Tesla Motors Inc (NASDAQ:TSLA) has been unable to hasten deliveries of its Model X SUV. This has forced JPMorgan to cut their fourth quarter earnings estimate for the EV maker, leading to a sharp drop in the company’ stock price on Monday. The stock closed down 3.1% at $196.38, the lowest level since April 2015.
Gross margin a concern
Auto analysts Ryan Brinkman and Samik Chatterjee slashed their profit estimates by more than half as the company did not sell as many SUVs as they expected.
“We estimate that the slower than expected ramp in Model X vehicle production will pressure gross margin,” analysts wrote.
Tesla revealed its fourth quarter deliveries earlier this month, which included around 200 Model X SUVs. Initially, the company appears to be taking a cautious approach towards Model X deliveries. Smartly, the company is reportedly keeping deliveries near its headquarters to ensure a quick address to any problems.
JPMorgan analysts expected the automaker to deliver 4,000 Model X units in the quarter. The shortfall in the delivery number was almost compensated for by greater-than-expected deliveries of the Model S. Overall, Tesla missed their delivery estimate by fewer than 500 units, but concerns about the gross margin pushed the analysts to slash their earnings estimate to 10 cents from 26 cents.
Lower PT, lower EPS estimates for Tesla
After a string of long delays, Tesla delivered the first Model X units at the end of the third quarter. Recently, the EV firm sued a German supplier that made the car’s signature “falcon wing” doors, suggesting that the doors could be the major reason for the delays.
JPMorgan has a $180 price target on the stock, much below the average analyst price target of $276.41. The firm’s earnings estimate is also below the average analyst projection of a profit of 17 cents a share on sales of $1.84 billion.
In a note to clients last week, Robert W. Baird reaffirmed its Hold rating on the stock. Morgan Stanley, in a note on Jan. 14, reiterated its Buy rating with a price target of $450. The EV firm will report its fourth-quarter and full-year earnings after the market closes on Feb. 10. Year to date, Tesla shares are down by over 18%, while in the last year, it is down by over 2%.