Tesla Beats Shipment Estimates, But PacCrest Is Worried About Margins

Tesla Motors Inc (NASDAQ: TSLA) reported its Q3 deliveries at 24,500, well ahead of the consensus and the estimate.

Pacific Crest’s Brad Erickson believes the unit volume outperformance was a definite positive and would “reinforce any bullish thesis looking for a better-than-expected Model 3 ramp next year.” However, the analyst expressed concern regarding the dilutive gross margin impact due to the incremental volume.

“Given the estimated 930 bps gross margin hit on the lowest-end Model S SKU, we need more confidence in the gross margin moving into Model 3 before getting more constructive on TSLA,” Erickson mentioned.

Related Link: Tesla Displayed 'Phenomenal Execution' On All Fronts

The upside during Q3 was driven by Model S, while Model X deliveries came in below the estimate. Tesla reiterated its delivery guidance for H2 of 50,000 units.

Model S

However, Erickson pointed out that recent checks indicated that the 60 kWh Model played an important role in driving the unit volume outperformance, especially with Tesla converting Model 3 reservation holders into buyers of Model S through its recently launched two-year leasing program.

In addition, based on the checks, the analyst believes that “Model X delivery in the U.S. is currently running around five-to-six weeks. Prior to the car being launched, our checks and other third-party estimates indicated a backlog of over 30,000 reservations.”

However, it's unclear whether those other orders failed to convert, were changed to Model S or simple cancelled.

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