Why Tesla’s first quarter deliveries aren’t enough to impress long-term bear Gordon Johnson

Tesla Inc (NASDAQ: TSLA) First-quarter delivery numbers that exceeded analysts’ estimates left Gordon Johnson of GLJ Research less than impressed.

Tesla analyst: Johnson maintained his sale rating on the shares of the company led by Elon Musk and valued the shares at $ 67, exiting 2022.

Tesla’s Thesis: Johnson admitted that the automaker exceeded GLJ’s estimates by 13,000 cars by delivering 184,800 vehicles in the first quarter of 2021. The analyst said GLJ had “incorrectly” cut its Tesla delivery estimates from 188,000 to 171,600 units.

Johnson said in a note that comparing the first quarter of 2021 with the same period in 2020 is “irrelevant” and the proper comparison is rather with the fourth quarter of 2020. He said that most Tesla analysts are exaggerating delivery numbers Tesla’s first quarter or misunderstood them.

The GLJ analyst said Tesla has a growing demand problem. Johnson highlighted the fact that the automaker was “badly” producing cars in China in the first quarter of 2020 and price cuts of approximately $ 8,500 for the Standard Range Model 3 and $ 24,100 for the Long Range Y model have not yet had been made.

“More specifically, the ONLY quarter in which TSLA cut prices for its cars in China entirely and had total production in China was 4Q20, where the company sold 180,600 cars; so, the ONLY thing that matters to TSLA in 1Q21, and going forward, in our view, is sequential growth, ”wrote Johnson.

According to the analyst, increasing volumes of 2% in the first quarter on a quarter-by-quarter basis “is not a good thing”.

Johnson said Tesla’s growth prospects in major auto markets around the world have peaked and “there is no more fruit at hand”.

“This is not a company with a production problem; this is a company with a DEMAND PROBLEM, ”wrote Johnson.

The analyst finally questioned the margins that Tesla enjoys in its various vehicles and how it affects the company’s financial results. He assumed that the average margin on a Model 3 / Y vehicle was almost $ 4,000. In the S / X Model, Johnson calculated the margin at approximately $ 20,000.

The story continues

Extrapolating these figures, he pointed out that Tesla sold 16,900 fewer Model S / X cars in the first quarter of 2021 compared to the previous quarter, meaning it had $ 321.1 million less in profit. Johnson said Tesla sold an additional 211,300 Model 3 / Y cars in the period, which means an additional $ 84.52 million in profit.
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“So, net-net, the mix in the quarter, in cars sold alone, seems destined to negatively impact TSLA’s financial results by – $ 236,580mn, that is, except for credit sales, they will probably lose money again in 1Q21” , according to Johnson.

Finally, according to Johnson, while Tesla’s growth potential has materially diminished further competition from rivals like Ford Motor Company (NYSE: F), Volkswagen AG (OTC: VWAGY), and General Motors Company (NYSE: GM) is expected this year.

Opinions are in contrast to those of Wedbush analyst Daniel Ives, who dubbed the first quarter delivery report as a “let go of the microphone” moment.

Gene Munster of Loup Ventures also expressed a view that even if Tesla had missed street estimates in first quarter deliveries, that would not be a cause for alarm.

Share price: Tesla shares closed 0.93% lower at $ 661.75 on Thursday.

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