The electric-vehicle maker is due to report first-quarter delivery numbers this week and investors are bracing for bad news.
Tesla had guided for 500,000 vehicle deliveries in 2020, but its ability to meet that target looks tenuous at best in the face of supply-chain disruptions, business closures and weakening demand.
Tesla shares at last check rose 4.9% to $526.90.
Tesla typically reports delivery figures within the first few days of a quarter. Here’s what to watch.
1. The Total Damage
As of Tuesday, analysts polled by FactSet were expecting 92,000 deliveries in the first quarter, but that figure may prove too high. Several analysts have slashed their delivery targets for Tesla in recent days, estimating that the pandemic could push that number down into the mid-80,000s or lower. Deliveries made in the last two weeks of the quarter are essentially out the window, and those account for a “disproportionate share of its quarter’s units,” wrote Morgan Stanley’s Adam Jonas. A big miss on first-quarter deliveries also places its target of 500,000 deliveries for full-year 2020 further out of reach. Investors should watch for revised guidance or other commentary on Tesla’s delivery outlook for the rest of the year.
2. Factory Impact
The pandemic has hit automakers hard, and Tesla likely won’t be spared. For both production and sales, Tesla investors had set their sights on China as a promising market - along with Europe, where it’s seeking to build another factory. But the coronavirus stymied those hopes, at least for now. Tesla’s newly opened Shanghai factory temporarily shut down during the outbreak, as did its retail stores across the country. It also sent workers home from Germany. Closer to home, Tesla’s main factory in Fremont, Calif., is shut down amid an Alameda-County-wide shelter-in-place order that closed all but essential services. With Bay Area counties extending the order until May, Tesla’s production will likely stay at a virtual standstill for several more weeks. Expect more commentary from Tesla on what the closures mean.
3. Demand Outlook
Tesla’s troubles, like those of so many other companies right now, span both production and sales. Store closures and economic disruption for millions of people mean that “Tesla, like every other auto manufacturer, is seeing demand softness globally over the last month as consumers remain in a virtual lockdown with health and food/essentials now the priority over a Model 3 purchase,” wrote Wedbush analyst Dan Ives in a recent note. With the virus still spreading in the U.S. and elsewhere, it’s not clear when robust demand for Tesla vehicles will return - but it’s reasonable to assume the first half of the year will be rough, Ives added. Looking ahead, Wall Street may overlook a rough first half if the company can execute a steep ramp-up in the second half. But it's too soon for anyone to issue any solid predictions on precisely when things will revert to the status quo.