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Goldman reiterates sell on Tesla and expects Model 3 deliveries to miss estimates

Key Points
  • Goldman Sachs says Model 3 deliveries may come in under consensus. 
  • Analyst David Tamberrino also questions whether Tesla can sustain a Model 3 production rate of 5,000 cars per week.
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Goldman Sachs is reiterating its sell rating on Tesla and expects the electric car maker's widely watched Model 3 delivery number to fall short of Wall Street expectations.

Tesla is expected to release its second-quarter production and delivery numbers in the first few days of July. Goldman analyst David Tamberrino expects the company to report it delivered 22,000 units of its Model 3 mid-size electric sedan, which is up from his previous estimate of 19,000 cars, but still several thousand units below an analyst consensus of 28,000. He bases this estimate on data from InsideEVs.com, GreenCarReports.com, and registration bureaus in various European countries.

And though Tesla CEO Elon Musk has said it is "quite likely" the company will hit its goal of making 5,000 Model 3 sedans in a single week by the end of June, Tamberrino wonders how sustainable that rates is. It might be possible to hit the target, given the extra assembly lines Tesla has recently set up at its Fremont factory, but Model 3 production has a history of volatility and occasional downtime.

On the other hand, Tamberrino expects deliveries of the higher-priced S and X models to be up 4 percent and 5 percent over the same quarter last year, respectively. That is slightly above the consensus of 22,300 units, according to a FactSet consensus Tamberrino cites. But eyes are likely to be far more trained on the Model 3, which Tesla has billed as an electric car built for the masses, and which many consider key to Tesla's goal of becoming a major automaker.

Investors are already likely pricing in a sustained Model 3 production rate of 5,000 cars per week, and are now focused more on gross margins as well as the company's ability to persuade Model 3 reservation holders to opt for the higher-priced versions of the Model 3 the company is prioritizing in production now, instead of those sold at the $35,000 base price Tesla had initially advertised.

Tesla shares closed Tuesday up 2.7 percent at $342. While shares are down about 9 percent over the past year, the stock is up nearly 10 percent since January. During the past year, the stock has traded as high as $389.61 in September, and as low as $244.59 in April. 

Tesla's market capitalization is $58.1 billion, which is higher than auto giant General Motors ($57.8 billion) and Ford ($45.1 billion).