After a terrible winter and a gloomy spring, see Tesla Inc. (NASDAQ 🙂 investors are finally showing signs of a better summer.
The electric car & # 39; s manufacturer announced a record number of deliveries last week, claiming to have shipped 95,200 & # 39; s in the second quarter, taking the previous company record of 90,700 in the fourth quarter of 2018. Analysts expected about 91,000 deliveries for the period.
The head certainly took some fresh air in the company's sails. Purchases from Tesla & # 39; s cheaper Model 3 sedan had fallen sharply in the first quarter, even after several rounds of price drops.
In the past year, Tesla shares had lost almost half their value in the six months to the end of May, hurt by a series of missteps. But although they were lost in the last two sessions, the shares have gained 12.6% since early June and traded at $ 230.34 at the end of yesterday.
In spite of this new momentum, the problems that Tesla has to deal with are still far from over, in our eyes.
An important reason why we continue to worry is that Tesla's path to profitability is still full of danger. Although the company was able to deliver more cars in the second quarter due to strong demand from European markets and Canada, Model S and Model X are still struggling with higher margins.
The combined deliveries of these models fell to 17,650 in the quarter, a decrease of more than 20% from a year ago and 50% from the previous quarter. Many analysts are concerned that the cheaper Model 3 cannibalizes the more expensive cars of the automaker, making it more difficult for the company to make money in the long run.
Ambitious goal
Even with the quarterly rise in demand, it is still unclear whether Tesla will be able to meet its ambitious 2019 target of 360,000 to 400,000 cars. The Tesla press release was quiet on this front. With the US federal tax reduction for electric vehicles shrinking in the second half of the year and ending in 2020, it becomes even more difficult for the company to sell more cars in the United States in the second half.
And perhaps Tesla must once again rely on foreign markets to bridge the gap and at the same time keep shipping costs and logistics costs under control. Because of this lingering concern, many Wall Street analysts are not yet ready to change their negative view of Tesla, despite the positive surprise of the past week
"We still expect that demand will decrease over time and that we will eventually continue in 3Q19," analyst David Tamberrino of Goldman Sachs, wrote in a note. Tamberrino has a "sell" rating on the shares with a price target of $ 158.
Barclays & analyst Brian Johnson, who "underweight" the stock with a target price of $ 150, has expressed similar views in a recent note:
"The incentives of Tesla are strongly focused on maximizing deliveries to focus on generating cash, probably at the expense of profitability. We continue to expect a loss this quarter, as well as a challenging sales / profit environment for the rest of the year. "
Bottom Line
Tesla's share remains a very speculative bet. It is difficult to justify the premium assessment in comparison with peers if the overall picture of demand remains muddy and the company still faces deep cash flow problems. It is better for investors to ignore the noise caused by the positive delivery numbers, and instead focus on the upcoming release of the company to get more clarity.
