mmd
Active Member
Didn't see this posted here. A long note from Pacific Crest.
Tesla Motors: ‘Too Few Fundamental Upside Scenarios For Our Taste’
"Tesla reported Q1 deliveries below expectations, driven by parts shortages from suppliers for the Model X. While the shortfall appears one-time in nature, it highlights the difficulty of ramping a new car, which could carry risk to delivering the Model 3 on time and within budget in the future. Given the current optimistic sentiment built into the name from Model 3 and our views of mixed demand trends for its current products, we continue to struggle with fundamental upside scenarios on the name and remain Sector Weight…
Model S orders appear curiously strong. While the company called out Model S orders as having increased 43% y/y in the quarter, we have struggled to reconcile this apparent strength when triangulating three things: (1) deliveries were only up 23% y/y (and down 28% sequentially), (2) Model S production run rates have not increased since the past quarter and (3) our checks indicate that lead times for the S remain roughly four weeks (as of last week). We’re not suggesting that demand for Model S is declining; however, given that the company just did 12,420 vehicles in Q1 on just over 50,000 last year, we think demand for Model S is showing signs of plateauing from a run-rate perspective.
Model X shortfall is production-related, but our demand concerns persist. Our latest checks…indicated that Model X conversion rates were likely below plan, which was at least partially being driven by the lack of showroom models. While time will tell if getting showroom models in the coming month or two will help conversion, the feedback we’ve gotten from sales centers continues to indicate soft overall Model X demand and orders, which has been a concern for us on the name. Tesla roller coaster to continue in the near term. While we’d expect another positive Model 3 reservation update by Wednesday from the CEO, we continue to struggle with the fundamental upside case for Tesla given its recent rally. The Model 3 is clearly going to continue to garner a lot of enthusiasm and interest, in our view; however, with significant challenges to work through over the next two years, as illustrated by today’s most recent shortfall, we think further volatility is inevitable with frothy sentiment leaving too few fundamental upside scenarios for our taste in the name."
Tesla Motors: ‘Too Few Fundamental Upside Scenarios For Our Taste’
"Tesla reported Q1 deliveries below expectations, driven by parts shortages from suppliers for the Model X. While the shortfall appears one-time in nature, it highlights the difficulty of ramping a new car, which could carry risk to delivering the Model 3 on time and within budget in the future. Given the current optimistic sentiment built into the name from Model 3 and our views of mixed demand trends for its current products, we continue to struggle with fundamental upside scenarios on the name and remain Sector Weight…
Model S orders appear curiously strong. While the company called out Model S orders as having increased 43% y/y in the quarter, we have struggled to reconcile this apparent strength when triangulating three things: (1) deliveries were only up 23% y/y (and down 28% sequentially), (2) Model S production run rates have not increased since the past quarter and (3) our checks indicate that lead times for the S remain roughly four weeks (as of last week). We’re not suggesting that demand for Model S is declining; however, given that the company just did 12,420 vehicles in Q1 on just over 50,000 last year, we think demand for Model S is showing signs of plateauing from a run-rate perspective.
Model X shortfall is production-related, but our demand concerns persist. Our latest checks…indicated that Model X conversion rates were likely below plan, which was at least partially being driven by the lack of showroom models. While time will tell if getting showroom models in the coming month or two will help conversion, the feedback we’ve gotten from sales centers continues to indicate soft overall Model X demand and orders, which has been a concern for us on the name. Tesla roller coaster to continue in the near term. While we’d expect another positive Model 3 reservation update by Wednesday from the CEO, we continue to struggle with the fundamental upside case for Tesla given its recent rally. The Model 3 is clearly going to continue to garner a lot of enthusiasm and interest, in our view; however, with significant challenges to work through over the next two years, as illustrated by today’s most recent shortfall, we think further volatility is inevitable with frothy sentiment leaving too few fundamental upside scenarios for our taste in the name."
