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How Is Tesla Positioned in March 2018?

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Mar. 23 2018, Updated 9:01 a.m. ET

Tesla is facing the heat

Tesla stock (TSLA) has been facing the heat lately due to its slower-than-expected ramp-up of Model 3 production. Also, analysts from many notable research firms such as Goldman Sachs expect the company to continue missing its weekly Model 3 production goal in 1Q18.

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Recent financials

In 4Q17, Tesla reported adjusted net loss of $3.04 per share on a non-GAAP (generally accepted accounting principles) basis. This was the biggest quarterly loss for the company so far but still better than analysts’ estimate of $3.10 per share.

In 4Q17, the company delivered 29,967 car units to customers, an increase of about 34.7% YoY and 14.7% quarter-over-quarter. Out of these total deliveries, 28,425 units were Model S and 1,542 units were Model 3. With this, TSLA’s 4Q revenues grow positively by 43.9% YoY (year-over-year) and 29.9% quarter-over-quarter to $3.3 billion on a GAAP (generally accepted accounting principles) basis.

In the fourth quarter last year, Tesla’s GAAP gross margin from the automotive segment was at 18.9%, slightly better than 18.3% in 3Q17 but worse than 22.6% in 4Q16. A minor contraction in Model S and Model X margins was seen in 4Q17, but the company expects these margins to improve in 2018 with the help of lower manufacturing costs and a better product mix.

Key risks ahead

Despite the fact that the Model 3 production ramp-up has been faster than that of Model S and Model X, Tesla continues to miss its own production rate estimates. Tesla expects to reach a Model 3 production rate of 2,500 units per week by the end of 1Q18 and 5,000 units per week by the end of 2Q18. A continued lower-than-estimated 1Q18 production rate could hurt the company’s future growth estimates and investors’ sentiments.

As of March 20, Tesla stock has gone down by 9.5% on a month-to-date basis. By comparison, other carmakers (XLY) such as General Motors (GM), Fiat Chrysler (FCAU), and Ferrari (RACE) have seen 6.3%, 0.4%, and 2% month-to-date losses during the same period.

Now, let’s dig deeper into key positive and negative factors for Ferrari in 1Q18.

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