Later this week, investors expect an update from electric vehicle maker Tesla (DSLA) In its Q3 production and distribution. The stock is one of the biggest winners this year, setting several records for the two major auto production curves this quarter. Today, I will look at some key numbers to see where the stock is going in this report.
Before we start thinking about Q3, let me remind you of what Tesla reported so far this year. In the graphics below, you can see the initial numbers given by the company for production and distribution in Q1 and Q2. As a reminder, the Fremont factory was closed for about a month and a half due to the corona virus, mostly during Q2, when the Shanghai plant also experienced some idle time. Final numbers will be reported in the Q3 Revenue Report.
(Source: Tesla Q1 Release, Found here)
(Source: Tesla Q2 Release, Found here)
As a reminder, the company’s original forecast is that this year’s deliveries could easily exceed 500,000 units and production will be higher than that. Despite the epidemic, management left out the distribution forecast in the Q2 report. In the last week Battery day event, CEO Elon Musk called for 30% to 40% supply growth this year, representing approximately 477,952 to 514,718 units.
With the above numbers from the first half of the year, Tesla will need a big six months to achieve its goals. As I pointed out My most recent article, The company certainly has the potential to meet this growth forecast. The graphic below shows the last four quarters of this important metric in product and factory lines.
(Source: Tesla Quarterly Investor Letters, Found here)
If you average the end of the period for quarterly production rates from the last four quarters, you get 153,750 units. Apparently, the company could do a little more than that at this point, given the Shanghai and Model Y curves, the latter is expected to add another 100,000 units of capacity by the end of this year. That 100k extension was supposed to be in mid-2020, but this delay would be more reasonable given the corona virus shutdown.
In the Q3 report I would be interested to see if Model 3 / Y numbers get 50k or 100k more. If you assume that there is no installed capacity increase in the third quarter of 2020, the previous quarter production will rise to an average of 169,375 units. For my production estimate, I will take that number with the 153,750 mentioned above and divide it by two. I take a week on a quarter for maintenance and other supplies, which gives me a Q3 production forecast of 149,135 units.
Last week, I Posted a blog post Wrapping up battery day, I discussed where the street average for Q3 is 144,000 deliveries. In that sense, I said my personal estimate for deliveries was 850 units more than that and production would be more than 4,000 deliveries. In the end, my production number ended up a few hundred units higher, but that wasn’t really a big difference.
I’m also interested to see where Tesla’s lease percentage ends up in Q3. The Model Y lease came out a lot earlier than the previous models, so you can see the placement in the 3 / y lease percentage. While leasing at Tesla is ideal for short-term skins, it can earn very little revenue for a given vehicle and affect cash flow slightly if a lot of leasing has taken place.
Using my Q3 number and Q1 / Q2 real Recent Earnings Report The company will place over 324,000 units over a nine-month period. This will of course monitor Tesla to meet the new annual guidance forecast, and will give the company the opportunity at 500,000 units. Of course, that means another big consecutive quarterly jump in deliveries is needed, so investors should look for price changes in the Tesla lineup in the coming weeks. The following chart may give us some clues as to how far the average daily close of the US dollar in Q3 has been below the Q2 average.
(Yahoo! Finance – 9/25 to Q3 numbers)
With Volkswagen (OTCPK: VLKAF) With the introduction of its ID3 caused a huge impetus in Europe, with the rise of the Polarstar 2, I would not be surprised if Tesla reduced the price of the Model 3 at least on the continent to Q4. The company can easily say that it will pass on savings from the weak dollar, but it is also a way to enhance the look as Tesla raises Q4 deliveries. We already saw the loan program in Norway in late Q3, and Tesla’s Netherlands site now highlights the next phase in that country’s EV benefit program later this year.
As for Tesla shares, they are the biggest winner even from the highest position of all time. As the chart below shows, the stock is above its 50-day moving average, which seems to support the name in recent months. This key trend is still rising, but if some bad news comes out this week, it will be interesting to see what happens if the stock falls below it for more than a day or two.
(Source: Yahoo Finance)
In the end, Tesla’s Q3 production and distribution report should be the next big boost for stocks this week, after last week’s Battery Day event turned into a nonsense. All indications are a record quarterly detail, but how close will Tesla come to its established production capacity? With Elon Musk calling for at least 30% supply growth this year, a strong Q3 is a start because the company will need even better Q4 to hit its annual forecast.
Disclosure: I / we have no positions on any of the specified stocks and have no plans to start any positions within the next 72 hours. I wrote this article myself and it expresses my own opinions. I did not receive compensation for that (except for looking for Alpha). I have no business relationship with any of the companies mentioned in this article.
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