ:TSLA) M-3 Production Target Missed


Tesla Inc (NASDAQ:TSLA) has fallen short of its Q-3 Y 2017 production goals for its Model 3 sedan. During the Quarter, the company delivered 220 Model 3’s and produced 260, missing the production target of 1,500.

Tesla is no stranger to missed forecasting.

The company had previously just guided for 2-H S and X deliveries to be above a 1-H mark of 47,000. Analysts, on average, had expected about 50,000.

This is a clear signal that production has not, is not smooth as Elon Musk would have investors believe.

In July, the company started producing the Model 3, which is about 50% of the starting price of Model S.However, during the Quarter ending 30 September, Tesla delivered 26,150 EVs, +4.5% Y-Y and 17.7% sequentially. The rise was due to increased deliveries of the Model S and Model X during the Quarter.

In its Q-2 earnings results the company said that it aims at achieving a run rate of 5,000 and 10,000 units per week in Ys 2017 and 2018, respectively.

Now, because of this target miss, customers doubt if the company will manage to make its target/s in the future.

Now according to Musk & Company, there is no fundamental drawback in the production of supply chain of Model 3. Tesla attributed production bottlenecks for this slow production and is confident of addressing the issue.

In its statement Tesla said: “It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.

Our delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct. Final numbers could vary by up to 0.5%. Tesla vehicle deliveries represent only one measure of the company’s financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles.”

I do not believe that is the reality at Tesla.

Morgan Stanley analyst Adam Jonas came out with a note making a bull case to buy the stock.

According to Mr. Jonas, positive delivery figures for the company’s other car brands – Model S and Model X – point to an 11% gainer on overall delivery figures for this Quarter.

However, the Morgan Stanley analyst also acknowledged that Tesla’s disappointing Model 3 delivery figures offset the Model S and Model X figures.

“Tesla cited ‘production bottlenecks’ and emphasized that there were no ‘fundamental issues’ with production or supply chain,” Mr. Jonas wrote.

In other words, this was not a problem that the company could not fix (with enough money)

In his note, Mr. Jonas advised investors buy Tesla on the dip, stating that “a significant degree of Model 3 success may be discounted in Tesla’s share price, and we reiterate our (equal weight) rating and investment thesis.”

All of the is well and good with the caveat, “if nothing goes wrong”

Tesla shares are down 11% from their 18 September highs at 389.61, but + 60% YTD.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 348.14 3 October 2017 10.04 335.9 348.55 331.28 10,133,600
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Neutral (-0.01) Neutral (-0.14) Neutral (0.04) Neutral (0.07)

Stay tuned…


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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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