TSLA stock underperformed major indices this week, down 3.2% compared to the S&P 500 up 0.4% and Nasdaq composite up 0.6%. This was the stock's first weekly decline since early June, following four positive weeks in a row.
This was the first full trading week following Tesla’s record deliveries and production report. Although impressive, this did not translate to continued upside momentum for the stock. Tesla delivered a record 201,250 vehicles which marginally beat the Wall St. consensus of 200,900 vehicles. Despite praise from analysts like Dan Ives, this ‘beat’ may not have been enough for investors to increase their position or outlook in TSLA stock.
For us, Tesla was within ~1% of our forecast for both deliveries and production. We were not surprised to see Tesla increase their inventory after reporting multi-year low inventory at the end of Q1.
For Tesla Daily's delivery report recap: Click Here
Tesla has handled negative press since its inception, however, the coverage appeared to be relatively more negative this week. Whether it was a strange Plaid Model S fire, a new lawsuit, or a Bloomberg article highlighting China break failure rumors (which lack substantive evidence), the coverage of Tesla may have added to the downward pressure on the stock price.
Are these headlines worrisome?
First, the Plaid Model S fire. The New York Post reports the Model S was owned by Bart Smith — the head of the digital asset group at trading firm Susquehanna International. The firm manages over $600B in assets and has a number of positions on TSLA, including derivatives. A review of Susquehanna’s most recent 13F filing shows long and short positions, but due to limited reporting requirements, it can not be determined whether the firm is net long or net short TSLA stock. Bart Smith would likely not be involved in the firm's TSLA position, but the connection is interesting.
Second, the lawsuit. All automotive accidents are unfortunate, and accidents involving Autopilot are naturally going to face more scrutiny. However, in terms of liability, Tesla states, “While using Autopilot, it is your responsibility to stay alert, keep your hands on the steering wheel at all times and maintain control of your car.” Autopilot continues to improve and was involved in ~79% fewer accidents (one accident for every 4.19 million miles) than when Autopilot and active safety features were not engaged (one accident for every 0.98 million miles).
Third, perception in China. Tesla has started tackling false narratives surrounding their brand. Both Chinese media outlets and TikTok influencers have apologized for spreading rumors about break failures. Tesla has also reached out to government officials in China to prevent rumors from spreading.
While the significance of an individual story may not have a profound effect on the company, the culmination of negative headlines may influence the public’s perception. Therefore, the resulting defensive actions by Tesla are warranted to prevent tarnishing of the brand. Within China, despite the headlines, The Ministry of Commerce and the government of Shanghai reiterated their support for Tesla as a promising place for growth.
Two weeks ago, we mentioned Tesla raised the prices on the Model Y in the United States. Late this week, Tesla raised prices for the Model S and Model X. The price increase is a significant $5,000 bump to the Long Range (LR) version of each vehicle. The Model S LR increased from $79,990 to $84,990 while the Model X LR increased from $89,990 to $94,990. It is unclear if these price hikes are related to greater demand or if supply chain price pressures are responsible. Investors will look forward to Tesla's Q2 earnings report to better understand Tesla's numerous price changes throughout the quarter.
What did you think was the biggest news of the week? What are you watching for next week? Let us know on Twitter, @teslapodcast.
Disclosure: Rob Maurer and Brennan Ertl are long TSLA stock and derivatives.