Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Tesla (TSLA) Stock Hangs on 2018-Ordered Vehicles


Tesla (TSLA) is coming off perhaps its best year yet. While 2018 wasn’t its strongest showing in the market (the stock grew a modest 3.8%), the company posted its best-ever quarterly results (in the most recent quarter) and reached production milestones that were once deemed too aggressive. While Elon Musk was removed from his chairman position following an SEC investigation, the company proved itself as a business that has a long-term future.

But blogger Bill Maurer says investors shouldn’t focus only on production in 2019, as deliveries will actually be a more important metric to judge Tesla. (To watch Maurer’s track record, click here)

Tesla is looking to build on its recent quarter results, where it built more than 53,200 Model 3 vehicles, or about 4,095 Model 3s each week. The company is expected (based on VIN research) to report producing more than 75,000 Model 3 vehicles in Q4, or more than 40% higher than Q3.

While Maurer is impressed with production, he says “the more interesting number, however, will likely be deliveries.” The blogger says there is predictability for the Model S and X, which has seen company guidance of 100,000 units for production/delivery. But the big question is Model 3 deliveries, as the US tax credit for electric vehicles was cut in half upon 2019, prompting some concern among investors.

Unlike the Model S and X, the Model 3 is built for the masses, and aims to compete on price with the likes of Nissan and Chevy. So as a result, Tesla – which has until now built luxury cars for high prices – has used this tax credit to bring prices to a more manageable level for the average consumer. But with the credit halved, it increases the average selling price for consumers, which may slow demand for the model. Furthermore, CEO Musk had pledged that Tesla will cover the lost half of the tax credit for any 2018 purchase not fulfilled by the end of the year. If Tesla was not able to produce and deliver enough 2018-ordered vehicles, Maurer says this pledge could be “quite costly on the margin front” and lead to a credit rating downgrade.

Wall Street doesn’t really know what to think about Tesla. Of 25 analysts polled in the last 3 months, 10 are bullish, while 7 remain neutral and 8 are bearish. With a return potential of only 1.5%, the stock’s consensus target price stands at $337.74. (See TSLA’s price target and analyst ratings on TipRanks)

 

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