Tesla Motors Inc stock fell on Wednesday as traders followed a trend in the wider market. Anxiety was added on the firm’s Q4 numbers on the back of a Deutsche Bank report. Rod Lache, who covers the EV maker for the German bank, says that Tesla Motors may only hit “the lower half” of its production target for the fourth quarter.
That won’t come as too much of a shock to those following the firm, however. The 15,000-17,000 production number likely relied on the firm making a lot of headway with the Model X. The Deutsche Bank team says that Tesla Motors management suggested during its recent earnings call that the 17,000 number implied the production of 2,000 Model X EV SUVs. That’s not going to happen. Lache has a $280 price target and a Hold rating on Tesla stock.
At time of writing Tesla stock was selling for $221.08, down 2.49 percent for the day’s trading so far.
Deutsche Bank visits the Tesla Motors factory
Rod Lache wrote the report on Tesla stock after his experience at the firm’s plant in Fremont, California. He said that in order to meet the 2,000 production target for the fourth quarter Tesla Motors Inc would need about one-in-four of the cars on the line be a Model X. The Deutsche Bank team observed a number was more like one-in-fifteen.
That means that the Model X production numbers are unlikely to be hit in the fourth quarter, according to Mr. Lache, but he didn’t seem to think there was much worry about the Model S figures. That means, in the view of the Deutsche Bank team, that Tesla Motors should be able to build around 15,000 Model S in the fourth quarter and supplement its numbers with whatever amount of Model X EV SUVs it can manage.
Trip Chowdhry of Global Equites Research said, in a report published Tuesday December 7, that Tesla Motors Model X shipments may have already started based on some trends he saw in and around the firm’s plant in Fremont. Mr. Lache didn’t comment on the Model X SUVs hidden behind the trees, or the delivery trucks that Mr. Chowdhry noticed.
If Tesla Motors can hit its production targets at all Wall Street is likely to be happy. There’s been a certain amount of anxiety around Tesla stock since the September 29 launch of the Model X. It became clear in the days and weeks following that launch that Tesla Motors did not have the car ready for mass-production, and wait times for Signature versions of the car have dragged on ever since.
For the fourth quarter Tesla Motors is targeting shipments of 17,000-19,000 units of its cars, and it’s likely that the higher end of that target will also be eroded by the lack of Model X shipments. Shipment figures are likely more important in deciding the direction of Tesla stock, but that number is are intrinsically with production figures.
Tesla Motors looks ahead
Mr. Lache reckons that the firm will manage to deliver as many as 84,000 cars in 2016 as it ramps up production on the Model X line. In his view “Tesla appears to be preparing to ramp up quickly. During a quick walk through the company’s metal stamping area we saw 100’s of Model X hoods, side panels, doors, and other components staged in racks, and ready to be delivered to the company’s robotic body shop. Production could potentially ramp up quickly, so we know of no reason to question Tesla’s targets for Q1.”
Right now Tesla Motors may have as many as 30,000 bookings of the Model X to fulfill, but lack of clear data on cancellation makes those numbers, which come from the Model X tracker, less than clear.
Tesla stock is driven, for the most part, by expectations about how the firm will perform in the future rather than what it’s doing right now. that’s why the firm’s stock has managed to weather so many disappointments and downward revisions. The news that Tesla Motors Inc appears ready to ramp up Model X production will come as a confidence booster to some holding Tesla stock, but the fact is that promises like this have been heard before.
Tesla stock stays in doldrums
Tesla Motors Inc stock looked like it was heading for a breakout just days ago, but a couple of bad sessions for Wall Street as a whole have taken the fire out of the firms’ movements. Credit Suisse analyst Dan Galves was one of the major sources of optimism in the last couple of weeks. In a November 25 report he said that Tesla Motors would meet its targets for the fourth quarter and would have a much cleaner year in 2016.
That’s a story those with Tesla stock have been hearing for a long time however. A little over a year ago Wall Street voices were forecasting that 2015 would be the year of the Model X, and the year in which Tesla Motors finally managed to turn a profit.
As recently as last April, Mr. Galves of Credit Suisse forecast that Tesla Motors would eke out a small profit of $15 million for 2015. Now the consensus on Wall Street is that the firm will record a loss of hundreds of millions. Mr. Galves says that Tesla Motors will manage to make a profit of $4 per share in 2016. Given the constant downward revisions many holding Tesla stock may be skeptical.
Like Mr. Galves, Mr. Lache of Deutsche Bank is also confident that Elon Musk can turn Tesla Motors into a thriving concern in the year ahead. That remains to be seen, but it seems that Tesla stock has found strong support at current levels despite the worries that have dogged it.
Tesla Motors fourth quarter numbers will be delivered in full in the first weeks of February, but the firm is likely to release its shipments totals for the fourth quarter sooner than that. The firm established a new trend this year whereby it reveals shipment totals just a few days after the quarter ends which means we’ll find out if Mr. Galves is right in the first week or two of January.
For now it seems as though both he and Mr. Lache of Deutsche Bank are confident that Tesla Motors will at least manage to hit the lower end of targets. Getting over that hurdle will likely be a boon to Tesla stock, but a rate rise in December, as is expected from the Fed, and other market-wide conditions may do more to drive the stock’s movements than simply meeting its own goals for the fourth quarter.