Tesla Cuts Production In Half For Q3, Earnings And Valuations Downgraded

JUL 18 2012 BY JAY COLE 4

Half As Many Tesla Model S Vehicles Will Be On The Assembly Line This Quarter

Production for the upcoming quarter on the Tesla Model S has been cut in half from initial estimates by the California auto maker according to Wunderlich Securities analyst Theodore O’Neill.

One Of The First Model S Sedans Leaves Tesla's Factory

That means that only 500, not 1,000 Model S vehicles will roll out of their Fremont assembly plant over the next three months.  Tesla is still holding year end projections of 5,000 cars produced, but industry wide speculation has that number also in jeopardy.

As to why the production cuts, the analyst has some thoughts:

“Tesla wants to be sure the cars are right and apparently they are not in a position to ramp to get to 1,000 units this quarter.  From our own due diligence, we don’t believe there is any shortage of components, so it could be as ‘simple’ as just getting the hang of lining up all the body panels, which is part art. Could it be something more serious? If it were more serious, we believe sales would have been delayed – but who knows?”

Not terribly assuring, nor is Wunderlich (and other securities firms) quick, knee jerk downgrade of the company…all the way from a “buy” rating to a “sell”.

Tesla CEO Elon Musk

 Before this news, analysts had expected around  $125-130 million in revenue and a  loss of 65-70 cents per a share for Q3.   All of which has been drastically slashed today.

In the case of Wunderlich, they are now looking for $86 million in revenue and a loss of 75 cents a share.   While adding their model assumed a gross margin of 15%, which is above the Street consensus at 10%, so the losses could be wider still.

Wunderlich moved their price target from $49 to $28.  Tesla shares fell almost 4% today to close at $32.15

Categories: Tesla


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4 Comments on "Tesla Cuts Production In Half For Q3, Earnings And Valuations Downgraded"

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Given the tenacity of Elon Musk and the great reviews for their Model S, it might soon be a good time to invest in Tesla stock. Any thoughts?

Growing pains or something more? Assuming we can believe the press releases, they have thousands of orders, they just need to fill them. So, why the slow down of the production? Puzzling and disconcerting at the same time.

Buy a Volt. At 1/3 the price, you get the benefits of EV without the hassles of Tesla.

Hey, they are being carefu. After the Fisker snafu’s, they are right to be cautious and get the model S perfect…