Tesla’s Mixed Q3 Results, Stock Reaction, and JPMorgan’s Cautionary Outlook Amid Industry Challenges
Tesla (TSLA) delivered 462,890 vehicles in the third quarter of 2024, marking a 6% increase year over year.
While this exceeded Wall Street’s forecast of 462,000, Tesla’s stock dropped 3.5% in Wednesday trading, closing at $249.02. The broader market remained mostly unchanged, with the S&P 500 flat and the Dow Jones Industrial Average rising by just 0.1%.
Stock Reaction and Whisper Numbers
The stock’s decline, despite the strong delivery numbers, was not entirely surprising. Tesla shares had surged 23% in the month leading up to the delivery report, creating high expectations. However, the actual delivery numbers fell short of the "whisper number" of 470,000, leading to the pullback in stock price. Despite the drop, Tesla has delivered 1.29 million vehicles so far in 2024, which is down 2% compared to the same period in 2023. To match last year’s total of 1.81 million vehicles, Tesla will need to deliver approximately 515,000 units in Q4, a target that will be closely watched by investors.
JPMorgan’s Caution on Tesla
JPMorgan (JPM) analysts have taken a more cautious stance on Tesla, assigning the company an Underperform rating. Although Q3 deliveries were in line with recent Wall Street expectations, they fell significantly short of earlier projections. In October 2022, analysts predicted that Tesla would deliver 651,000 vehicles, a 29% difference from 2024’s results.
JPMorgan also lowered its full-year earnings per share estimate for Tesla from $0.64 to $0.60. A potential miss in 2024 deliveries could emphasize the growing disconnect between Tesla’s stock price and its actual performance. Analysts argue that a delivery miss may not cause a sudden stock collapse but could lead to more investors scrutinizing the widening gap between the company’s valuation and fundamentals.
Challenges in Self-Driving and Competition
Tesla’s ambitious goal of mainstreaming self-driving vehicles continues to face hurdles. Competitors like Waymo, owned by Alphabet (GOOG), and GM’s (GM) Cruise have also encountered setbacks, including accidents and recalls, as they attempt to integrate autonomous taxis into urban traffic. Tesla’s robotaxi project, expected to take center stage at the upcoming Robotaxi Day event on October 10, will be a critical moment for the company to prove its leadership in autonomous driving technology.
Production and Inventory Management
Tesla’s production in Q3 2024 totaled just under 470,000 vehicles, about 7,000 more than it delivered. While this production surplus isn’t alarming, it adds to an inventory of roughly 125,000 vehicles, equivalent to 25 days’ worth of sales. This is relatively low compared to traditional automakers, which prefer to maintain around 60 days of inventory. The industry average currently sits at about 77 days.
Tesla’s Stock and Cybertruck Recall
Despite challenges, Tesla’s stock rose 3.9% on Friday, closing at $250.08, rebounding from a three-day losing streak following its Q3 delivery report. This increase occurred despite another recall affecting 27,185 Cybertrucks, which involved fixing an image lag in the rearview camera. Tesla managed to resolve the issue with an over-the-air software update, though regulators still classify such fixes as recalls.
The Cybertruck has faced five recalls in total, reflecting the difficulties Tesla has experienced in producing its unique stainless steel vehicle, which Elon Musk has described as “insanely difficult” to manufacture.
Upcoming Catalysts: Robotaxi Day and Q3 Earnings
Investors are now turning their attention to Tesla’s Robotaxi Day on October 10, where the company is expected to showcase its AI-driven self-driving technology and provide an update on its robotaxi plans. The event could serve as a pivotal moment for Tesla to reaffirm its position as an innovation leader in the autonomous vehicle space.
Additionally, Tesla’s Q3 earnings report will be closely monitored, with Wall Street projecting a rise in operating profit margins to 8% from 6% in Q2. Stable margins will be crucial in showing that Tesla’s growth is not solely reliant on price cuts.
Tesla’s Volatile Stock Performance
Despite recent fluctuations, Tesla’s stock remains up 73% from its April 2024 lows, though it has fallen about 2% year-to-date. As the competitive landscape in the electric vehicle market intensifies, and Tesla’s fundamentals come under greater scrutiny, the company’s ability to navigate these challenges will determine its future growth trajectory.
In the coming months, Tesla will face a critical period as it aims to maintain its market dominance while proving its ability to innovate and adapt in an increasingly competitive industry.
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