A loss of $2.92 per share was worse than the shortfall of $2.31 Wall Street expected. Beyond the bottom line, delays in Model 3 production are affecting investor psychology. Musk said on the earnings call that Tesla will produce 5,000 Model 3s per week by the end of the first quarter, a benchmark that the company previously expected to meet in the fourth quarter of this year. Longer term, Tesla expects Model 3 production to hit 10,000 units per week.
Shares fell after-hours Wednesday and were down 6.7% to $299.67 on Thursday late morning, though the stock is still up about 40% this year.
Here's what Wall Street is saying.
Robert Cihra, Guggenheim Securities LLC
A 1-quarter delay seems small compared to the type of breakthrough potential we expect Model 3 to deliver over the next 3yrs, and with strong initial orders we continue to see Model 3 supply set up to chase demand for the next 2-3yrs. We trim our estimates but continue to forecast Model 3 volumes ultimately driving meaningful revenue, margin and FCF leverage off the high fixed-cost structure Tesla has been building.
Jeffrey Osborne, Cowen & Co.
Elon Musk needs to stop over promising and under delivering and the Board should rein in a CEO who publicly shares his aspirational goals that have rarely been hit but investors have historically always given him the benefit of the doubt on. This will become more paramount as the company aims to be more reliant on the less forgiving debt markets in the future.
James Albertine Consumer Edge Rearch
We are optimistic, we think the Model 3 is a game changer in its segment but (TSLA - Get Report) needs to do what it says it can do. We understand scaling from 100 units per week to 1,000 units per week presents different challenges vs. scaling from 1,000 to 5,000 (it's not linear and should get easier to 5,000, in our view) but in our opinion there is not as much cushion in shares now for subsequent delays.
Efraim Levy, CFRA Research
In our initial thoughts, after steady positive news for much of the year, the shares and news flow have backtracked recently, but we don't think TSLA has derailed; instead it is just delayed. Q3 was not a make or break period, in our view. Still, we see greater pressure on TSLA to meet its one-quarter delayed weekly run-rate of 5,000 Model 3 vehicles produced per week by the end of Q1.
Colin Rusch, Oppenheimer
With 4Q17 [gross margins] guided lower Q/Q on slower than expected Model 3 ramp, we believe TSLA has a challenging road ahead to reach projected runrates and margins given recent price declines and complexity of automation in the Model 3 manufacturing process. We expect bulls to focus on [advanced driver assistance system] progress and look toward 1Q18 production, the benchmark for Model 3.
George Galliers Evercore ISI
In line, $307
While behind, if Tesla do hit their Q1 target of c5k units a week by the end of Q1 then we see Model 3 production of c293k units as feasible. In our own model, we now assume that c5k units is not reached until the middle of Q2, resulting in production of c268k units.
Tony Hughes, Moody's Investor Service
Judged as a car company, Tesla is currently producing a tiny volume of cars in unpopular segments with an uncompetitive unit cost for the mass market. Residual prices and sales data clearly show that American consumers want to drive trucks and large SUVs powered by cheap gasoline, not small electric sedans. ... Tesla needs to quickly learn how to produce cars cheaply or face massive sunk costs in its nascent energy storage business."
Brad Erickson, KeyBanc Capital Markets
Sector Weight, NA
Given the stock's retreat as Model 3 skepticism has grown over the recent negative news flow, combined with the lowered 4Q commentary around expected run rates, we find the stock's after-hours behavior as interestingly and potentially reflective of bulls' waning conviction in TSLA to maintain its purported lead vs. future competing ramps. We continue to believe significant earnings potential for 2020 remains in the event Model 3 production improves; however, given the lack of growth at the high-end and the almost certain execution missteps likely with the Model 3 ramp in process, we remain SW.
Romit Shah, Nomura|Instinet
We believe that this shift actually right sizes production guidance closer to what the Street was forecasting heading into the print, and that reaching 5k/week by end March 2018 would be viewed positively by investors. We remain positive about the long-term prospects for Tesla, given the company's unprecedented growth profile, battery cost leadership, and elite brand recognition.
Colin Langan, UBS
We see additional capital needs to deliver [Tesla's crossover SUV] Model Y by late 2019 (~$3-6bn Gigafactory/assembly plant) in addition to the cash needed to expand its dealerships & charging stations . We remain cautious on EPS & cash burn, and see rising risks from increased competition (most luxury OEMs are launching EVs in 2018-20).
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