Can Tesla Meet Its Growth Outlook After Weaker Than Expected Q3 Deliveries?

Tesla (NASDAQ:TSLA) said that it had delivered 343,830 vehicles for the quarter ended in September, rebounding from about 255,000 deliveries in the prior quarter when sales were impacted by the suspension of production at the company’s Shanghai factory. While this marks a quarterly record for Tesla, it falls short of market expectations. Moreover, the year-over-year growth rate of about 42% falls below Tesla’s long-term guidance of growing deliveries at a rate of at least 50% a year over a multi-year period. Tesla is apparently facing issues with its distribution, noting that it was facing difficulty in securing vehicle transportation capacity at reasonable prices toward the end of the quarter when its shipments typically surge. For perspective, production for the quarter stood at 365,923, about 6.5% ahead of deliveries.

So will Tesla be on track to meet its guidance of at least 50% delivery growth this year? For the first nine months of the year, Tesla delivered about 908k vehicles, translating into year-over-year growth of about 44.5%. This implies that the company will need to ship close to 500k cars over the holiday quarter to achieve its long-term guidance figures.

Now demand for Tesla’s EVs remains strong despite the weak economy, with CEO Elon Musk indicating that Tesla is constrained by production and not demand. For perspective, delivery timelines for the Model Y SUV stretch to as long as six months. So will Tesla be able to produce 500k vehicles this quarter? This is possible, given that the company has been ramping up production at its new facilities in Texas and Berlin. The company recently said that the Berlin facility has been able to ramp up production to 2,000 cars a week while noting in August that the Texas plant had hit production of 1,000 cars a week.  These numbers are only expected to grow in the coming weeks. Tesla also wrapped up a project to expand capacity at the Shanghai facility in mid-September.

We remain positive on Tesla stock with a $341 price estimate, which is about 25% ahead of the current market price. Despite the weaker than anticipated quarterly numbers, Tesla should pick up the slack as it scales up production at its new factories. Moreover, Tesla’s margins are also among the highest in the auto industry and this should enable the company to be solidly profitable as sales rise further. See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How TSLA Makes Money.

[1] Month-to-date and year-to-date as of 10/3/2022
[2] Cumulative total returns since the end of 2016

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