Tesla Q4 Deliveries Show Another Big Miss (NASDAQ:TSLA)

One of the worst performing stocks in recent months is Tesla (NASDAQ: TSLA). While the electric car maker’s shares fell largely on the drama surrounding CEO Elon Musk’s purchase of Twitter, there are also concerns. a slowdown in demand for the company’s cars. Tesla made the announcement on Monday Q4 production and delivery figuresand the numbers aren’t likely to ease those sales concerns anytime soon.

As Tesla continues to expand its new factories in Germany and Texas, new records are expected to be announced every quarter, along with increased production in Fremont and Shanghai. At the start of 2022, some of the company’s biggest supporters hoped the name would deliver more than half a million vehicles in the final quarter of the year. These expectations have been gradually tempered by the COVID issues in China and slower-than-expected production ramps. Tesla posted new records for both production and delivery as seen below.

The first thing you’ll notice is that production significantly outpaced deliveries for the second quarter in a row. Management attributed this to a “steady shift toward a more even regional mix of auto production,” leading to more transit vehicles at the end of the period. Musk said in early 2019 that Tesla would soon correct the surge in deliveries that led to a glut of deliveries at the end of the quarter. Despite many opportunities to reorganize vehicle build times at manufacturing facilities, this has not yet happened over the past three years. As a result, the company produced 56,500 more vehicles than it delivered in the second half of 2022. This will only help alleviate concerns about sluggish demand.

It was the second straight quarter in which Tesla’s reported delivery number fell slightly short of estimates. In the chart below, you can see how street estimates mostly hung around 430,000 for most of the fourth quarter. In late December, Tesla investor relations posted a figure that was slightly below the company’s usual estimate of 418,000 vehicles. Although that number is slightly below where the street was just a few weeks ago, the actual number is down almost 13,000 units.

The delivery result is even more disappointing when you consider a few important elements. First, the company’s CFO guided for “just under 50% growth” for the full year in its 3Q earnings report, which in itself was a drop, and Tesla only posted slightly above 40% growth in 2022. The second is that there were numerous promotions during the fourth quarter to increase demand. In the US, Tesla pushed out a $3,750 credit at the end of the quarter, which eventually doubled and gave away 10,000 free supercharge miles. In China, many promotions were detailed during the quarter, and these came even after prices fell earlier in the quarter. Some other promotions have been enacted to help even countries with lower sales volume, but they seem to have been insufficient. Tesla has started 2023 in China by offering another set of incentives to offset the elimination of the country’s electric car subsidy.

When we get the fourth quarter results (including leases and loans) in about three weeks, I’ll be very interested to see Tesla’s vehicle revenue per vehicle, especially given all the discounts there. A lower sales mix of Model S and X vehicles will also provide a small headwind to this average price figure, as will an increase in the percentage of leased vehicles compared to Q3 2022. On the other hand, the company will likely recognize some of the delayed car. full self-driving income maintained for years, which should offset some of these consistent average returns to car losses.

Key numbers analysts will likely focus on gross margins for the 4th quarter. Tesla management has mentioned inflationary pressures in past conference calls, and discounts certainly won’t help. Continued production ramps at the Berlin and Austin factories should improve margins at these facilities, though more production from Europe, which halted sales of Chinese-made cars, and the closing of the Shanghai plant for a week or more in December could be small. to drag Going into Monday’s release, analysts were expecting $1.24 in non-GAAP EPS for Q4, compared to the $1.05 seen in Q3. As shown below, I’ll be watching to see how much the revenue estimate drops, given that it’s down more than a billion dollars since late October.

As for Tesla shares, the news was not welcome for those looking for a short-term rebound. Tesla finished last week around $123, which is $15 above its recent multi-year low after hitting more than $300 in late September. An upbeat report could have sent the stock back to its 50-day moving average, currently below $180 but down by the day, but near-term upside now appears limited. The average price target on the Street was $248 on Monday, down from $336 nearly eight months ago, but we could see more target cuts in the delivery release.

Finally, Tesla missed its second-quarter delivery estimates by a wide margin. Management will talk about regional builds, but it has been talking about ending the end of quarterly supply growth for years and still hasn’t done much about it. With production greatly outstripping supplies in the back half of 2022, bears will be talking about weak sales along with a slew of promotional activities. Now we’ll see analyst estimates and price targets cut, and unless the overall market starts the new year with a decent rally, I don’t expect stocks to rally massively ahead of earnings.