Stocks

Tesla Stock Sags as Wall Street Cuts Forecasts for Deliveries

Tesla stock is under pressure, down about 2%. Concern over Covid-19 and what it will do to first-quarter deliveries is one explanation.

Tesla stock is under pressure, down about 2%. Concern over Covid-19 and what it will do to first-quarter deliveries is one explanation.

Stock in the electric-vehicle company Tesla is under pressure, down about 2% while the S&P 500 rises 0.9% and the Dow Jones Industrial Average is up 0.3% in early trading.

Concern over Covid-19 and what it will do to first-quarter deliveries is one explanation. Morgan Stanley analyst Adam Jonas, for his part, is worried expectations for sales are too high.

“Tesla typically delivers a disproportionate share of its quarter’s units in the last two weeks of the quarter,” wrote Jonas in a Monday research report. That will be more difficult in the first quarter of 2020 as the spread of the Covid-19 coronavirus has accelerated in the U.S. and Europe in recent weeks.

The U.S. now has the most diagnosed virus cases with more than 143,000, according to the Johns Hopkins Coronavirus Resource Center. Three countries in Europe have more than 40,000 cases: Italy, Germany, and France. Mortality in Italy is at more than 10% of diagnosed cases.

Jonas expects Tesla to deliver 88,000 units in the first quarter. The consensus Wall Street estimate, according to FactSet is 97,000, while Tesla delivered about 120,000 cars in the fourth quarter of 2019.

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The gap between Jonas’s view and the Street’s is wide, but in a Covid-19 world, consensus estimates don’t matter. Everyone knows the consensus number is coming down. Estimates were made before the outbreak accelerated, and analysts update their numbers at different rates.

Investors Jonas speaks with are expecting something in the low 80,000 range.

That delivery number is consistent with what New Street Research analyst Pierre Ferragu expects. His first-quarter estimate for Tesla deliveries is 80,000 cars—lower than Jonas’s—and he expects 72,000 cars to be delivered in the second quarter. Still, he rates shares the equivalent of Buy and has a $800 price target for the stock. Ferragu thinks the long-term outlook for the company is still bright.

Jonas rates shares the equivalent of Hold and has a $440 price target for shares.

“We are at [82,000] down from our [105,000] estimate,” Wedbush analyst Dan Ives tells Barron’s. “Numbers are biased downside as [second quarter] units could be down sequentially if shutdown continues into May. Some dark days ahead in the near term.”

Dark days for everyone and not just Tesla. The question for Tesla investors is, what kind of trouble is already reflected in the stock price? Tesla shares are down almost 50% from their February 52-week high, but remain up about 20% year to date.

In the end, numbers, for now, don’t appear to matter all that much. Most companies—Tesla included—should get a pass from investors on their first-quarter reports and calls as long as management sounds like they have a plan to manage through the downturn brought on by Covid-19.

Buying or selling the stock based on first-quarter or first-half results would be a mistake. It’s never a good idea to trade based on earnings at their low point.

Write to Al Root at allen.root@dowjones.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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