Tesla shares tumble as much as 10% as company misses Wall Street vehicle delivery estimates, cuts prices

Key Points
  • Tesla delivered 90,700 vehicles during the fourth quarter, falling shy of Wall Street estimates.
  • Tesla boosted production during the quarter, churning out 86,555 vehicles, up 8 percent from 80,142 during the third quarter.
  • Investors are disappointed in the news, sending shares south in morning trading.
Tesla shares tumble after lackluster delivery numbers

Tesla disappointed investors Wednesday, announcing that it delivered 90,700 vehicles during the fourth quarter — short of Wall Street forecasts despite its efforts to ramp up production.

Tesla also said it boosted production during the quarter, churning out 86,500 vehicles, up from 80,142 during the third quarter.

The electric car maker's shares fell by as much as 10.2 percent in morning trading Wednesday. Its stock rebounded somewhat by the afternoon to about $313 a share, down by about 6 percent from Monday's close of $332.80.

"Tesla shares tend to a have a lot more noise and volatility than most, but we think investors who are willing to take a longer-term view of the story will be rewarded handsomely and continue to believe Tesla is on track to post one of the market's most robust year-over-year earnings increases in 2019," said CFRA analyst Garrett Nelson.

The company also announced that it's cutting prices on all of its models by $2,000 to help offset a reduction in federal tax credits for drivers who buy electric vehicles. The $7,500 federal tax credit for Tesla cars was cut in half as of Tuesday.

Although the delivery numbers were 2,000 fewer than expected in a FactSet survey of analysts, Wedbush Securities analyst Dan Ives told CNBC they were consistent with his prediction. He said the cut in prices was likely weighing on the stock.

"It was a move that was within the realm of possibility, but it caught investors off guard," he said.

Bearish investors are likely interpreting the price cut as an attempt to stimulate demand, but Ives said it was more of a way to soften the blow from the tax credit drop.

Tesla Model 3 vehicles are loaded onto a truck for transport at the company's manufacturing facility in Fremont, California, on Wednesday, June 20, 2018. 
David Paul Morris | Bloomberg | Getty Images

The company delivered 8 percent more vehicles during the quarter, a new all-time high, but the numbers were fewer than expected by Wall Street. The company said it delivered 63,150 Model 3s, 13,500 Model S sedans and 14,050 Model X SUVs. Wall Street analysts had forecast 92,000 total deliveries — 64,900 for the Model 3, 14,200 for the Model S and 13,600 for the Model X, according to average estimates analysts compiled by FactSet. The numbers vary since FactSet tracks nine analysts on total deliveries, but not all analysts break out the data for each model.

FactSet does not compile average estimates on Tesla's production.

Tesla's own internal tracking of Wall Street analysts show that its deliveries were in line with or above estimates, spokesman Dave Arnold said. The company tracks 22 analysts that forecast an average of 91,046 deliveries during the quarter, according to data compiled by Tesla.

A tent is seen at the Tesla factory in Fremont, California, U.S. June 22, 2018.
Reuters | Stephen Lam

Tesla previously gave investors hope that its production rates would improve, saying that the number of labor hours to build the Model 3 fell by more than 30 percent from the second to the third quarter. The company also told investors in late October that it took less time to build than the Model S sedan and Model X sport utility vehicle — another first for the company.

"We will focus even further on cost improvements while continuing to increase our production rate" during the fourth quarter, the company said at the time.

CEO Elon Musk announced Oct. 23 that the company planned to limit certain options on its higher-end Model S sedans and Model X SUVs to streamline production. The company also announced plans during the fourth quarter to start selling a $45,000 version of the Model 3, before raising the price $46,000. It has yet to produce the base Model 3, which it has promised for a price of $35,000 before incentives.

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