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Go Beyond Tesla's Delivery Number -- Here's the Number Investors Must Watch

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Looking beyond Tesla's (TSLA) - Get Tesla Inc. Report headline delivery number, which beat Wall Street expectations, there was an implication investors in the electric vehicle innovator are especially sensitive to. 

The implied gross margin from the delivery number isn't looking so good. 

Before we break that down, here were the delivery results:

Delivery Results

Tesla delivered 97,000 vehicles in the third quarter of 2019, beating Wall Street expectations of 96,800, but missing its own guidance of 100,000.

The company's full year 2019 guidance of between 360,000 and 400,000 is now in question, as analysts out with notes Thursday morning now see a much reduced likelihood Tesla hits its target. Tesla would now have to deliver 105,000 cars in the fourth quarter to meet the low end of its full year guidance. Analysts, whose estimates on Tesla often lag those of management, were only looking for 357,000 deliveries for the year. 

Even though Tesla was not expected to meet guidance for the third quarter and it did beat analysts expectations, the stock fell 4.57% to $232.01 a share Thursday. "Bulls wanted more," wrote Wedbush Securities analyst Dan Ives in an note. Many analysts have framed Tesla as a "show me story," meaning that the burden of results proof is so high that even a marginal beat of expectations is not always enough to see the stock higher. 

Gross Margins

Here's the number inside the number. Tesla sold more of the lowered priced ($35,000) Model 3's than expected, at 79,600, versus Wall Street expectations of 78,500. The rest of the sales were the higher priced Model S's and X's, which go for $75,000 and $81,000 respectively. The higher-priced deliveries did not beat expectations. 

With Tesla selling a heavier mix of the lower gross margin Model 3's, its gross margins will be hit. Tesla's gross margin is a key profitability metric investors constantly monitor, as it allows for more flexibility for operating and net profits. 

The lower gross margin and the fact that Model S and X sales grew at negative rates year-over-year makes one analyst wonder about Tesla's path to consistent profitability. "Given the decelerating revenue growth in 2019 and ongoing gross margin pressure, we expect net losses to exceed the losses in 2018, placing more pressure on what we see as an already expensive valuation," Needham & Co. analyst Rajvindra Gill wrote in a note. Tesla's 2018 adjusted net loss was $1.33 per share. Analysts polled by FactSet do currently expect 2019 loss per share to be $4.20. 

Earnings are on October 23, when investors will see Tesla's gross margin and net profit result. 

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