Tesla Provides Negative Delivery Update

Jul. 07, 2017 3:11 PM ETTesla, Inc. (TSLA)100 Comments

34.28K Followers

Summary

Company details in-transit vehicles.
Huge sequential drop from Q1.
Q3 2017 sales will be major question.

Yesterday, I discussed the latest excuse provided by Tesla (NASDAQ:TSLA) as to why the company badly missed Q2 2017 delivery estimates. One of the major problems I had with the report was the company's lack of in-transit vehicle number, as it appeared management was trying to hide something. On Friday, Tesla provided an update on this matter, detailed below, and the number further hints at weakening demand.

In addition to Q2 deliveries, about 3,500 vehicles were in transit to customers at the end of the quarter. These will be counted as deliveries in Q3 2017.

Tesla detailed a production shortage of 100 kWh battery packs as leading to delivery numbers that came in about 2,000 vehicles below street estimates. The company said that this problem was resolved in early June, and after that June orders and deliveries were strong, and I quote "ranking as one of the best in Tesla history." You would think that would result in a rise in in-transit vehicles, but let's take a look at Tesla's history of this metric.

Q1 2016 (taken from Q2 2016 link below): 2,615
Q2 2016: 5,150
Q3 2016: 5,500
Q4 2016: 6,450
Q1 2017: 4,650
Q2 2017: 3,500

The latest number comes in at the lowest since Q1 2016, at which point the Model X was not really in volume production yet. Tesla is down about 3,000 vehicles from the Q4 2016 number, which helped a record 25,000 plus deliveries in Q1 2017. It's hard to imagine how the company expects to sell more S and X vehicles in the second half of this year with much less currently in transit. Perhaps there will be a mass flood of Model 3 cancellations now that most reservation holders know that their M3 is likely not coming until at least Q1 2018 at the absolute earliest.

Tesla shares had started to recover some of this week's big losses, hitting $318 in Friday's pre-market, but they've lost a large share of these gains today, now below $312 a share. In fact, the latest leg down came after this update on in-transit vehicles, seen in the chart below. I'm curious to see what happens if shares start to head towards $300, because the rising 200-day moving average is only about $12 below that key point. Will more technical selling occur if shares lose this key moving average? Additionally, will computer traders sell more next week as analyst estimates for Q2 and full year 2017 come down, since analyst estimates on Yahoo have barely budged so far on the disappointing Q2 delivery number? One thing is certain, and that is that the lower in-transit vehicle will definitely add to the bearish sentiment currently surrounding Tesla shares.

(Source: Yahoo! Finance)

This article was written by

Bill Maurer

34.28K Followers

I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year. Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

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