Tesla shares fall 8% as first-quarter deliveries disappoint

Bengaluru — Tesla shares fell more than 8% on Thursday after a bigger-than-expected drop in first-quarter deliveries, led by waning demand for its luxury Model S and X vehicles, added to worries about the electric carmaker’s finances.

At least four Wall Street brokerages cut their price targets on the company’s stock, citing concerns about profitability and revenue after deliveries of the higher-priced luxury cars more than halved compared to the fourth quarter.

RBC analysts called Model S/X deliveries “very disappointing” and estimated the numbers would translate to a more than $1bn shortfall in revenue compared to previous estimates.

The company had already flagged in February that it expected to post a first-quarter loss as it launched its cheaper $35,000 version of the Model 3 sedan.

In the quarter, Tesla delivered 50,900 Model 3s, the linchpin of its growth strategy, falling short of analysts’ estimates of 58,900, according to IBES data from Refinitiv. Tesla pinned the blame for the first-quarter delivery drop to longer transit times, which analysts said could affect cash flow, even though the company claimed it had sufficient cash on hand.

The company said it had delivered only half of the quarter’s numbers by March 21, with 10,600 vehicles still in transit at the end of the quarter. By comparison, only 1,900 vehicles were in transit at the end of the fourth quarter.

Cowen and Co analysts said the delivery and transit details suggested “cash was likely dangerously low” after Tesla paid off a $920m convertible bond obligation in cash in the beginning of March.

Still, there were no new downgrades by brokerages on Tesla shares. The company is currently rated “buy” or higher by 12 of the 30 brokerages covering the company, seven “hold” and 11 “sell” or lower.

The carmaker reaffirmed its forecast to deliver 360,000 to 400,000 vehicles in 2019, and said US orders for the new Model 3 outpaced what the company was able to fulfil in the quarter.

Nord LB analyst Frank Schwope called the numbers “more shocking than disappointing” and said doubts remained whether Tesla could deliver 400,000 cars in 2019.

Lawyers for Tesla chief Elon Musk will argue that he did not violate a fraud settlement with the US Securities and Exchange Commission (SEC) and should not be held in contempt, the latest twist in a high-profile battle between the billionaire and the government.

Musks fight with the SEC, to play out in a Manhattan federal court hearing, has raised investor worries that it could lead to restrictions on his activities or even his removal from Tesla, while distracting him at a pivotal point in the company’s expansion.

Reuters