How Did Wall Street Get Tesla’s Fourth-Quarter Deliveries So Wrong?

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Electric-vehicle leader

Tesla

blew away Wall Street’s fourth-quarter delivery expectations.

The plaudits are pouring in from Wall Street. “Jaw-dropping,” “supercharged,” “blowout,” and “fireworks” are all terms being bandied about by analysts describing the quarterly result. Beating expectations is always a good thing on Wall Street, but the size of Tesla’s outperformance might make investors wonder: How did Wall Street get the fourth quarter so wrong?

Analysts were predicting about 266,000 deliveries for the final quarter of 2021. Tesla (ticker: TSLA) delivered 308,600 units. The 42,600 gap is about 16% of the original estimate. That’s not even close. What’s more, Wall Street is getting worse. A year ago, analysts missed fourth-quarter 2020 deliveries by about 3%. A quarter ago, analysts missed third-quarter results by about 8%.

The “Street is slow and has a cautious bias, nobody wants to look like a fool, bullish on deliveries,” explains New Street Research analyst Pierre Ferragu. He is a Tesla bull, rating shares Buy with a Wall Street-high $1,580 price target. His fourth-quarter delivery estimate was 282,000 — one of the highest on Wall Street, but still not that close.

The “Street did react to Elon‘s email about not rushing end of Q deliveries, remained cautious and missed monster deliveries in China that went public only last week,” Ferragu added.

An email to employees from CEO Elon Musk did leak in late November that tempered some enthusiasm for year-end deliveries. Musk told employees not to rush because pushing a lot of deliveries into the final two weeks of a quarter and not delivering any cars in the first two weeks of the following quarter was inefficient, adding needless cost.

The email was one reason for conservatism, but analysts seemed to miss some things that could have benefited their clients. Tesla stock, after all, is up about 10.3% in early trading Monday, at about $1,165 a share.

S&P 500
and

Dow Jones Industrial Average
futures rose 0.5% and 0.4%, respectively.

If the Tesla gain holds, it will be the largest move on the first day of the year in Tesla history. Tesla stock, including the early 2022 move, has risen six times and fallen six times on the first trading day of the year.

It seems that investors wanting a more accurate estimate need to head to Twitter of all places. Higher, more accurate, numbers are popping up on what investors refer to as “fintwit,” short, essentially, for financial Twitter.

Future Fund Active ETF
(FFND) managing partner Gary Black ran a poll asking his followers where deliveries were likely to land. The weighted average result was about 290,000 units. It isn’t where Tesla’s numbers ended up, but a lot closer than Wall Street’s estimate.

And closest of all was an estimate on Twitter from an account that many investors, including Black, and Wall Street analysts, including Ferragu, frequently reference. @TroyTeslike published Tesla delivery estimates and has amassed more than 42,000 followers who rely on his data. Troy, as he is referred to online, estimated Tesla would deliver just under 300,000 units for the fourth quarter.

Before seasoned investors dismissed Twitter accounts, they should consider that Troy’s estimates are based on some interesting data, including vehicle identification number, or VIN, registrations he obtains, as well as industry data from around the world regarding vehicle production and registration.

His method is working. Troy has missed quarterly deliveries by less than 3% for the past three quarters. (He publishes his error rate each quarter).

Everyone on Wall Street wants an edge. A Tesla edge seems to be hiding in plain sight on Twitter. Eventually, investors will figure out where to get the best information, be it on Twitter or anywhere.

That doesn’t mean the importance of an account such as @TroyTeslike will fade away. The one-day trading benefits might fade, but better information is good for all investors. For starters, It can lead to less stock market volatility. In the long run, cultivating a diverse range of information sources improves investors’ own research efforts, beefing up their confidence and knowledge about companies and industries.

Write to Al Root at [email protected]