Tesla Deliveries Set a Record. Shares Should Fall.

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Tesla

quarterly deliveries set a new record, but the number probably won’t be good enough to support shares for the next couple of weeks.

On Sunday,

Tesla

(ticker: TSLA) reported delivery figures for the third quarter. It delivered 343,830 cars and produced 365,923 cars.

Wall Street was looking for a delivery number of about 358,000, according to Bloomberg.

It’s a miss relative to expectations. Still, the third quarter number is a big jump from the 254,695 deliveries in the second quarter of 2022, when Covid-19 lockdowns impacted production and sales of the entire Chinese auto industry.

(

Tesla
’s
most productive manufacturing plant is in Shanghai.)

The third quarter result is also a new record. Until now, Tesla’s quarterly delivery record was 310,058 vehicles delivered in the first quarter of 2022.

Strong delivery results tend to mean good things for Tesla stock. In eight of the past 11 quarters where Tesla deliveries beat analyst expectations, the company’s shares outperformed the market over the span between delivery results and Tesla’s quarterly earnings report.

The third quarter, number, however is likely to disappoint investors—a least in the short therm.

Bears will focus on the miss while bulls will highlight the higher production figure. The 22,093 spread between sales and production is large for Tesla. The company doesn’t have traditional car dealerships, so typically there is very little difference between what’s produced and what gets sold.

Some concern, however, grew late in the quarter that some of Tesla’s production out of Shanghai was in transit on its way to Europe. Vehicles in transit don’t count as deliveries until they are in the hands of customers. The transit problem was noted by both New Street’s Pierre Ferragu and

Piper Sandler
’s
Alexander Potter in research reports previewing deliveries.

Ferragu actually cut his delivery estimate from 381,000 to 360,000 to account for vehicles in transit. Still, the roughly 344,000 deliveries isn’t 360,000 and Tesla’s quarter looks to be 15,000 to 20,000 units light.

Bulls also will focus on the delivery spread and add the units in transit to their fourth quarter estimates.

Investors will want an update about production rates as well as vehicles when Tesla reports third quarter numbers after the close of trading on Oct. 19.

This past delivery cycle, Tesla stock rose about 9% between the July delivery report and the third quarter earnings report. The

S&P 500
rose about 4% over the same span. And Tesla stock is up about 17% since its July delivery result. The S&P is down about 6% over that span.

In recent weeks, investors have appeared relieved that Covid-19 issues in China have faded. They were also impressed by better than expected second quarter numbers.

Investors still have their concerns related to inflation and rising interest rates. Coming into Monday trading, Tesla stock is down about 25% year to date while the

S&P 500
and

Nasdaq Composite
are off about 25% and 32%, respectively.

Write to Al Root at [email protected]