Tesla's stock is beginning to recover after a brutal start to the year, rebounding about 25% from its June nadir as optimism about second-quarter vehicle deliveries has picked up steam.
The state of play: CEO Elon Musk's message to shareholders that there is "not a demand problem," and June 25 email to employees saying Tesla is "on track to set an all-time record" for deliveries have also helped stabilize the stock. But investors would be wise to sit out any celebration, Charley Grant at WSJ writes.
- "For starters, record deliveries would hardly guarantee a profit. Tesla managed a net profit margin of less than 2% in the fourth quarter of 2018.... [T]here is reason to believe margins have shrunk since then."
- "We believe that Tesla has an incentive … to 'move the metal;' in other words, prioritize deliveries over margins and pricing, which it appears to have done this quarter," Barclays analysts wrote last week.
Tesla also now faces more competition on its higher-end Model S and Model X cars, which have much higher profit margins than the mass market Model 3, from Jaguar and Audi.
- Further, Grant notes, U.S. federal tax credits for Tesla buyers will be reduced again in the U.S. starting today to just $1,875, compared with $7,500 last year.
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