Tesla Motors Inc (NASDAQ:TSLA) reported startling third-quarter results with the best quarter ever, but a few announcements kept investors from celebrating much. Amid the mixed feelings, a Merrill Lynch investor letter claims that there are more factors about Tesla that raise concerns.
Tesla sits on 3,000 cars
A report in the Daily Kanban cited research meant for Merrill Lynch clients that suggests Tesla had around 3,000 vehicles piled in its inventory or in transit at the end of the third quarter. This is a significant number in light of the fact that the company reported selling 7,785 units for the whole quarter. This revelation is surprising, as Tesla does not keep an excess supply and generally keeps inventory levels low, and there are apparently waiting lists for the Model S. Tesla CEO Elon Musk has always maintained that the company is facing challenges in maintaining enough supply to meet the demand.
The Electron Global Fund was up 2% for September, bringing its third-quarter return to -1.7% and its year-to-date return to 8.5%. Meanwhile, the MSCI World Utilities Index was down 7.2% for September, 1.7% for the third quarter and 3.3% year to date. The S&P 500 was down 4.8% for September, up 0.2% for the third Read More
The research report from Merrill Lynch also stated, “China is proving to be more challenging for Tesla to penetrate than expected.”
Tesla does not report sales numbers by regions, which could have helped to verify the issue in China. However, the company has mentioned that the most number of cars were sold in the Shenzhen store, and there are now 23 Supercharger locations in 10 Chinese cities.
Other analysts cautious too
The EV manufacturer stated that 907 vehicles were delivered in a single day, which is its best, and is targeting increased production to get more vehicles out the door by the end of 2015. But the celebrations were somewhat marred by the further delay announced in the launch of Model X and higher prices in Europe.
Prior to the Merrill Lynch letter, other analysts also released cautious reports contradicting Musk’s positive assertions. In October before the announcement of the results, a report from The Wall Street Journal claimed that Tesla’s sales were declining. Another analyst noted that the company will need an injection of $6 billion to implement all its plans accomplished by 2025.
Despite the cautious tone, Tesla shares are showing a rising trend, and if they sprint beyond $260 per share, the next resistance level will be much higher, according to an influential market research firm. Shares have climbed by almost 70% this year to $251, and according to Bespoke Investment Group, they could hit $300 by the end of this year.