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Tesla: Why Its Deliveries Beat Means Nothing

Apr. 08, 2021 9:38 AM ETTesla, Inc. (TSLA)NIO, STLA, VWAGY619 Comments


  • Tesla beat sales estimates during Q1, which was a surprise to most.
  • But in the grand scheme of things, this doesn't really change anything. At around $700 billion, Tesla is too expensive.
  • Looking closer, Tesla may actually have lost more market share in Q1, despite growing sales meaningfully year over year. Many peers grew their deliveries much more than Tesla.
  • I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Tesla Assembly Plant In Tilburg Reported To Cease Production
Photo by Dean Mouhtaropoulos/Getty Images News via Getty Images

Article Thesis

Tesla (NASDAQ:TSLA) beat delivery estimates for the first quarter, showing strong growth year over year. A closer look, however, shows that this may not be too significant, as Tesla possibly even lost market

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Jonathan Weber profile picture
Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. He is an active author on Seeking Alpha since 2014.    
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Comments (619)

I would actually be disappointed as an investor if Tesla DID show substantial profit at this point. They need to spend aggressively on expanding production and capacity. This is assuming that they are reporting gross profit which is income adjusted for cost of goods sold (which includes fixed costs). Expecting a positive gross profit at all is short-sighted for a company that is seeking extreme growth. So Tesla, please don't take profits - re-invest in R&D and expanding production capacity like you promised us, and don't give in to the short-sighted demands of some investors to perform for immediate-term profits.
17 Apr. 2021
Your arguments, LOL.
1/ 180K vehicles is still too far from 1M -> guidance was 500K++. We are getting endless EPS upgrades all year given the street has 52% rev growth and we are growing >100%. This week especially watch for everyone to yank their EPS numbers up for the Q1 and beyond

2/ “Sales moved to lower-prices vehicles”-this will age well. Now there’s an S & X tailwind for Q2, and we see just how far Y and 🇨🇳 margins really are.

3/ “Tesla is growing slower than the market” - of course bc EVs are growing > anyone can serve them. Like $AMZN vs online $.

4/ 4/ “Other EV Companies are Outpacing Tesla’s Growth” - $TSLA did $31.5B in sales last year. >$63B this year. What matters is their Rev, FCF, and earnings growth rate. & outlook. On any fwd growth-adj basis (how all growth managers look at stocks) it’s cheaper than $FB and $BABA.

Happy to discuss further what’s your Twitter ?!
doggydogworld profile picture
@JGGFH - ">$63B this year."

I'll take the under.
Actionable Conclusion profile picture
The Deliveries Beat Means Nothing!!!

Every time I see this title, I picture an old man with veins popping out of his head shaking his fist and yelling at clouds.

lapha profile picture
@Jonathan Weber in June 2020 (TSLA around $200):

"Tesla: Don't Buy The Stock, Or The Car"

Since June 2020: TSLA +250%

Good one, Jonathan.
@lapha he was right to identify Tesla as a bubble. Speculators who want to ride the volatility will make a fortune, but for those of us who want to invest long who needs the headache?

It's the same with bitcoin.

I steer clear of these monsters because one day you are paper rich, the other day it crashes. I'll revisit Tesla when the price is right.
Actionable Conclusion profile picture
Being right means nothing, getting it right means everything.
@Actionable Conclusion fair enough. But I'll buy when the price comes down. I've learned not to FOMO.

good luck to all
Being more valued than NIO or LI makes a kinda sense doesn't it? There's always Opacity beyond measure and funny numbers with most Chinese firms , n'est pas? I've ridden a few for a while, but I'm just saying if we're looking at a value argument based on projected income x-years from now, I'd rather put my money with a slightly Chaotic White-Hat Musk, than promises of Riches behind the curtain: no peeking, just gotta trust it, and hope the ChiGovt doesn't seize it or something.
fairestcape profile picture
As is the case with most Tesla skeptics, your analysis falls down on several issues:
1. Tesla has no viable "competitors". Others may be making electric CARS, but that's where the comparison ends. Tesla's "cars" are actually sophisticated computers that "happen to have wheels and can move". Tesla's focus is not on what cars ARE, but what they DO for us - and what they DO is move us and our stuff from A to B. Telsa is concentrating on TRANSPORT, and how people will use transport in the future. To this end the reality (when it comes, not if) will be the utilisation of self-driving vehicles that individuals are unlikely to own. When FSD happens, owning a car for most of us becomes redundant. Any automotive manufacturer NOT enabling FSD will go out of business as increasing numbers of people will stop buying cars and will be using TaaS (Transport as a Service).
2. Tesla is not a "car company". Your analysis assumes that this is what Tesla is. Tesla is a technology company focusing on renewable energy generation, storage and usage. (Their "cars" are one facet of that activity).
3. Increased sales (across the board) of EV's heralds the demise of ICE technology, and this will happen at an exponential rate. Legacy ICE makers can't (yet) make profitable EV's, and are unlikely to ever do so. Their EV's don't compete with Tesla - they compete with ICE equivalents.
4. Other EV manifacturers are coming off a small base, so when you say that Nio (for example) is growing much faster than Tesla, you neglect to factor in Nio's small numbers. If I make 10 EV's this year and 40 next year, that too is a 400% increase (but 40 EV's is negligible).
5. You assume that ANY other EV is a "Tesla competitor". This is plain stupid. Like any product, there are lots of variations - some cheap, some expensive. There's as much common sense in your argument as there is in saying: "Ferarri sales have dropped because more quad-bikes are being sold".
6. Tesla's VALUE is not the same as Tesla's STOCK PRICE. You may consider it OVER-PRICED, but what really needs attention is its VALUE. If you extrapolate Tesla's goals into the future (at least 5 - 6 years), then the company is probably under-valued - but you'll only see this when you discover that Tesla is NOT a car company. Until you come to that realisation, your analysis is worthless.
1) "transport as a service" is just a new fancy name for something that is around for decades. You can call it taxi, Uber/Lyft/..., car rental, car sharing, public transport, parcel/postal service, ... For some of them even full self driving wouldn't be new, some trains / subways already use it.
For most of them the only thing that fsd would change are the costs to use them. I'm not saying that fsd isn't a big thing, from a technical standpoint is an amazing technology, but will it really be that revolutionary for the way we live or travel? I've never owned a car and have used public transport for my whole life. If a bus is driven by a driver or an AI doesn't make much of a difference to me.
2) In that case Tesla would be an industrial company, but still not a tech company, because as long as you produce materials things your costs will increase linear with your business. What makes tech companies so profitable is that they can grow their income exponentially while keeping their costs linear or even flat.
3) Do you have any proof for that claim? For me that sounds more like wishful thinking from Tesla investors.
4) The legacy manufacturers are also growing their EV output quicker than Tesla. In Europe VW, Hyundai/Kia and Stellantis have each sold more EVs than Tesla last year and the difference has increased in Q1 of this year.
5) That's the only point I can agree with you. Tesla is often be used synonymously with EVs and they've earned that, but over time it will fade.
lapha profile picture
@fairestcape "Worthless" is the most relevant word here. Check out this guy's article from June 2020 where he warns against buying TSLA...
@fairestcape assume TaaS becomes the main value driver. Who has best ability to execute? Tesla, Google, Apple, GM, VW? Apple has things cooking with Magna, Google is Waymo has a big autonomous effort, and GM VW are too big to ignore. If TaaS dominates marhlgins will be shitty at volume. So unless the solar roof takes off, I can't see this price PE sustained in 5-10 years.
doggydogworld profile picture
"800,000 cars for 2021 seem like a realistic and achievable estimate."

Q1 included zero S/X. Shanghai has the Lunar New Year shutdown in Q1 and Model Y production was minimal the first two months. Barring chip shortages or whatever I see Shanghai at 65k 3s and 35k Ys in Q2, rising to 65k/65k in Q3 and Q4. So the last nine months is:

360k - Shanghai 3+Y
270k - Fremont 3+Y (90k/quarter, less than prior record)
70k - Fremont S/X (two shifts per Musk)
700k - total

That's 880k for the full year, plus whatever they get from Berlin and Austin. I don't expect S/X to maintain two shift production forever, btw, but with pent up demand 70k this year seems reasonable.
One thing that happens with growth stocks with extreme valuations is that they have to grow earnings at very rapid rate to justify a stock price. TSLA has an extreme valuation, and its competitors and emerging competitors have very low valuations in comparison. The market is showing signs of adjusting to that reality. GM has doubled since last summer as investors like the idea of it moving toward in all in position in EV. TSLA has been weakening technically since its release about deliveries. So far it has failed to move beyond $700 where current resistance exists. Its also down about 30% from its 1/2/21 price. Not so for competition. VW is up 35% roughly and along with GM are the current leaders since 1/1. As they move towards EV markets there is plenty of room for creating a speculative value, since they remain deeply undervalued even with the gains. Another one that could wake up eventually is NISSAN. I believe what JW is referring to about market share is that as the number of buyers expands for EV's and they have more to choose from TSLA's market share will decline. It will eventually lose its leadership position. Psychologically that will be a negative because of the extreme valuation of TSLA's stock. TSLA is successful of course, but that does that always mean the stock will be if it has a valuation that makes its competitions valuations look like a steal. Companies like GM, VW, NSANY and others will become valued at higher levels as investors cheer on their entry into EV and other alternative energy fuels. I believe there is a far better chance NSANY will go to $20 from $10 and change, than TSLA going to $1350. It is the same % return.
Jonathan Weber profile picture
@chaeflin That's true. And if growth isn't high enough, shares will inevitably decline. See Cisco in 2000 etc.
@Jonathan Weber When Tesla went into the sp500 a lot of economists pointed out that overvalued large cap companies usually decline in the first 45 days—Rob Arnott’s joke that sp500 buys high and sells low—and that seems to be holding.

When shorts last year went after Tesla, they seemed to refuse the reflexivity and gamma plays that SoftBank and others put to use, even Nancy Pelosi’s husband took an easy bet on calls for the stock that once it entered the index it would go up.

I didn’t enter the scene—but I think it’s fine to take a small hedge against Tesla in OTM puts into 2022. Given how cheap puts are with Tesla it’s a small speculative bet with high payout returns and safer than shorting
Jonathan Weber profile picture
@dmzporter Good point. I assume it is due to front running by many investors before inclusion
Actionable Conclusion profile picture
TSLA.Q would be wise to put ego and emotion aside and manage their position like a seasoned pro, instead of like a scorned lover out for revenge.

Me, I'm long Tesla and long big. But I also short stocks from time to time. I also have experience managing risk in other arenas.

There are some prudent strategies... and no, hope is not one of them.

Can the shorts find a way out? If any of the shorts seek guidance with various exit strategies and managing risk... feel free to hit me up.

To me a simple way to view this is as follows;
. what percent on the $700 billon valuation is their auto business? - Let's say 75% or $530 billion [bulls and bears will disagree]
. VW already has larger EV market share than Tesla. [author describes]
. Could VW spin off EV business for $500 billion?
. that would then leave is ICE business at 0 value despite 5-10 billion in annual profits. [at 10 times earnings that is $50 billion value]

does any of that make sense. no no and no
Jonathan Weber profile picture
VW does not yet have a larger market share, but will likely come close later this year. Apart from that, great argument, I completely agree -- comparison to VW or Stellantis shows how overpriced Tesla is
lapha profile picture
@Jonathan Weber You are forgetting that VW has hat outdated ICE business dragging them down. Thei ICE business has a negative value, so should lower valuation significantly.
lapha profile picture
@roswellion VW does not have a bigger EV market share than Tesla. Tesla's worlwide market share is well ahead of VW's.
I'm sorry, are you suggesting that with such an increase in sales, Tesla did not increase its auto-sector market share? Did global auto sales go up that much? I doubt it. It's very misleading to suggest otherwise. Simple math cam show that Tesla can lose share in the BEV sector whole coming to dominate the auto sector in general. That's in fact the way the world is going.
@Tim_MacNeill You realize Toyota--just Toyota--sells like 9 million vehicles a year, right?
fairestcape profile picture
@dmzporter ... not for much longer... Toyota is the "Nokia of the car industry" - stubborn arrogance will see a quick and terminal collapse.
lapha profile picture
@dmzporter You didn't even address his point, which is the GROWTH.

Please pay attention.
But Cathie said...
Author, would the delivery number still have meant nothing to you if it had come in below expectations? If so, fair enough. I have just seen a lot of bears who are saying this delivery beat doesn’t mean anything, but if it had come in below expectations, they would have said it means a lot.

To be fair, both bulls and bears emphasize stats that fit their bias and dismiss stats that contradict it. I guess that is just human nature.

Not criticizing you, just curious if you think a delivery miss would also have been meaningless. If you say yes I can respect that. I think there is too much short term noise both ways about Tesla and prefer to take a long term view.
Jonathan Weber profile picture
@minoret The thesis wouldn't change. Tesla is overvalued, and short-term delivery beats or misses don't change that
@Jonathan Weber I appreciate your conviction in your beliefs. We don't see things the same way, but I respect your views and I don't think it's right for people to attack you in the comments. But that is the case on any bearish stock article on here, I've noticed.
Jonathan Weber profile picture
@minoret Thanks for your nice comment, I appreciate it!
Tesla could sell 10 million cars in 2030 and it wouldn't be worth $700 billion in 2030 let alone today.

Toyota has the best margins in the biz and had a higher market share of total cars sold than tesla ever will. Cash flow machine but it was never even $200 billion.

Authors point is so simple but all the teslabots, "but tesla is growing!". Gee that means it's a buy at any price. 700 billion? Sure! 700 trillion even! No concept of reality.

And stop with the robotaxi nonsense or utility storage. Robotaxis are pure fantasy. Don't exist and musk has conned you for years. Camera only fsd will likely never exist. Utility storage is not new and has huge competition with bigger shares of the business than tesla.
Alexander the Great II profile picture
@kenberthiaume ,

" Robotaxis are pure fantasy. Don't exist and musk has conned you for years."


Your comment is false. See link.
@Alexander the Great II FSD is vaporware. It will never hit level 4 let alone level 5. Cadillac had a better system and you don’t have to pay 10k for it. See you on the way down. Tesla stock is way overvalued
The tam is growing, look in absolute terms, not relative.
50-60% YoY greater auto deliveries for the next several years, greater margins, bigger utility-scale energy sales, FSD, no competitors near them in price/capability. Yup, Tesla is doomed.
Jonathan Weber profile picture
@mlhutche Who says that they are doomed?
@mlhutche Not doomed, just insanely overvalued.
For me, they need to come down to below $100 to buy the stock. I would not give advise on Tesla to begin with, since at the moment it's not valued on sound economics.
If you like to gamble, and are prepared to lose 75-90% of your investment, go ahead, you might gain if it goes up, i just don't see the value in it at current price.
lapha profile picture
@Mr. McCoy Why is Tesla overvalued? Show your calculations.
Money is worthless...

But market share going for high 80's to low 80's is a problem when the market (as you define it) is growing rapidly.

I hope you put your money where you keyboard warriors mouth is...

Please, please short the shit out of the stock with all you have and all you can borrow.

I like taking shorts money...

The market is cars... all cars...
Not just blue ones, or sedans, or electrics, all cars.

Your cherry picking data...
Jonathan Weber profile picture
@Michael_Berger They don't have 80% market share
@Michael_Berger tesla has 80% of the market in cars? Europe their market shate went from 80% to 10%. 10% of the entire auto market isn't worth 700 billion. Toyota has more than thay and was never even 1/3 of that. Ahh but robotaxi and hyperloop fantasies need to coubt too!
lapha profile picture
@kenberthiaume No, their market share did not go from 80% to 10%. Another lie.
hawkeyec profile picture
@Jonathan Weber

You said: " Tesla may actually have lost more market share in Q1, despite growing sales meaningfully year over year. Many peers grew their deliveries much more than Tesla."

This is essentially the fate that befell Apple in the early days of the PC. Initially, Apple had forty percent of the fast growing PC market but it didn't take long for Apple to lose its early advantage during the rise of IBM and its MS DOS clone competitors and soon, even though Apple continued to grow its sales, its market share fell to less than 5%. If not for the i-phone it would probably not survived on PCs alone. @bmeier.vonmod shows the way this same kind of trend is likely to progress in Europe, and no doubt in the US. There is no secret technology in a Tesla to protect the product. Every major car company in the world has bought one of each model and torn it apart in a back room somewhere. The first manager of the first IBM PC plant was asked by a reporter why with all their knowledge and experience with computers and their world market leadership IBM wasn't a pioneer in the desktop market. The IBM guy replied something to the effect: because a pioneer is a guy with arrows in his back. Not very politically correct, perhaps, but a good sense of the limits of the so-called "first mover" advantage. Sometimes the second guy gets the best outcome.
Jonathan Weber profile picture
@hawkeyec That's true. But Apple was never valued at $700 billion during the PC days, whereas Tesla is
@hawkeyec TEsla EU sales will go up 3x when the EU factory opens up. We just saw this happen in China.
@WillLong no. No and no.
Can anyone explain to me why this market share argument keeps popping up? It is not totally irrelevant until the market is mature? Basic math is all that is required to see that but somehow that's just ignored to make a fictitious position.Year 1:Company A - 500,000 sales
Company B - 100,000 sales

Company A has 83% market share.Year 2:Company A - 750,000 sales
Company B - 200,000 sales

Company A market share went down to 79% while still 2.5x increasing the unit sale increases of Company B.I know you understand this math and yet you pretend you do not by mentioning it with NIO and XPeng and then immediately dismiss it. Dishonest and misleading analysis that anyone with a 4th grade math education could show the fallacy of. You're also fully aware that the price is built on the expectation of FSD reaching level 5 first but pretend that is not the case and that it's only car sales. Can you disagree that Level 5 FSD will be obtained? Sure. But to pretend that is not the fact of the matter and ignore it entirely is the work of a charlatan.
Jonathan Weber profile picture
@jjohn234 Many bulls believe Tesla will dominate the EV market. For that they have to gain market share, but they are losing market share
@Jonathan Weber what market.

People buy cars..
It's a car market...
@Jonathan Weber Show me some quotes from "Tesla bulls" who have stated that for their price targets that TSLA has to maintain or gain EV market share when the whole EV market is exponentially growing every year!? That is crazy talk.

Apple did not need to gain market share to become the 2+ Trillion dollar company they are today: www.statista.com/...
Actionable Conclusion profile picture
Numbers just in from China... off the hook month over month growth.

Up 96%... not a typo.

$35,000 cars sold in China in one month. 18,000 prior month. And this while there is supply constraints.

Tesla is guiding to sell damn near a half million cars in yr 2021 just out of Tesla-Shanghai.

Which begs the question. Is Tesla gonna break a million cars sold in 2021? Guiding for around 800k to 900k but thats beginning to look light.

Either way... its all good in THood.
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