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Tesla Motors Inc (TSLA) Can Scar Shareholders With This Number

Tesla Motors Inc (TSLA) Model 3 TSLA vs GM Chevy Bolt

Tesla Motors Inc is set to release its Q3 2015 results today after the bell and the bears on Wall Street are already circling around like vultures waiting to descend on a carcass. Tesla Motors is still far away from reporting a profit and analysts expect the firm to report a loss – no one will blink an eye if Tesla reports weak financials. However, it is doubtful that Tesla will escape unscathed if it cannot show decent delivery updates and targets.

Tesla Motors Inc Model 3 TSLA vs GM Chevy Bolt

Tesla has given itself a delivery target of somewhere between 50,000 cars and 55,000 cars. Yet, the number of cars it shipped in the year-to-date suggests that the firm is already behind its target. The firm has already delivered 33,157 cars and it needs to deliver another 16,843 cars in the next three months to meet the low end of its target – it needs to ship 21,843 cars to meet the high end of its target.

Wall Street is worried about Tesla Motors shipping

The launch of the Model X was supposed to be a key event that would make it easier to Tesla to reach its target of shipping out 55,000 cars. However, the number of delays in the unveiling and launch of the Model X had hacked out much of the positive sentiment. The worst part is that Elon Musk only managed to deliver 6 units of the Model X just to save face – the SUV has still not been shipped to buyers outside of Musk’s immediate circle.

Analysts are starting to voice out their fears about Tesla’s chances of becoming a major player in the auto market. Ben Kallo of Robert W. Baird & Co, who has a neutral rating on the firm says, “Sentiment is 2015 deliveries will come in near low end of guidance (and guidance could potentially be lowered) with low Model X volumes… we need to see a few thousand Model X vehicles produced before we gain comfort in TSLA’s production ability.”

Tesla Motors needs to step up

Tesla would need to deliver at least 1,307 cars per week henceforth if it would meet the low 50,000 target. Shipping out 1,307 cars per week will require Tesla to increase its output by 35% over the previous rate of 965 cars per week.

The problem though is that Tesla now has to make two cars (Model S and Model X) from the same assembly line. Tesla’s factory in Fremont, CA is already working in top gear but the cars are not just driving off the ramps.

Tesla Motors is has tried adding a “Line 2” to assembly line but the new line is not yet working in full steam. Elon Musk still has about 25,000 people waiting for their Model X (many of them own shares of Tesla) – the stock might face some headwinds if these people feel that Musk is not doing enough to deliver their cars. Tesla makes great cars but it needs to step up its game by increase production speed or risk the wrath of the gods on Wall Street.

 

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.