Tesla's sales fall short, but analysts optimistic about future

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【Summary】Tesla reported lower-than-expected third-quarter deliveries, causing concerns among investors about production issues and profit margins. The stock initially dropped but later rebounded. Tesla's sales were impacted by factory downtime in Shanghai and Texas. However, analysts believe that better days are ahead for the company. In contrast, EV startup Rivian exceeded Wall Street expectations with its quarterly sales, demonstrating continued demand strength for its electric vehicles.

FutureCar Staff Oct 02, 2023 9:15 AM PT

Tesla's sales fall short, but analysts optimistic about future

Sales numbers for Tesla Inc. and other electric vehicle (EV) makers failed to have a positive impact on their stocks, highlighting concerns among investors regarding production issues and profit margins. Tesla reported lower-than-expected third-quarter deliveries, causing the stock to initially decrease by 3%. However, the stock has since rebounded slightly after rising 4% in anticipation of the data.

While delivery estimates for Tesla had already been lowered due to a Model 3 refresh in certain regions, the company still fell short of the most recent reduced expectations. Citi analyst Itay Michaeli noted that quarterly production was in line with forecasts, suggesting limited destocking and flattish inventories. This could potentially impact sentiment about gross margins by the end of the year.

Tesla produced 430,488 vehicles and delivered 435,059 vehicles in the third quarter, marking a 17.6% increase in production and a 26.5% increase in deliveries compared to the previous year.

On the other hand, EV startup Rivian Automotive Inc. reported better-than-expected quarterly sales, surpassing Wall Street's expectations by a significant margin. The company produced 16,304 vehicles and delivered 15,564 vehicles during the quarter, exceeding the FactSet consensus of 14,000 deliveries.

The gap between Rivian's production and deliveries demonstrates sustained demand for their electric SUV and delivery vans. Analysts have noted that Rivian has successfully executed on cost and delivery targets, reducing the risk of reaching breakeven. Evercore ISI analysts have raised their rating on Rivian stock to a buy equivalent and increased their price target.

Looking ahead, Rivian has the potential for further growth, with expectations of a production ramp, breakeven gross margins, and the reveal of their compact SUV in the first half of next year. Tesla's stock has doubled this year, while Rivian's stock has gained 35% in the same period, compared to a 12% advance for the S&P 500 index.