As Tesla's (TSLA) Q3 deliveries report draws close, it's worth remembering how its shares moved over the course of July.
In early July, Tesla's stock popped in response to a Q2 deliveries report in which the company disclosed better-than-expected shipments for both its Model 3 sedan and (following a weak Q1) its Model S sedan and Model X crossover. And its shares continued trekking higher over the following three weeks.
But all of that came to an abrupt end after Tesla released its Q2 report on July 24th, which led shares to drop 14% on July 25. In spite of its deliveries beat, Elon Musk's company badly missed Q2 EPS estimates due to a weaker-than-expected automotive gross margin.
And though Tesla maintained its full-year deliveries guidance of 360,000 to 400,000 vehicles, it backed away a little (via some creating wording) from a prior goals of being cash-flow positive during each of the last three quarters of 2019 and reporting positive GAAP net income for each of the last two quarters. The company also disclosed that co-founder/CTO J.B. Straubel is leaving and said it's aiming to start Model 3 volume production at its Shanghai Gigafactory by the end of 2019, after previously saying it's aiming to do so early in Q4.
Given how differently Tesla reacted to its Q2 deliveries and earnings reports, a stronger or weaker-than-expected Q3 deliveries report shouldn't lead investors to assume that the company's Q3 earnings report will be equally upbeat or downbeat. That especially holds if the deliveries report features few or no details about Tesla's near-term profit and margin expectations.
With Tesla's gross margin having dropped by 2.2 percentage points annually in Q2 even though its deliveries (and with them, its economies of scale) more than doubled thanks to the Model 3 ramp, markets are paying as much attention to how profitable vehicles sales are as they are to how many sales are taking place. In particular, concerns have been running high about the profitability of the Standard Range and Standard Range Plus versions of the Model 3, each of which have sub-$40,000 starting prices and appear to be weighing on margins.
For the moment, the consensus among analysts polled by FactSet is for Tesla's Q3 deliveries to come in at 99,000, up 4,000 sequentially and 15,000 annually. Model 3 deliveries are expected to account for about 80,000 of the total, with the remainder split between the Model S and Model X.
Notably, Electrek, a website that appears to have a source or two inside of Tesla, reported on Monday morning that Tesla was "a few thousand" cars short of a Q3 delivery goal of 100,000 units with a day to go. At the same time, a recent e-mail from Elon Musk indicated that Tesla's Q3 net orders are "tracking to reach about 110,000." If true, that would suggest Tesla currently has a healthy backlog of orders that it's working to fulfill.
But regardless of what Tesla's Q3 deliveries and orders looked like, investors should keep in mind that they'll only tell part of the story for a company whose $50 billion-plus enterprise value bakes in expectations of significant earnings and cash-flow improvement in addition to continued sales growth.