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Tesla Triumphs but Questions Remain

Stocks in this article: TSLA GM

NEW YORK ( TheStreet) -- Let's start with the two main unanswered questions regarding Tesla's near-term future: Demand and profitability. These are two questions Tesla has got to answer on its quarterly earnings call this week.

1. Demand: I walked into a Tesla store this weekend and asked several times how long the wait is for a car, for someone ordering a Tesla right now. I was told 30 days, which is shockingly quick, compared to what we were told only one to two months ago.

There are only three things you have to stick to if you want delivery in 30 days:

A. the battery must be the 60 or 85 kWh version -- not the 40 kWh;

B. you must order the $1,500 air suspension option;

C. you can't have the new red color.

Basically, those three options (40 kWh battery, regular non-air suspension and the new red color) go into production in April.

There are multiple ways to interpret this 30-day lead time. Let's start with the worrisome interpretation.

It is said that Tesla had over 19,000 reservations (deposits) for the Model S in the US. Approximately 5,000 have been delivered by now. That yields us 14,000 net.

Furthermore, the consensus is that Tesla is now building 400 cars per week. That's approximately 1,600 cars per month, 5,000 cars per quarter and 20,000 cars per year.

With 14,000 U.S. net reservations for the Model S remaining, how can the wait for the car be only 30 days? They're only building 1,600 cars per month. The wait should be almost 11 months (14,000 divided by 1,600).

Clearly some of the cars are red, 40 kWh battery and don't have the air suspension -- but 90% of the order stock? Seriously? That seems like a lot. Seems very unlikely.

A Tesla bear would say that thousands of people must have asked for their deposits back. Basically, the backlog has been significantly reduced. If true, this would be a horrendous bearish sign, and it could cause the stock to collapse upon the earnings report.

Another explanation would be that those who have deposits have chosen to "defer" their deliveries until some time in the future, even though they could have taken delivery right now in February. This may be true to some extent, but it would be surprising if it explained the whole gap.

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