TSLA Stock Crashes 7% on Friday, Up 2% in Pre-market Now, Last Quarter Demand Plunge Can Haunt Tesla

UTC by Bhushan Akolkar · 3 min read
TSLA Stock Crashes 7% on Friday, Up 2% in Pre-market Now, Last Quarter Demand Plunge Can Haunt Tesla
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Tesla’s stock plunge gets analysts to wonder about the continued market demand for its electric cars in the fourth quarter. While Elon Musk has set an ambitious target of half-a-million deliveries by 2020-end, analysts remain skeptical.

Despite the coronavirus pandemic and slowdown in the automobile industry, electric car-makers Tesla Inc (NASDAQ: TSLA) has outperformed its peers. The company has seen massive demand for its cars and has been consistently pushing demand up quarter-after-quarter. In fact, TSLA stock has been the top-performer on Wall Street surging over 300% year-to-date. However, on Friday, October 1, TSLA stock tanked over 7% closing at $415. The fall came despite Tesla reporting more than expected quarterly sales such as 139,300 vehicle deliveries for the third quarter against expectations of 137,000. The Tesla Model 3 and Model Y vehicles contributed 90% of the total sales, a massive 56% higher from the quarter a year ago.

Nevertheless, industry experts say that the fall on Friday was amid the concerns of continued demand in the future. Tesla Inc has already set up the bar higher outperforming its peers to become the world’s largest automobile by market cap. We can also see this clearly reflecting in its stock price making investors wealthier. Speaking to MarketWatch, Joseph Spak, an analyst at RBC Capital said:

“We do believe there could be some supply constraint, but bears may also point to some potential demand concerns. “Some of the early data we’ve seen in Europe suggests sales may be softer than we expected, and we continue to believe Model 3 sales in the US are down y/y (but Model Y helps U.S. demand).”

Tesla’s Goal of Hitting Half-A-Million Deliveries by Year End

At the Battery Day announcements last week, Tesla CEO Elon Musk said that the company’s target is to clock half-a-million deliveries by the year-end. It means that the car manufacturer will have to deliver 171,000 vehicles more in the last quarter of 2020. If the company really manages to deliver this, it will be clocking 30-40% more deliveries in 2020 over the last year.

Wedbush analyst Dan Ives believes that Tesla can attain the lower end of the goal i.e. 478,000 deliveries in 2020. However, he too remains skeptical about clocking the milestone of half-a-million deliveries. He adds that Tesla has managed to defy all odds and deliver a performance one could have only dreamed of. Tesla hit “the high end of bullish whisper expectations for the quarter,” – added Ives.

Ives is also hopeful that Tesla will squeeze out more efficiency from its two major gigafactories: Shanghai and Fremont. He also bets on demand in China as a major strength to the overall sales. Speaking about the Friday’s stock plunge, Ives said:

It is “a knee-jerk reaction in a risk off tape this (morning) after a parabolic run in shares, although as the Street digests this eye popping number the stock should head higher over the coming days and weeks”.

The TSLA stock has always been a high-beta stock showing big moves on the indices. Recently, company CEO Elon Musk noted that the Tesla stock seems to be overbought at this time. However, he said that it could be a wealth creator for long-term investors. The TSLA shares are already up 2.41% today in the premarket hours.

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