Tesla’s Delivery Growth Surpasses Estimates. What Does This Mean For The Stock

Tesla (NASDAQ:TSLA) saw its deliveries for Q2 2023, compared to last year, surge by 83% to 466,140 units. While the growth rates were driven in part by a favorable comparison with Q2 2022 when the company’s Chinese business declined sharply amid strict Covid-19-related lockdowns, Tesla has also likely benefited from price cuts on popular models and an expansion of manufacturing capacity. Tesla has cut prices on its vehicles multiple times over the last two quarters, with popular models such as the Model Y selling at more than 20% below last year’s prices. Moreover, the Model 3 and Y are also eligible for the $7,500 tax credit under the Inflation Reduction Act in the U.S. and this is also making Tesla’s EVs more accessible to a broader customer base. The ramp-up of production at Tesla’s factory in Texas is also helping supply to an extent. With the Q2 tally, Tesla’s total deliveries for the first half of the year stand at about 889,000, meaning that the company should be roughly on track for a 2 million delivery target for 2023 if the momentum holds up. The delivery numbers should also put Tesla on course to meet its 50% long-term compounded growth rate target this year.

So. do the strong delivery numbers make Tesla stock a buy? Although we continue to believe that Tesla will remain a big beneficiary of the long-term transition to electric vehicles given its well-oiled supply chain, superior electric drivetrains, and its lead with software and self-driving technology, we are presently negative on Tesla stock with a $210 price estimate, which is about 20% below the current market price. Tesla stock has already gained over 2x year-to-date and presently trades at about $262 per share, or at about 75x forward consensus earnings, which is slightly high, in our view. Tesla’s earnings for 2023 are also projected to decline year-over-year as automotive margins have been contracting due to price cuts. For perspective, over Q1 2023 gross margins stood at 19.3%, down almost 10% compared to the year-ago quarter. See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How Does TSLA Make Money.

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[1] Month-to-date and year-to-date as of 7/3/2023
[2] Cumulative total returns since the end of 2016