There’s no way around it, Tesla’s (NASDAQ:TSLA) Q1 deliveries were pretty awful. Expectations had already been reset lower, but even that low bar was missed as the company delivered 386,810 vehicles in the quarter, way below the Street’s forecast of ~443,000.
“Not good,” says understated Canaccord analyst George Gianarikas. “That delivery number was worse than we thought. It was actually less than 400k – which we would have assumed was a low probability outcome.”
The question, though, is what was the awful miss all about? Those keeping a tab on proceedings can point to several explanations, from the much-publicised soft EV demand backdrop to CEO Elon Musk becoming an increasingly controversial figure, thereby tainting the brand.
While Gianarikas argues “some of those factors are likely partially responsible,” he has a rather different take on the matter, continuing to believe that the quarter’s issues were “somewhat demand-related but mostly supply-related.”
As evidence, Gianarikas quotes from Tesla’s press release, which states that the “decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.”
One theory Gianarikas proposes is that the company began to “ramp production” of the Model 3 in Fremont, the Cybertruck in Austin, and the Model Y in Berlin during the final weeks of the quarter. This resulted in a surplus of vehicles that couldn’t be delivered promptly given the late-quarter production boost (Tesla produced 433,371 vehicles in Q1, amounting to its biggest gap ever between production and deliveries). Gianarikas also notes that Model 3s in the US currently have delivery lead times extending into June.
While Gianarikas thinks that those saying the weakness is mostly a demand issue have a credible case, as noted above, he begs to differ, believing it is mostly a supply issue although he implores investors to “choose your own adventure.”
“Clearly, demand has not been stellar since the start of the year,” the analyst sums up. “But, again, if the company were clear of supply issues and were able to sell as many updated Model 3s as it could in the US and Cybertrucks globally, we think the quarter would have looked much, much different.”
Accordingly, Gianarikas rates TSLA shares a Buy, backed by a $234 price target. This implies the stock will surge 35% over the one-year timeframe. (To watch Gianarikas’s track record, click here)
On Wall Street, the Canaccord analyst is joined by 7 other TSLA bulls, but with an additional 19 Holds and 7 Sells, the stock claims a Hold (i.e. Neutral) consensus rating. Going by the $196.72 average price target, investors will be sitting on returns of ~14% a year from now. (See Tesla stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
