Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Tesla (TSLA) Deliveries: Underlying Demand Is All That Matters

By Gene Munster

Tesla (TSLA) announced first quarter 2019 production and delivery numbers on Wednesday evening. Here are our key takeaways:

  • As expected, logistics difficulties in China and Europe caused a miss on deliveries. Tesla delivered 63k total vehicles vs Street expectations of 75k. This included 50,900 Model 3s and 12,100 combined Model Ss and Xs.
  • We are focused on underlying demand. In an environment with stable production and logistics, deliveries are a proxy for demand. The company reaffirmed 2019 delivery guidance of 360k-400k total vehicles. This is an aggressive target, given the low end of the range (360k) implies an average of 99k deliveries per quarter compared to this quarter’s 63k and 91k in Dec-18.
  • The magnitude of the S and X miss was a surprise. The company delivered 12k vs expectations of 20k. We attribute the shortfall to allocating resources away from S and X toward Model 3 production, and, separately, it may be an indication that the sweet spot of demand is shifting to the lower-priced Model 3.
  • The reallocation of S and X production resources to Model 3 appears to have been inefficient. The company produced 11k (44% q/q) fewer S and X vehicles and only produced 1,556 (2.5% q/q) more Model 3s.
  • The company reported that is has “sufficient cash on hand.” It’s unlikely that Tesla will have to raise money in the Jun-19 quarter, but we believe raising money would be the right strategic movelong-term.
  • It appears that the Sep-19 quarter would be most at risk in terms of deliveries, given the federal tax credit will step down from $3,750 to $1,875 at the end of Q2.

What Does All This Mean for Tesla?

The Mar-19 delivery and production numbers have little impact on Tesla’s long-term outlook. We have expected 2019 to be a bumpy year for Tesla. This bumpiness includes continuing to work through production and logistics challenges and finding a baseline for demand as the initial rush of Model 3 buyers subsides. While 2019 will be a challenge for the company, we continue to believe long-term investors will be rewarded. This belief is based on Tesla converting its technology lead into capitalizing on the undeniable trends of electric and autonomous vehicles.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. 


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