Tesla Inc. (TSLA) - Get Tesla Inc Report shares traded sharply lower after the clean-energy carmarker published weaker-than-expected first quarter deliveries and investors eyed a hearing in Federal court over founder and CEO Elon Musk's contempt battle with the U.S. Securities and Exchange Commission.
Tesla said it delivered just under 51,000 if its flagship Model 3 sedan over the three months ending in March, well shy of the 58,900 consensus compiled by Refinitiv. Overall shipments, which include Model S and Model X cars, fell 31% from the previous quarter to 63,000, Tesla said, even as the group stuck to its forecast of a 2019 delivery range of between 360,000 and 400,000 total vehicles.
While Tesla noted that over 10,000 vehicles were in transit at quarter's end, and half of all vehicles delivered in the quarter occurred during the last 10 days, concerns regarding potentially flagging consumer demand will surely be front and center with investors," said Canaccord Genuity analyst Jed Dorsheimer, who lowest his price target by 13% to $391 per share. "While we were disappointed in the shortfall of deliveries in Q1 versus expectations, we continue to believe that the new lower-priced Model 3 variant will spur additional demand. Importantly, the company cited roughly two weeks of inventory in North America which may help temper concerns of an inventory build."
Tesla shares fell 7.4% to $270.12 in trading Thursday.
"Due to a massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak delivery levels, and many challenges encountered for the first time, we had only delivered half of the entire quarter's numbers by March 21, ten days before end of quarter," Tesla said in a statement. "This caused a large number of vehicle deliveries to shift to the second quarter. At the end of the first quarter, approximately 10,600 vehicles were in transit to customers globally."
"Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted," the company added. "Even so, we ended the quarter with sufficient cash on hand. Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what we were able to deliver in Q1."
Last month, Musk said a move to offer a cut-down version of its flagship Model 3 sedan will likely result in a first quarter loss, only weeks after telling investors he would turn the clean energy carmaker into the black.
Tesla said it will offer a $35,000 Model 3 with a reduced driving range of 220 kilometers (132 miles) and a slimmed-down interior. Increasing price points will boost both the range and the top-end speed of the Model 3, the company said, while buyers will be able to receive the new car withing two to four weeks.
"Given that there was just a lot happening in Q1, and we're taking a lot of one-time charges and there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable in Q1," Musk told journalists on a conference call. "But we do think that profitability in Q2 is likely."
Separately, Musk's battle with the SEC continues, with a hearing set for this week. The agency is asking Federal Judge Alison Nathan to hold Musk in contempt of court over tweets posted in late February that misstated, and then clarified, production targets for 2019.
Attorneys for the SEC charged that the tweets demonstrate that Musk's tweets aren't being reviewed by attorneys, as was mandated as part of Musk's earlier settlement with the agency.
In their own legal filings in late March, attorneys for Musk countered that "the SEC's position is wrong at virtually every level." Oral arguments are scheduled for Thursday afternoon E.T., and if Musk is ultimately found in contempt, potential consequences could include more fines for the billionaire or even a trial that forced him to relinquish his roles at Tesla.
--TheStreet's Annie Gaus contributed to this report.