Should You Buy Tesla Stock Before Oct. 2?
Key Points
Wall Street is divided over Tesla's third quarter vehicle delivery estimates.
While Tesla vehicles are growing in smaller markets, core regions such as the U.S. and China are experiencing weaker sales.
Timing your buys around specific events is not a winning strategy in the long run.
On Friday, Oct. 2 Tesla (NASDAQ: TSLA) is expected to publish its vehicle delivery and production stats for the third quarter. As usual, investors are asking whether it's a smart idea to buy Tesla stock ahead of the print. My take is to treat the delivery numbers as a headline, not a reason to buy shares.
What does Wall Street expect for Tesla's Q3 deliveries?
According to data compiled by Visible Alpha, the consensus delivery estimate for Q3 is 456,000. What's interesting is how far apart some analysts are in their forecasts.
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Image source: Tesla.
Goldman Sachs analyst Mark Delaney cut his delivery forecast from 490,000 to 435,000. He argues that sales in Tesla's biggest markets -- the U.S., China, and Europe -- are all tracking below consensus. The U.S. is the cleanest drag, with August sales down about 26% from a year earlier. Remember, around this time last year buyers were rushing to buy Tesla's in order to take advantage of an expiring $7,500 federal tax credit for electric vehicles (EV).
Delaney also says that exports from Giga Shanghai into other regions in Southeast Asia, as well as South America and Australia are growing year over year but will only partially offset the declines from the core markets.
Image source: Tesla.
On the other side is Barclays analyst Dan Levy, who is modeling deliveries around 475,000. Levy's bull case revolves around robust volumes out of Giga Shanghai. Between July and August, wholesale volume rose 19% year over year to 180,000 units while exports from the plant jumped about 92%. China retail was the counter side of that coin, with only about 77,000 vehicles delivered in those two months, down over 20% year over year. Essentially, deliveries in domestic China are falling while Shanghai exports record volumes.
In addition, Levy points to wider adoption of Full Self-Driving (FSD) in North America as one reason why Tesla's deliveries might surprise to the upside. Levy thinks FSD could pull more incremental buyers than investors are anticipating.
Interestingly, J.P. Morgan sits in the higher camp for delivery estimates even after cutting its forecast from 516,000 units to 482,000. One reason behind J.P. Morgan's reduction was due to falling vehicle registrations in major markets. The bank notes that Tesla's August registrations were down about 13% in China and roughly 4% in the U.S. While registrations in Europe are starting to rebound, Chinese EV rivals are accelerating at a faster pace in that market.
Should investors buy Tesla stock before deliveries are published?
Smart investors understand that market timing never works over a long stretch because you have to be right twice: before the news comes out and after everyone else has already priced it. Tesla stock has a history of experiencing fleeting pops on delivery headlines and then fading after the full earnings report is published. This dynamic showcases how Tesla frequently gets caught up in narrative-driven momentum trades.
If you own Tesla stock, buy it because you have conviction that Elon Musk can turn the company into an AI conglomerate spanning robotaxis, Optimus, autonomy, and energy -- not because Friday's car count might land a few thousand units above an analyst's model. One quarter of deliveries will not make the long-term vision any clearer by market close on Friday.
Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends Goldman Sachs Group and Tesla. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.