Tesla Deliveries Should Hit Another Record In Q2, So Why The Wave Of TSLA Stock Downgrades?

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Tesla (TSLA) is expected to report global second-quarter delivery data this weekend, giving investors an idea of how the company’s policy of price cuts and discounts have done to woo consumers to the brand. Meanwhile, Tesla stock received four downgrades ahead of the release, with analysts expecting vehicle price to continue weighing on gross margins.

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Tesla is slated to announce record deliveries for the second quarter, probably on Sunday, July 2. Wall Street predicts Tesla deliveries growing 74% to 445,000, according to FactSet. The big year-over-year increase reflects easy comparisons to Q2 2022, when Tesla’s Shanghai plant was shut down for Covid lockdowns for several weeks. Also, the Berlin and Austin, Texas, plants were slowly ramping up output.

Analysts Make Predictions

Late Monday, Piper Sandler estimated Tesla Q2 deliveries may total 469,000. However, analyst Alex Potter wrote the firm’s estimate “may be a tad high.”

“Regardless of the outcome this weekend, we wouldn’t be surprised to see profit-taking in the coming months, given the stock’s recent outperformance, as well as the likelihood of operational hiccups,” Potter wrote.

“The outlook for gross margin will probably be even more important than production,” he added. “Prices have been stable, but price cuts in Q3, if any, could reignite concern re: margins.”

Meanwhile, Deutsche Bank raised its TSLA stock price target to 230 from 200 on Monday, maintaining a buy rating on the shares.

The firm revised its estimates for Q2 deliveries to 448,000 units, above analyst consensus. Deutsche Bank predicts about 168,000 vehicles sold in North America, 153,000 in China, 87,000 in Europe and 23,000 in the rest of the world.


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Guggenheim also raised the firm’s price target on Tesla stock Monday to 112, up from 105, keeping a sell rating. Guggenheim forecasts 446,000 units delivered in Q2. The firm’s view is that end-of-quarter vehicle incentives and discounting could boost sales.

The two Tesla stock price hikes come as the global EV giant has been handed four downgrades, including revisions from Goldman Sachs and Morgan Stanley, over the last six days.

Tesla stock advanced 3.7% to 250.04 Tuesday during market trade. On Monday, shares tumbled 6.1% to 241.05, moving toward the 21-day line in above-average volume. Last week, TSLA fell 1.5%. Shares are up around 20% in June.

Tesla Tries To Move Inventory

Tesla has been working to move inventory before the end of the quarter, offering discounts and deals running through the end of June.

In mid-June, the EV giant began offering customers who order a Model 3 between June 14-30 three-months of unlimited free supercharging, according to the company’s website.

In China, Tesla once again be offering insurance subsidies on Model 3 vehicles. Costumers in China who buy and complete delivery of an inventory Model 3 rear-wheel drive vehicle before the end of June will be eligible for an insurance subsidy of about $1,120, according CnEVPost.

Tesla also got all Model 3 vehicle trims eligible for the full $7,500 tax credit under the Inflation Reduction Act (IRA) in early June. Tesla’s Model 3 and Model Y vehicles all qualify for the $7,500 tax credit.

Tesla Stock: Sky High Expectations For 2023 Deliveries

Analysts predict Tesla deliveries in 2023 to come in around 1.82 million, up from 1.313 million in 2022.

In April, Tesla Chief Executive Elon Musk told analysts Tesla is “comfortable” with its 2023 production target of 1.8 million. However, he downplayed the 2 million production number he used at the end of the fourth quarter.

“These are volatile times,” Musk said. “From a production standpoint, if things go well, we’ve got a shot at 2 million vehicles here. But that is the upside case.”

Tesla has not given a 2023 delivery target.

In Q1, Tesla deliveries rose 36% vs. a year earlier to 422,875. That was 4% above the prior record of 405,278 in Q4. However, Wall Street expected around 431,000 Tesla deliveries. Q1 deliveries included 412,180 Model 3 and Y vehicles, along with 10,695 Model S and X luxury vehicles. Production once again exceeded deliveries, at 440,808. Model S and X production was at 19,437.

The Tesla Model Y was the world’s bestselling vehicle of any type in Q1, according to data compiled by industry analyst JATO Dynamics for Motor1. The Model Y had 267,200 sales in Q1, according to data from 53 markets and estimates for the rest of the world.

Tesla has just four models, with the bulk of its sales the Model Y crossover SUV. However, the Cybertruck is expected later this year. There’s also the specter of a revamped Model 3, but it’s unclear what the changes will be.


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Tesla Stock

Tesla shares are up 96% in 2023 and 137% from their Jan. 6 low. TSLA is down substantially from the all-time high 414.50 it hit in November 2021.

Tesla is well extended past a 207.79 buy point from what’s either a cup or a double-bottom base. It’s possible TSLA is building handle on a consolidation going back to late September. However, Tesla could use a handle with some length and depth.

Shares are about 23% above their 200-day line, even with the recent pullback.

Analysts continue to worry about price cuts weighing on gross margins, and TSLA valuation.

On April 19, Tesla reported a big first-quarter earnings decline while revenue missed views. Profit margins for the global EV giant also fell below 20% as the company executed an aggressive price-slashing strategy in the first part of 2023. Tesla reported revenue increasing 24% to $23.33 billion with earnings of 85 cents a share, a 20% decline compared with 2022.

The EV company’s total gross profit came in at $4.5 billion, with Tesla’s profit gross margin at 19.3%, down from 23.8% in the fourth quarter and 29.1% a year earlier.

Auto gross margins excluding regulatory credits and leases skidded to 18.3% from 23.8% in the fourth quarter. That remains below the 20% gross margin “floor” Tesla previously targeted.

Tesla stock ranks third in IBD’s automaker industry group. It has a 98 Composite Rating out of 99. Tesla has a 89 Relative Strength Rating and its EPS Rating is 93 out of 99.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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