Tesla (TSLA) Q2 2019 production and delivery report: What Wall St analysts are saying

Tesla stock (NASDAQ: TSLA) is surging on Wednesday on the heels of the release of the company’s Q2 2019 delivery and production report. With deliveries and production far exceeding forecasts from Wall St, several analysts have weighed in on the electric car maker’s record-setting quarter, which saw Tesla producing a total of 87,048 vehicles, comprised of 14,517 Model S and Model X, and 72,531 Model 3; and delivering a total of 95,200 cars, comprised of 17,650 Model S and X and 77,550 Model 3. 

Morgan Stanley analyst Adam Jonas, who quoted a “worst case” $10 price target on TSLA stock back in May, admitted that despite the number of leaked Elon Musk emails and reports pointing to a record quarter, Tesla’s over 95,000 vehicle deliveries were unexpected. “We had not spoken to any investors that expected deliveries to be this high. We expect the stock to squeeze and then fade on this news,” Jonas wrote in a note. Nevertheless, the analyst still pointed out that continued concerns about “sustainable” demand and competition in regions such as China would likely weigh down the stock. 

“It isn’t clear how much of the beat was due to underlying demand, more attractive pricing, sales bonuses, or pull-forward from (the) third quarter after tax credit reduction. Based on year-to-date deliveries, if Tesla achieves 95,000 units in the third and fourth quarters, it would take them to about 350,000 units for 2019, just shy of guidance of 360,000-400,000 units,” Jonas, who currently has an Equalweight rating on Tesla stock with a price target of $230 per share, noted. 

Nomura analyst Christopher Eberle, who has a Neutral rating and a $300 price target for TSLA, also weighed in on the electric car maker’s Q2 results. “Tesla noted that orders generated during the quarter exceeded deliveries, implying the company enters 3Q19 with an increase in its backlog,” he stated. Eberle remained cautious, adjusting his third-quarter delivery estimate by just 5% to 80,000 units. 

Joseph Osha of JMP Securities, who maintains a Market Perform rating and a $347 price target on the electric car maker, stated that he expects to see Tesla’s cash balance rise to $2.67 billion in the second quarter. Osha also argued that the second quarter results prove that the company’s lower-than-expected first quarter figures were not an indicator of real end demand in the United States. “Overall, the message we hear is that Tesla’s weak first quarter was not, in fact, an indicator of real end demand in the U.S. market. The combination of U.S. demand and export volume appears sufficient to support an outlook of ~380,000 deliveries this year, and our outlook for the second half of the year remains unchanged,” the analyst stated. 

Wedbush Securities analyst Daniel Ives, who has a Neutral rating and a $230 price target on Tesla stock, noted that the company’s strong Q2 delivery numbers were “a clear step in the right direction,” which could help restore the credibility of Elon Musk’s story. Ives was among the most vocal critics of Tesla following its first-quarter results, at one point calling Q1’s results “one of (the) top debacles we have ever seen.” Ives also mocked Tesla for maintaining its optimistic forecast for the rest of 2019, stating that “Musk & Co., in an episode out of the Twilight Zone, act as if demand and profitability will magically return to the Tesla story.” Prior to the release of Tesla’s Q2 2019 production and delivery report, Ives expected the company to deliver 84,001 vehicles. 

Goldman Sachs analyst David Tamberrino, one of TSLA’s most ardent critics who currently has a Sell rating and a $158 price target on the electric car maker, stood by his pessimistic outlook on the company. Tamberrino stated that “second-quarter deliveries and order flow were helped by the release of Tesla’s Standard Model 3 variant, right-hand drive Model 3s and the upcoming phasing out of U.S. tax incentives.” The Goldman Sachs analyst also expects a “sequential” stepdown in demand in the third quarter, on account of Tesla’s decision to offer lower-priced Model 3 variants and a leasing option, which he notes could have negative impacts on the vehicle’s gross margins and FCF generation. Interestingly, Tamberrino expected Tesla to deliver 91,124 vehicles in the second quarter (one of the highest on Wall Street, exceeding even that of Tesla bull and Baird analyst Ben Kallo), which is quite ironic considering his constant pessimistic stance against the electric car maker. Goldman Sachs’ investment bank is also among TSLA’s prominent shareholders. 

As of writing, Tesla stock is trading +6.13% at $238.31 per share.  

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.