Is Tesla's Delivery Shortfall the Real Problem?

Shares of Tesla Inc. (NASDAQ: TSLA) were hammered Wednesday following the company’s announcement of its fourth-quarter production and delivery totals. Deliveries, especially, did not meet Wall Street expectations.

For the quarter, Tesla delivered 63,150 Model 3 sedans (up 13% over the third quarter), 13,500 Model S sedans and 14,050 Model X sport utility vehicles. Analysts polled by FactSet expected 64,900 Model 3 deliveries, 14,200 Model S deliveries and 13,600 Model X shipments.

Tesla also reported total 2018 deliveries of 245,240 vehicles: 145,846 Model 3 and 99,394 Models S and X. The company noted in its filing that it delivered nearly as many vehicles in 2018 as in all prior years combined.

The company also said that it will cut the price of all its vehicles by $2,000 to help offset the loss of half the $7,500 federal tax credit for buyers of all-electric vehicles. For 2019, the tax credit drops to $3,750.

Production totals rose 8% sequentially in the fourth quarter to 86,555 vehicles, including 61,394 Model 3 cars and 25,161 Models S and X vehicles. Model 3 production was up 15% quarter over quarter.

While Tesla came in pretty close to delivery and production expectations, close is no longer good enough to win the cigar. The stock closed Monday at about $10 off (about 3%) its consensus price target, indicating that it may still be overvalued. GM closed nearly $12 (about 27%) below its target, and Ford closed about 24% ($2.35) below its target.

The pricing change may be the real culprit. The drop shows that electric vehicle sales remain tied to incentives, which indicates that Tesla believes that in order to maintain demand it needs to cut its margins.

After about a half hour of trading, Tesla stock traded down about 8.6%, at $303.90 in a 52-week range of $244.59 to $387.46. The consensus price target on the stock is $342.85. The S&P 500 index was down about 1.1% in early trading.