Tesla investors are experiencing an unusual down month for the stock, but news that could send it higher again is coming soon. In about a week, the company will report how many electric cars it delivered in the third quarter.
September has been a lousy month for Tesla (ticker: TSLA). Shares fell 22%, as of Thursday’s closing price, as a widely anticipated update on the company’s battery technology failed to wow investors. The decline is worse than Tesla’s 21% drop in March, when the entire market was plummeting because of the coronavirus.
It might have been impossible for any company to live up to the expectations for Battery Day. Tesla shares rose 74% in August, partly in anticipation.
Wall Street’s analysis of the event fell along party lines. Bearish analysts wrote that the event was too full of aspirations and light on news that will affect shares in the near term. Bullish analysts wrote that Tesla’s lead in battery technology was accelerating, and that the day gave them more confidence the company would be delivering millions of vehicles annually in a few years.
That event is now in the rearview mirror and third-quarter deliveries—a proxy for sales—are the next thing to watch. Shares rallied more than 13% in early July after second-quarter delivery numbers blew by Wall Street expectations that had been dragged lower by concern over how much the pandemic would hurt production.
The strong number raised hope that Tesla would report a profit in the second quarter—a prerequisite for the company being included in the S&P 500 index. That, in turn, could have brought more gains because funds that track the S&P 500 would have had to buy the stock.
(Tesla produced the required profit and still wasn’t added.)
Less drama is attached to the third-quarter numbers than came with prior delivery releases. Both of Telsa’s factories—in California and China—are open. What’s more, analysts expect profitability will be easier to achieve than in the second quarter, tamping down the impact of any S&P 500 index-related surprises.
Wall Streets expects the company will deliver about 141,000 cars during the third quarter. Estimates range from 123,000 to 161,000.
Until recently, FactSet—an aggregator of Wall Street forecasts—listed an estimate of 190,000 vehicles as one of the figures used to produce its consensus numbers. That was skewing the average a little, but the estimate vanished this week. Removing the 190,000 figure dropped the average estimate by about 3,000 vehicles.
The current quarter is expected to be a record for Tesla by a wide margin. The company delivered 112,000 vehicles in the fourth quarter of 2019—the current record—before the pandemic hit.
Analysts expect the company to deliver about 483,000 cars in 2020, up from 368,000 in 2019. That’s an impressive feat given the global economic recession. Ford Motor (F), for instance, is expected to sell about 4.2 million vehicles in 2020, down from 5.4 million in 2019.
The relative performance is reflected in stock prices. Ford shares are down 28% year to date, worse than comparable returns of the S&P 500 and Dow Jones Industrial Average. Tesla stock, on the other hand, is up about 380% year to date.
Tesla stock was up 5% on Friday, leaving shares down about 8% for the week.
Write to Al Root at firstname.lastname@example.org