Tesla Stock Is Falling. China Is the Reason?
Tesla stock is limping over the finish line this week. China is the most likely reason.
$Tesla Motors(TSLA)$
From June through August, Tesla sold about 13,000 EVs a week to Chinese car buyers. September sales have dropped to about 9,000 a week, according to insurance registration data collected by Citi analyst Jeff Chung.
Fewer retail deliveries in China will make it difficult for Tesla to hit the consensus call among analysts tracked by FactSet that the number for the third quarter will come in at 463,000 cars.
Expectations have been coming down. The average Wall Street estimate was about 473,000 a few weeks ago. Tesla delivery estimates tend to come down heading into the end of a quarter, but the slide to 463,000 would leave deliveries below the 466,000 Tesla achieved in the second quarter.
Tesla took some planned downtime at factories in the third quarter, limiting production. The company also is introducing an updated version of its Model 3 sedan in China, which is also leading to reduced sales of the car this month.
Tesla sold about 240 Model 3 sedans in China from Sept. 11 to Sept. 17, while the typical figure is between 2,000 and 3,000 a week. That trend should reverse in October when the newer version starts shipping.
Tesla is expected to report deliveries around Oct. 2, followed by earnings a few weeks later. The consensus call on Wall Street is for third-quarter earnings per share of 79 cents, down from 91 cents in the second quarter and $1.05 in the third quarter of 2022. Price cuts and competition in China continue to weigh on profit margins for Tesla and all Chinese EV makers.
Investors should brace for some trading volatility between now and the end of the quarter, as well as from the delivery report to earnings. Tesla's stock chart has shown some troubling patterns lately.
Tesla stock went from roughly $220 to $280 in a heartbeat. But now, the shares are threatening to break below $260. If they do, $240 is in play, according to Cappelleri's charts.
Cappelleri's call isn't based on the outlook for Tesla's business. He analyzes charts of moves in the shares to get a sense of where they can go over the short- and medium-term. It is an additional tool to help investors make sense of what is happening with the EV maker's relatively volatile stock.
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