Tesla Inc’s delivery dip forces rethink from some analysts

Forecasts for Tesla Inc (NASDAQ:TSLA) earnings have been cut after the electric vehicle (EV) manufacturer reported a decline in deliveries for the first time in two years.

A lockdown in China which halted production and soaring costs due to inflation meant the Nasdaq-listed company only delivered 254,695 vehicles in the second quarter, down roughly 18% from the first.

However, Tesla noted that June was the strongest production month in the company’s history.

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Supply chain issues at facilities in Texas and Germany also hurt production, with Tesla saying this week that it will halt production at its Berlin and Austin plants this month to carry out upgrade work.

Ahead of the company’s earnings announcement on July 20, some analysts expect these issues will hit the company’s profits.

At the start of the year the goal was 1.5mln to 1.6mln units, with a stretch goal of 1.7mln, said analysts at Wedbush, but now the “whisper” is closer to 1.4mln, given the China issues coupled with global supply chain issues.

Analysts at JPMorgan have cut their second-quarter and full-year earnings per share estimates, as well as their target price on the stock by US$10 to $385.

“There may be a reason to believe that production and financial results could be being impacted also by company-specific execution issues at the company’s new factories in Austin and Berlin,” the JPM analysts said.

At Wedbush they expect US$15.9bn of revenue for the second quarter and earnings per share to fall to US$2.10 from US$3.22 in the first, with full-year revenue and EPS of US$80.98bn and US$11.46.

Barring no more major China zero Covid issues, Wedbush sees production in the second half climbing 40%-50% from the first, but a softer macroeconomic backdrop, is the “elephant in the room” for the company and the broader auto market, even though demand for the Tesla Model Y is still outstripping supply.

“Even with China essentially shut down for 2 months (April, May) from a demand/production perspective that Tesla is still on pace to increase deliveries roughly 50% year over year in 2022, an impressive feat that speaks to our strong long term EV demand thesis around the name,” said Wedbush, maintaining its ‘outperform’ rating and US$1,000 price target.

Susannah Street, an analyst at Hargreaves Lansdown, said: “Tesla is faced with a whack-a-mole scenario, the faster one problem is fixed, another pops up.”