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Tesla (TSLA) Stock Sinks by 10,7% as Car Deliveries Drop

Tesla (TSLA) stock was down sharply this morning on horrific Q1 delivery numbers. Those numbers came out as the CEO readies to learn his faith resulting from being held in contempt of court for violating an agreement with the U.S. Securities and Exchange. That court hearing is scheduled for today.

At their lowest level Thursday, Tesla stocks were off nearly 11%, the worst percentage decline since Jan. 18. They closed down 8.2% at $267.78. The shares are a distant 30% from their record high close of $385 in September 2017.

The carmaker pinned the miss on “massive” backlogs in China and in Europe. Tesla delivered about 63,000 vehicles in the first quarter, including 50,900 Model 3s; that compared with expectations of around 76,000 vehicles, including 54,600 Model 3s, according to FactSet.

Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly.

— Elon Musk (@elonmusk) September 17, 2018

Tesla reaffirmed its 2019 sales guidance of 360,000 and 400,000 vehicles.

Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.

— Elon Musk (@elonmusk) February 20, 2019

Garrett Nelson, an analyst with CFRA said that with the weak start to the year, “they’re going to be hard-pressed” to hit that guidance, especially with federal electric-vehicle tax credits being reduced mid-year and going away at year-end.

In February, Musk said Tesla would close most of its stores around the country and rely on online sales as part of an effort to slash costs so it could sell the $35,000 car profitably. But 11 days later, Tesla reversed course and said it would keep many of the stores, and reopen some that had already closed. It also said it would increase prices on all its cars except the $35,000 version of the Model 3.

In the coming weeks, Tesla is expected to report a loss for the first quarter. The company was profitable in the final two quarters of 2018 as Model 3 sales rose.

Ryan Brinkman, an analyst at JPMorgan cut his price target to $200 a share from $215, implying a drop of about 24% from where shares were trading Thursday morning. He wrote:

“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 pressures on the shares.”

In March, Tesla paid off a $920 million bond that took a big chunk out of the $3.7 billion in cash it had on hand at the start of the quarter. That followed a $230 million payment the company made in November. Its next big payment is a $566 million debt issue that is due in November, followed by another $1.4 billion in notes that is due in two years.

The company said in its statement on Wednesday that it “ended the quarter with sufficient cash on hand.”

Wall Street analysts expected Tesla to deliver about 50,000 Model 3s. And Tesla had already said it expected fewer Model S and Model X sales compared to a year earlier.

Daniel Ives, managing director at Equity Research, said in an email that Wall Street was already bracing for “an apocalyptic quarter.”

Ives said overall sales were “clearly soft,” but the low number “represents an ‘air pocket’ quarter in our opinion.” He added that he was encouraged because Model 3 deliveries “were better than feared.”

Tesla (TSLA) CEO Elon Musk emerged from a Manhattan federal district courtroom Thursday afternoon with a renewed opportunity to resolve a dispute with the U.S. Securities and Exchange Commission outside of court.

“I’m very happy with the results and very impressed with Judge Nathan’s analysis,” Musk told reporters after a nearly two-hour hearing during which Musk’s and SEC lawyers argued whether Musk should be held in contempt.

The SEC argued Musk should be held in contempt based on its position that his tweet violated the court’s prior order requiring him to obtain pre-approval from a designated Tesla representative before posting tweets that contain or reasonably could contain information material to Tesla or Tesla shareholders.

The order was based on an agreement between Musk and the SEC after the SEC filed an action alleging fraud against Musk for an August 7 Tweet in which Musk falsely claimed to have secured financing to take Tesla private.

Tesla (TSLA) Stock Sinks by 10,7% as Car Deliveries Drop

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