If you want proof that investors are more than just a little fickle, you only have to look at the treatment of Tesla Motors Inc (NASDAQ:TSLA) on Tuesday — the first trading day back from a long holiday weekend. Tesla stock is down 4% in the wake of its Q2 delivery news. In simplest terms, the number wasn’t anywhere near as big as expected, or even projected, by TSLA.
Yet, a closer look at all the numbers — and how they compare to all the other relative results — paints a picture that wouldn’t be quite so grim if traders weren’t hell-bent on viewing the glass as half full.
And no, contrary to belief, Tesla Motors wasn’t trying to “sneak these figures in” over a holiday weekend to dampen the bearish impact they may have on the value of TSLA shares.
The Good, The Bad and the Overlooked
Just for the record, yes, I’m the same guy who can rail on Tesla stock pretty regularly. Case(s) in point: The endeavor to acquire SolarCity Corp (NASDAQ:SCTY) is a poor one, and late last year I pointed out that the fiscal math of the Model 3 just wasn’t apt to make sense.
I’m not a so-called “hater,” though, and while I was fully prepared to beat up on Tesla stock again following this weekend’s news, I had no choice but to instead come to its defense. Neither the timing nor the delivery shortfall is as big of a deal as they’re being made out to be.
Don’t get me wrong — not all is as great as it should be. But it’s not the end of the world.
The numbers: Last quarter, Tesla Motors delivered only 14,370 vehicles, falling short of its guidance for deliveries of 17,000 cars, and even falling short of the previous quarter’s deliveries of 14,810. Nevertheless, CEO Elon Musk still contends the company will deliver between 80,000 and 90,000 vehicles in calendar 2016, meaning Tesla will need to deliver a minimum of 50,000 automobiles in the second half of the year. That pace would require a 72% improvement on the pace of deliveries for the first half of 2016.
That seems an unachievable target.
But deliveries are one thing. Sales are another. Just because a delivery hasn’t happened yet doesn’t mean a vehicle hasn’t been effectively sold. It just means that revenue can’t be booked yet.
With that as the backdrop, know that 5,150 automobiles were in transit as of the end of last quarter. That’s 2,535 more than the number in transit as of the end of the first quarter. Adding that figure back into deliveries ratchets the total shipped (even if all were not yet received) back up to 16,905. That’s pretty darn close to the 17,000 the company said it was expecting to deliver last quarter.
It’s also worth noting that almost half of last quarter’s total of 18,345 vehicles produced — let’s call it 9,000 — were made in just the last four weeks of a 13-week quarter. That’s a pace of 2,250 units per week. With 26 weeks remaining in the year, at that pace, TSLA could presumably make another 58,500 cars, and deliver most of them.
And as for the timing of the press release, yes, Sunday is an odd time for any company to unveil big news. It’s not as odd or as sinister as some have presumed, however, as if Musk thought nobody would notice over the course of the Independence Day weekend.
A closer look at the company’s delivery announcement history confirms this data has been posted two or three days after the end of the calendar quarter regardless of what day of the week the news might fall on. The fourth quarter’s delivery tally was also posted on a Sunday. That wasn’t treated like an evasive maneuver, however, because the numbers were relatively strong.
Bottom Line for Tesla Stock
Don’t get me wrong. Tesla Motors still has its work cut out for it, and owning Tesla stock is still more of a dangerous speculation than an investment. The degree of negative spin the bears were able to put in this weekend’s news is evidence of that.
Take a step back and look at the bigger picture, though.
If nothing else, TSLA investors have to be impressed that year-over-year deliveries were up 25% on a year-over-year basis. It doesn’t mean much in the short run, but for the long haul, the progress will eventually matter.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
