Tesla Sales Forecasts — Good Or Bad?
I wrote yesterday about Tesla’s 4th quarter production and delivery forecast throughout the year and what it’s likely to achieve. This was simply a data-driven effort to match up expectations and the likely scenarios. I didn’t think I’d return to the topic anytime soon, but a tweet caught my eye this morning and brought to mind many additional points.
The tweet came from Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities. Dan has been covering Tesla for a few years, and here’s a list of other tech companies he covers (including Rivian, Lyft, GM, and Apple). Here’s what Dan tweeted:
“We remain bullish as Tesla is one of our favorite long term disruptive names to own period. However, for Musk now is the time to execute on reasonable growth and unit targets into 4Q/2023 and it starts tomorrow. No more excuses-Street wants execution on goals.”
It’s just got … an interesting tone. Whether it was that tone or the substance of the demand, it shot me back several years. We’ve covered Tesla since 2012, and I would say that from about 2012 to about 2020, there was very heavy skepticism regarding Tesla’s growth targets. Tesla’s goal of 500,000 vehicles a year by 2020 was considered absurd for years, especially by Wall Street. That’s why if you had the funds, insight, and bravery, you could pick up a lot of high-value Tesla stock very cheaply. That’s why Tesla [NASDAQ:TSLA] was one of the biggest business and stock stories of the past decade — probably the biggest. Elon Musk’s production and delivery (read: consumer demand) goals for Tesla were considered ludicrous. Serious people were constantly saying that Tesla needed to set more realistic expectations.
Sure, Tesla did miss some short-term and mid-term targets at times, especially when ramping up the Model 3 and going through “production hell.” But, overall, the long-term forecast was ridiculously spot on.
As noted at the top, the article about Tesla’s 4th quarter production and delivery forecast was not about saying, “Oh my! Look how far off Tesla’s forecast is likely to be!” Its aim was just to provide the best data-driven, realistic forecast we could on what to expect from Tesla in the 4th quarter, and perhaps help temper expectations about what is possible or probably from Tesla. It also spent some time trying to tease apart what happened that shifted Tesla sales downward a bit. In the grand scheme of Tesla’s growth and development, a slightly missed 4th quarter target is a penny in a pot of leprechaun gold. I don’t think it’s the monumental issue Dan Ives seems to be implying it is. There are plenty of sharp and critical responses to Dan’s tweet. But I think the more useful comments putting this story into perspective are some of the ones we received under my article yesterday, so I want to highlight those.
Electricity Electricity said: “50% production growth in something as capital intensive as autos is incredible.
“Differences between production and deliveries don’t matter unless we start hearing about cars sitting unsold on the lots for long periods of time.
“And anyone trying to value TSLA based on deliveries is kidding themselves. Valuation for anything is more an art more than a science, and that’s more true of mega-meme stocks like TSLA.”
All of the points there are superb, but I have to say that I love that last bit: “Valuation for anything is more an art more than a science, and that’s more true of mega-meme stocks like TSLA.” 😀
sri writes: “I am in the ‘this is nitpicking’ camp. Increasing the production is the real hard issue to be solved. Who cares if they deliver, say, 20-30K vehicles in the last week of 2022 or first week of 2023. The Chinese demand concern seems to be a stretch. But let’s say there is a serious economic issue and demand goes down? Wouldn’t the raw material/component prices go down too? And which EV maker and comfortably drop the prices by 5-10% and still make a decent profit.
“I do understand wall street cares about these things and the stock price can be highly volatile in the short term as a result. But as someone who has been watching this from 2015, what’s new?”
I don’t really have a clue if the China demand concern is a stretch or not. We’ll have to wait and see what happens to know. However, I agree that if it became a notable concern to Tesla, the company would just lower prices, and that Tesla has crazy high margins that allow it to do such things when needed. I agree that I expect volatility from Wall Street in the short term, but I also don’t closely follow or care about those short-term fluctuations.
Will Meek writes: “Even hitting under 50% would be a non-issue. But it is overwhelmingly likely they will meet a 50% increase in production.
“Sure, trolls will scream from the hilltops but it is meaningless. More vehicles produced means more in transit at the end of the quarter.
“Even more, as Tesla achieves a significant market share, growth will inevitably slow.
“Not making 50% is a nothing burger.”
There are plenty of other good comments under that article that make similar arguments, that push back against those arguments, and that go into other topics altogether (like the current situation in China, where the country is headed, and its complicated relationship to Elon Musk and Tesla). I recommend exploring the full discussion.
My perspective on the overall Tesla growth story hasn’t changed. Though, I think it was not completely expressed yesterday. I still expect Wall Street to respond negatively, maybe even harshly, to the lower-than-expected deliveries if Troy Teslike’s forecast is accurate. But in the long run, does it matter?
The biggest question seems to be whether Tesla can truly grow at an average of 50% a year through the rest of the decade. Many were wrong about Elon Musk’s bullish expectations for Tesla in the past decade (I was not, as I bought into the story), but the coming decade could be a bit different. Even the most iconic champions don’t always win, and businesses can see tremendous growth that seems like it will go forever but then … does not. Annual growth of 50% is ambitious at such a large scale, and just as competitors are truly bringing good options to market — not to mention the macroeconomic trends that can always have a large impact. Any obsession over very slightly missed targets in Q4 2022 should be approached cautiously, but what everyone wants to know is what Tesla’s long game will truly look like.
Briefly returning to the Dan Ives tweet and the title of this article, looking backward, Tesla’s long-term sales forecasts have been phenomenal, almost eerily textbook and spot on. They have clearly been good guidance, so colorfully dramatic calls to greater accuracy seem out of place to me. However, the past is not the future, and we’ll see if the future brings the same sort of long-term accuracy.
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