Tesla Has Stock Traders Getting It All Wrong - The Motley Fool

The stock market has had a terrible first nine months of the year in 2022, but it seemed as though investors might get at least a brief respite. Futures contracts on major market benchmarks were moving higher Monday morning on the first day of the fourth quarter, although the Nasdaq Composite (^IXIC 1.41%) only managed barely to poke into positive territory as of 8 a.m. ET after having been down much of the morning.

The downward move in Tesla (TSLA -8.55%) was the big culprit holding the Nasdaq back Monday morning. Shareholders responded negatively to the electric vehicle (EV) company's third-quarter unit volume numbers, and there were some reasons to justify their concern. However, in focusing too much on one particular metric, investors seemed to ignore more promising news that arguably should have kept them more bullish on Tesla's future.

Image source: Tesla.

Deliveries fall short

Tesla's stock was down more than 5% in premarket trading on Monday. The reaction came almost entirely due to the EV pioneer's report on the number of vehicles it delivered to consumers during the months of July, August, and September.

Tesla announced on Sunday that it had delivered more than 343,800 vehicles in the third quarter. That was up considerably from the nearly 254,700 Tesla vehicles that consumers received in the second quarter, and it was even well above the 310,000 EVs that Tesla got into customers' hands during the first three months of 2022.

Yet the record results didn't meet the expectations of those following Tesla's business operations. Most analysts covering the EV stock had anticipated the number would be somewhere between 350,000 and 370,000, with the average coming in a bit over the 360,000 mark. In typical fashion, the lower number prompted immediate selling once premarket trading began.

Why did Tesla under-deliver?

Tesla had an explanation for why its delivery numbers fell short. Unlike some other automakers, which have had to curtail delivery of vehicles because they haven't been able to get the necessary parts and components to complete production, Tesla didn't have any shortage of finished cars to deliver.

Instead, Tesla noted that as its production figures have grown, it has become increasingly difficult for the company to line up the logistical resources necessary to get its vehicles to end-buyers. Strains on the transportation system more broadly have also caused shipping costs to rise dramatically, particularly during the end-of-quarter periods at which Tesla has concentrated its vehicle movement efforts.

Also adding to the challenges involved is the fact that Tesla has taken greater advantage of its growing production network to optimize its vehicle building efforts. That creates benefits in efficiency, but at the cost of requiring even better logistics handling and having more vehicles moving near the end of the quarter.

Drawing the wrong conclusions

Rather than taking the company at its word, traders inferred that they should be more worried about falling demand for Tesla vehicles. After all, that plays well into the overall macroeconomic environment, with consumers pulling back on a host of discretionary purchases, particularly on big-ticket items.

However, the number that Tesla investors should be focused on is the production figure, which soared to nearly 366,000. In the past, production and delivery figures have been close to each other, with some quarters seeing production exceed deliveries and other quarters seeing the opposite.

But with a 22,000 vehicle difference, the primary issue for Tesla here is timing, and that's a far easier problem to resolve than the production bottlenecks rival automakers are facing. Indeed, the problem should fix itself in the first weeks of the new quarter -- and could well help Tesla deliver the 500,000 EVs it hopes to produce between now and the end of 2022.

Logistics problems aren't inconsequential, but they're also not permanent. In time, they'll subside -- and when that happens, Tesla shareholders who sold on artificially low delivery numbers will realize the mistake they've made.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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