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Record Tesla Sales Not Enough To Convince Wall Street Sceptics

by Paul
Tesla

Tesla this week announced second quarter sales of 95,200 vehicles, which represents a new record and impressive turnaround from just 63,000 over a sluggish first quarter. Analysts had been expecting 88,600 as a consensus estimate. Production also saw a leap to 87,048 compared to 77,100 over the first three months, leading to a 4.3% Wednesday gain for the Tesla share price, which reached $234.9. However, despite the healthy uptick, Tesla’s stock has still lost just under 30% over the year-to-date.

While there was a generally positive response from analysts covering Tesla’s share price, bears are yet to be convinced the strong Q2 figures represent a sign the company is moving towards long term sustainability.
Quoted in the Financial Times, Wedbush analyst Daniel Ives reflected:

“With massive challenges faced in the field after a 1Q debacle, Tesla got the demand story back on track as this was a major step in the right direction for Musk & Co. While the bulls will rightfully cheer this report…on the heels of this better than expected delivery number, the stock and future of Tesla all resides on the sustainable demand going forward and elusive profitability profile which continues to be a major concern on the name”.
Adam Jones of Morgan Stanley similarly added a note of caution around future demand at the end of a generally upbeat appraisal:

“With massive challenges faced in the field after a 1Q debacle, Tesla got the demand story back on track as this was a major step in the right direction for Musk & Co. While the bulls will rightfully cheer this report…on the heels of this better than expected delivery number, the stock and future of Tesla all resides on the sustainable demand going forward and elusive profitability profile which continues to be a major concern on the name”.

UBS’s Colin Langan also expressed in a note to the investment bank’s clients that his cautious view on Tesla’s share price had not been materially altered by Q2 sales coming in ahead of forecasts. He feels that the price cuts that Tesla believe are necessary for the Model 3 to have mass market appeal “will likely result in margin pressure.”

Tesla has still to release Q2 financials and analysts will focus on the details that those hold. It is expected that the company will achieve its target and forward guidance of being cash flow positive over Q2. However, any significant fall in margins, which is a worry with sales of the more profitable S and X Tesla models falling, could see Wall Street’s Tesla bears again gain the upper hand.

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