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Tesla (TSLA) Rides on Model 3 Delivery Amid High Expenses

Zacks Equity Research

On Aug 5, we issued an updated research report on Tesla, Inc. TSLA.

The Palo Alto, CA-based company is engaged in designing, production and selling of electric cars, solar energy generation systems and energy storage product. At present, the company produces and sells three fully-electric vehicles — the Model S sedan, the Model X sport utility vehicle (“SUV”) and the Model 3 sedan.

Recently, the company made good progress in Model 3 delivery. In fact, record Model 3 sedan delivery is aiding Tesla to overcome waning Model S sales. In second-quarter 2019, it delivered more than 95,200 vehicles that not only exceeds the year-ago quarter’s level but also surpasses fourth-quarter 2018 figure of 90,700. Of the total deliveries in the second quarter, Model S and Model X totaled 17,650 while the number for Model 3 was considerably higher at 77,550. The company made tremendous progress by efficiently organizing its global logistics and enhancing cost efficiencies.

Tesla is also focusing on building Gigafactory to produce batteries in collaboration with various partners. In January 2019, the company began the construction of Gigafactory Shanghai. In second-quarter 2019, it started to shift machinery into the facility for the first phase of production.

However, some factors, which are affecting Tesla’s results, are high research and development (R&D), and selling, general and administrative (SG&A) expenses. The company is investing heavily to increase production capacity, develop Model X and Model 3, construct the Gigafactory, and expand sales, services and Supercharger infrastructure.

In the past six months, shares of Tesla have underperformed the industry it belongs to. Shares of the company fell 25.8% compared with the industry’s decline of 2.8%.

Zacks Rank & Stocks to Consider

Currently, Tesla has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the auto space are Oshkosh Corporation OSK, CarMax, Inc. KMX and Gentex Corporation GNTX. All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Oshkosh has an expected long-term growth rate of 11.6%. In the past year, shares of the company have inched up 0.1%.

CarMax has an expected long-term growth rate of 12.6%. In the past year, shares of the company have moved up 11%.

Gentex has an expected long-term growth rate of 5%. In the past year, shares of the company have returned 11.7%.

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