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Goldman Sachs Expects Tesla to miss Model 3 Deliveries Again

Goldman Sachs said it expects Tesla to miss its guidance for Model S and Model X vehicle deliveries. It will also fall well below consensus estimates for its Model 3 deliveries, in the 1st quarter of 2018.

“We believe the company is tracking below its 2018 Model S/X guidance of approximately 100k units (an implied 25,000 per quarter),” David Tamberrino, Goldman Sachs analyst, wrote in a note to clients.

“Further, while monthly Model 3 deliveries are showing sequential improvement, we estimate that they will fall well short of consensus expectations.”

A Tesla Model S parked in front of a Tesla dealership
Goldman Sachs expects Tesla to miss its guidance for Model S and Model X vehicle deliveries.

He also said that production and deliveries of the Model 3 will continue to ramp up. However, more slowly than Tesla CEO Elon Musk has previously promised.

“We maintain that the Model 3 ramp will be below company expectations (albeit improved from Model S/X ramps), and note that incremental production issues may continue to appear as the company looks to ramp mass manufacturing along the chassis, body, and final assembly lines,” he wrote.

The analyst reaffirmed his 1st-quarter Model 3 delivery estimate of 7,000 against the Wall Street average of 13,800 after his analysis of vehicle registration data.

Tamberrino kept his rating on Tesla stock at a sell. He placed a price target of $205, which implies a 36% downside. Its stock has not traded in $205 territory since December 2016.

Additionally, Tesla shares extended its losses to a 5th straight session on Monday, sending March losses to more than 7%. It would be Tesla’s steepest monthly loss since July.

Tesla shares closed lower at $313.56, dropping 2.42% on Monday session. Its shares rose 0.03% to $313.66 in after-hours trading.

In the past 12 months, Tesla shares have gained 21%, compared with 14% gains for the S&P 500 index, and 18% gains for the Dow Jones Industrial Average.

Tesla’s Struggle

Though Tamberrino admitted that the 1st quarter was usually “seasonally softer,” he also noted the Tesla’s weak 4th-quarter 2017 production. The company has struggled to create enough batteries for the Model 3. It has even made drastic measures by making batteries by hand to deal with its production bottlenecks, according to sources.

Moreover, this isn’t the first time Goldman Sachs expressed doubts over Tesla and its assurances. Tamberrino wrote back in November that short-term gains from the newly unveiled Tesla Semi would be dragged down by the bigger and more long-term issues surrounding the Model 3.

Tamberino also mentioned the company’s missed production targets to the fact it rushed to sell its inventory in the 2nd half of 2017. Tesla offered showroom discounts and lowering interest rates, according to industry trade pub Electrek.

In January, Tesla reported it produced 2,425 Model 3 cars in the 4th quarter. However, it delivered 1,550, falling short on Wall Street expectations. Tesla pushed back its target of producing 5,000 Model 3 sedans per week to the end of 2nd quarter.

Increased competition in the electric car industry is unclear from Goldman’s view as to what degree it will harm Tesla. Other major competitors are Ford, General Motors, Toyota, BMW, and others.

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