Tesla is slowing down

The car-maker will announce its third-quarter numbers on 3 November, and its share price is declining despite increased production.

Tesla logo
Source: Bloomberg

Tesla’s production levels are at an all-time high, but you wouldn’t think it looking at the share price. The car-maker produced more than 11,000 vehicles in the latest quarter which was slightly more than its own projection.

As the company is relatively new, it is difficult to compare it to the production stream of an older automaker like Ford, but on a year-on-year basis the second-quarter output jumped by 51.8%. The rate of production is improving from quarter to quarter, but the company will struggle to achieve its full-year production target of 55,000, and after six months output stood at 21,552. In the third-quarter update traders will be seeking an update on the end of year outlook.

As Joshua Mahony stated, Tesla’s share price has accelerated over the past few years and traders have high hopes for the company, there are already talks of overvaluation, and if those high expectations are not met it will lead to a rapid downturn. The Model 3 is scheduled to be released in the second half of 2017, and that date has already been pushed back once; dealers don’t like delays. The Model 3 will cost $35,000 and the market will want to hear that both the production levels and release date are on track.

Traders are anticipating third-quarter revenue of $1.24 billion and a loss per share of 54 cents. This compares with the second-quarter revenue of $1.19 billion and the loss per share of 48 cents. Tesla will report its full-year figures in February, and the market is expecting revenue of $5.44 billion and a loss per share of 91 cents, and that compares with last year’s revenue and earnings per share of $3.59 billion and EPS of 14 cents.

Equity analysts are very bullish on the stock, and out of the 22 ratings, eight are buys, eight are holds, and six are sells. The average target price is $302.85, which is 43% above the current market price.

The number of short positions on the stock has risen by 12.8% since the company posted its second-quarter figures.

The share price has been pushing lower since July 2015, and the October low of $202 will be the initial target – a move below it will bring the support at $195 into play. Should the stock drive higher, resistance will be encountered in the $216.50 region and then at $230. 

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