Electric vehicle market leader Tesla will report third-quarter unit sales on Monday. Investors should prepare for a bit of chaos.
Wall Street estimates are all over the place. Analysts were forecasting 473,000 units a few weeks ago, according to FactSet. Now that number is 461,000. The company’s consensus estimate is around 455,000 units. This includes estimates from 25 major brokers.
Most of the time, Tesla’s estimates fall slightly at the end of a quarter, typically by 1% to 2%. Estimates for this quarter differ by approximately 3% from forecasts at the beginning of the quarter. Additionally, the range of estimates is wider than normal. The lowest estimate on FactSet is 438,000 units. The maximum value is 511,000. The difference of 73,000 units is about twice as large as in the second quarter.
If you leave out the top and bottom numbers, like the old figure skating rating, the range appears to be between 440,000 and 485,000 units. Tesla delivered around 466,000 vehicles in the second quarter.
Tesla’s third quarter results will either be slightly down, flat, or slightly up compared to the second quarter. According to many analysts, the reason for the lack of or low growth is planned plant shutdowns to modernize the plants. Tesla is about to deliver a revised Model 3 in Europe and China.
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Still, investors won’t like a low number. With interest rates rising and competition for electric vehicles increasing, this will raise questions about the demand for electric vehicles. Investors will also pay attention to production. In the second quarter, Tesla produced almost 480,000 units, almost 14,000 more than it shipped. Investors don’t want to see inventories rise. You want production and sales to reflect each other more closely.
Given all the estimate changes, it won’t be easy to predict how the stock price will react this quarter. When delivery numbers beat the Street, Tesla stock typically rises about two-thirds of the time between the delivery report and the earnings report. It’s not hard to see why. Better deliveries mean rising earnings estimates.
It happened after second quarter deliveries. Tesla shares were at $261.77 shortly before the second quarter figures were released. Just before third-quarter earnings were released, shares closed at $291.26, up about 11%.
However, Tesla shares have fallen about 14% since the earnings announcement. The market takes some of the blame for the decline. The S&P 500 and the Nasdaq Composite
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have fallen by around 6% and 8% respectively over this period.
There’s always a lot going on with Tesla stock. A quarterly delivery number is just one of the things that matters to investors. However, the delivery number can cause great trading volatility. Expect some volatility on Monday.
Write to Al Root at [email protected]