Tesla’s Blowout Model 3 Numbers Raise 9 New Questions

Tesla reported very strong preliminary Model 3 delivery and production numbers for the June quarter. The 77,550 Model 3 deliveries easily exceeded the 70,000ish the Street was looking for but was not a surprise in some ways. The stock is responding, up $11 to $236, but is down from the first few minutes of trading above $242.

Production level was good but almost the same as the December quarter

Tesla manufactured 87,048 cars in the June quarter made up of 14,517 Model S and X’s and 72,531 Model 3’s. This was almost 10,000 more than the company made in the March quarter (all Model 3’s) but less than 500 more than it made in the December quarter.

Planned and unplanned production outages may explain why production has essentially not increased over the past six months, but for the company to achieve enough profitability to support the stock price it will need to move the production needle higher.

Questions that need to be asked or answered

While the strong Model 3 sales could temporarily assuage concerns about its demand, the second quarter in a row of below trend Model S and X production and sales brings up others. Here are some questions that investors will have to wait until the quarter’s results are available and guidance is given.

• How many Model 3 sales were due to late March deliveries slipping into April?
• How many Model 3 sales were due to June/August sales pulled into the quarter due to the Federal Tax Credit being cut in half on July 1?
• Does Tesla still anticipate Model S and X demand getting back to 25,000 per quarter or 100,000 per year?
• September quarter delivery guidance: Will there be a drop-off similar to the March quarter after the Federal Tax Credit was cut in half or will international sales make up any U.S. shortfall?
• Will Tesla reiterate full year delivery guidance of 360,000 to 400,000? (I expect it will)?
• To what level can total production at the Fremont factory achieve?
• What will gross margins be given the high mix of Model 3’s with lower priced configurations?
• How much of the bottom line will be driven by ZEV and other credits?
• Did energy generation and storage revenue start its substantial revenue growth as outlined in the first quarter update letter?

Short squeeze will pop the stock

As of June 14 there were almost 41.5 million Tesla shares shorted, which is over 15 million more than on February 15 when the stock was at $308. With only 173 million outstanding shares, almost 25% are held by shorts who are experiencing a squeeze today.

Can it break out of its declining channel pattern?

Tesla has been trading in a series of lower highs and lower lows since December last year. With its spike to $242 this morning it will need to not just sustain this level but move higher to break out of this pattern. Otherwise it could be the continuation of a dead cat bounce. With the next major announcement probably being its financial results in early August the stock could pull back into the middle of the channel.