Shares of Tesla Inc (TSLA) are slightly lower on the day after a meteoric 40% run higher in the last two weeks after the company was selected to join the S&P 500 on December 21st, 2020. While valuation is sky high, there are other issues that investors should pay attention to. It appears Tesla is struggling to meet its end of year delivery numbers. In addition, it also appears the Cybertruck production is being delayed significantly. This warrants major concern not only for current delivery expectations but also for future earnings.
The delivery numbers are in trouble based on a major push from Tesla (including discounts) to get Cybertruck owners to lease other Tesla vehicles while they wait for the Cybertruck to be produced. Tesla is expected to deliver 180,000 vehicles into year end. That is 40,000 more than they have ever delivered in a quarter before. Pushing leases on those that have reserved a Cybertruck shows a major year end push by Tesla to boost their delivery numbers to meet expectations. This is also concerning because the lease terms of 2 and 3 years at a minimum. If the Cybertruck was going to be produced and delivered in a year or so (expectations were late 2021/early 2022), then this does not mesh with the lease terms. This signals that Cybertruck production will be delayed at least a year. This also leaves the door open to companies like General Motors (GM) and Ford (F) to get their electric pickup trucks rolled out first.
Based on the current valuation and sky high expectations for Tesla, look for significant selling after it has been added to the S&P 500. Downside is likely $400 or lower on the stock.
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