Tesla Battery Day Flops

Summary

• Shares drop more than 10% after highly anticipated event.
• $25,000 car gets a timeline pushback.
• Q3 production/delivery news comes next week.

Well folks, Tesla's (TSLA) Battery Day has come and gone. For those that were long the stock, it turned out to be a sell the news event, and shares ended up losing roughly $80 from Tuesday's after-hours high to Wednesday evening as seen in the chart below. While long term investors might like some of the things shown off at the event we've been waiting more than a year for, the initial reaction in the stock shows that the majority was less than impressed.

(Source: Yahoo! Finance)

As one fellow writer on this site pointed out, it's kind of funny to have a Battery Day where you don't have any batteries. If you were hoping for Tesla to show off it's newly designed cells, you were probably unhappy just getting a PowerPoint presentation. There was certainly a lot of news covered - from the cost savings Tesla expects, to the company getting into mining, to how many factories will truly be needed to generate all of the necessary items.

Interestingly enough, CEO Elon Musk went on his rant again about vehicle affordability, repeating multiple times that you can't sell a car if people don't have enough money to buy it. Of course, this was just a few minutes after he unveiled the Model S Plaid, a super high performance sedan that starts at just under $140,000. This new tri-motor vehicle is expected to see deliveries late next year, which could actually be prior to meaningful deliveries of the second generation Roadster and Tesla Semi that were unveiled back in 2017. 

Perhaps the one item that grabbed a lot of media headlines was the talk about Tesla producing a vehicle in three years that would be fully autonomous and cost just $25,000. As has been pointed out on Twitter, that doesn't seem to make sense given Musk's previous comments about how the full self-driving feature itself could cost tens of thousands of dollars. The three year timeline is also a repeat of something he said over two years ago, so you might say he is delaying this new vehicle by at least two years.

(Source: cnbc.com article, seen here)

So why did the stock sell off on the news? Well, you do have to remember that shares have soared in the past year ahead of this event. Elon Musk did try to take down expectations a little prior to do Battery Day, and with not a lot of major news outside of these battery improvements, most investors seemed underwhelmed. It didn't help things that Wednesday was the unveiling of the Volkswagen ID.4, which will be significantly cheaper than the comparable Tesla Model Y, and Tesla also suffered a major network outage during the day.

At this point, we're only a week or so away from the next major catalyst, which is the company's report on Q3 production and deliveries. Analysts are currently expecting about 144,000 units to be sold during the period. This would help Tesla to get to the 30% to 40% unit growth this year that Elon Musk reference at Battery Day, although the midpoint of his forecast was a little below the company's previous guidance for over 500,000. I'm pretty much with the street, currently looking for 144,850 deliveries, with production to exceed that by 4,000 units. The company is still not producing anywhere close to its installed capacity, so it will be interesting to see if there is any major progress made on that front in Q4.

In the end, investors were not thrilled with Tesla's Battery Day presentation, and the stock sold off as a result. While management talked about making huge improvements in cost over time, there was no prototype shown and the only new product reveal was a very expensive Model S. Elon Musk reiterated a three year call for a $25,000 vehicle, and he had tempered expectations prior to the event regarding the ramp of new products. The stock finished Wednesday's after-hours session just a few bucks above the 50-day moving average, so next week's deliveries report could determine whether that level holds over the next month.