Tesla (TSLA) stock is tumbling in pre-market trading on Thursday after reporting disappointing delivery figures that came up well short of consensus estimates.
Shares of the Palo Alto-based car company fell over 10%, nearing their lowest levels of the year.
First quarter deliveries of 63,000 vehicles came in well below the consensus as of of 74,930, marred by Model S and X deliveries that came in at about half of the expected rate, and Model 3 deliveries that came up shy of estimates.
Analysts pointed to this as a sign of decelerating demand and a disconnect between CEO Elon Musk's bullish outlook for the company and the bearish results.
"The now clear incongruence of CEO outlook statements with official company guidance may hurt the perception of management commentary, eroding investor confidence and potentially placing additional pressure on the shares," J.P. Morgan analyst Ryan Brinkman said.
He added: "Even if it could be argued that official full year guidance somehow increased from 360-400K deliveries at the time of the shareholder letter to 350-500K of the Model 3 alone just hours later, to 420-600K total production on February 28 - and now back down to 360-400K deliveries -the choppiness and inconsistency of this communication would still in our view erode investor confidence."
4000 Tesla cars loading in SF for Europe pic.twitter.com/BODbSzo3Fr
— Elon Musk (@elonmusk) February 20, 2019
"Our Underweight rating considers notable investment positives, including a highly differentiated business model, appealing product portfolio, and leading-edge technology, which we believe are more than offset by above-average execution risk and valuation that seems to be pricing in a lot," Brinkman explained, setting a $200 price target for the stock.
The company's recent discounting also raises questions about how early the company foresaw the deceleration in demand that was added to by a roll-off of tax benefits Tesla customers were offered until January 1. That is not to mention the margin minimization felt by the move.
The question marks surrounding the company trickle up to the company's celebrated CEO ahead of his much-anticipated court appearance on contempt charges to take place on Thursday, adding to the anxiety in the near term.
NEM!! National Elon Musk Day!! Thanks Elon for making everything a little more exciting than it used to be.
- Jim Cramer (@jimcramer) April 4, 2019
To be sure, there remained bullish analysts ready to look beyond the short-term results and noise.
Tesla numbers are a bit light. One qtr of massive global expansion. This is a long term story. Very happy to see demand our stripping supply by a large margin. We expect q2 numbers to be significantly better. No change in our opinion. $tsla
— Ross Gerber (@GerberKawasaki) April 4, 2019
"Tesla has the most impressive product roadmap out of any technology/auto vendor around and will be a 'game changing' driving force for the EV transformation over the next decade with Model 3 front and center," Wedbush analyst Dan Ives said.
"While there are a number of hot topic variables around European Model 3 demand, China demand/Giga 3 build out, ramping Model 3 production, the Musk dynamic, Autopilot functionality (and missteps/crashes) and a stretched balance sheet, we ultimately believe Tesla has a unique growth opportunity on the horizon and can grow into its valuation if it executes," he noted.
Ives set a $365 price target which, although lowered from his previous $390 price target, still offers significant upside. While the FactSet consensus remains a "Hold" as the bull and bear debate rages, the consensus price target of $327.82 remains well above the current stock price.
Anticipating the bull argument, Citi analyst Itay Michaeli advised caution to his clients lest they be convinced.
"Though Tesla bulls might look past the Q1 Model 3 miss, the S/X numbers will likely spark some legitimate demand & company margin concerns, particularly given the risk for some incremental cannibalization from the recently introduced Model Y," he explained. "We expect the stock to come under pressure on this and perhaps test recent lows-maintain Sell/High Risk."
Michaeli added that Tesla's common concern over cash is not something that can be forgotten either.
"Tesla noted that it had "sufficient" cash to end Q1, but we doubt the word 'sufficient' will inject much comfort," he said. "In fact it might even draw more scrutiny to Tesla's balance sheet issues, in our view."
Michaeli wondered if a capital raise might become a necessity in the near term.
The issue is particularly concerning given the company's contentious standing with not only regulators, but credit rating agencies. Moody's, for example, has rated the company's credit at Caa1, denoting a rating below investment grade.
"Tesla's rating could be lowered further if there are shortfalls from its updated Model 3 production targets," Moody's advised just one year ago. "The rating will also be pressured if the company is unable to raise sufficient new capital to cover its late-2018 and early-2019 convertible maturities, and to cover the operating cash consumption that will likely continue into 2019."
The bearish delivery statistics could provoke the agency to add comments in coming weeks, possibly adding to the pain for shareholders.
In the end, there are more questions surrounding Tesla than there are answers.
Shares are reflecting that dynamic.
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