Sometimes focusing on the Wall Street consensus can drive investors mad.
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Tesla
beat delivery estimates as demand is strong. No, wait. Tesla missed delivery estimates with the company’s dramatic early January price cuts having failed to draw in buyers. So … which is it? The answer matters for trading on Monday, but it doesn’t really matter all that much in the long run.
Tesla (ticker: TSLA) reported Sunday that it delivered 422,875 vehicles in the first quarter, up from 405,278 delivered in the fourth quarter of 2022 and a new quarterly record for the company. But was it better than expected?
That depends on the source. Investors can look at many sources to get aggregated Wall Street estimates. FactSet’s first-quarter delivery consensus was roughly 430,000 units. By that measure, Tesla’s first-quarter result was a “miss,” and a miss could mean there is something wrong at the auto maker. But the FactSet number was built on only 10 estimates, according to the financial data provider.
Overall, FactSet lists 47 analysts covering Tesla stock. Not every analyst provides the same estimates with the same frequency as others. Any one estimate tracked by FactSet or other aggregation services typically is less than the total number of analysts covering a stock. Take earnings, for example. The first-quarter earnings estimate of 86 cents a share for Tesla compiled by FactSet is an average of 28 analysts.
FactSet might not have enough analysts in its sample size. The consensus estimate for first-quarter deliveries on Bloomberg was closer to 421,000 units. That number was the average of 18 analysts.
Investors have other sources besides FactSet and Bloomberg. There is the Tesla compiled consensus. That’s an average of 25 analysts. That number came to about 421,000 units delivered in the first quarter.
Investors might be wary of taking numbers from a company, but at least it is consistent and transparent. Tesla lists all the brokers it averages: Baird, Barclays, Bernstein, BofA, Canaccord, Citibank, Cowen, Daiwa, Deutsche Bank, Evercore, Goldman Sachs, Guggenheim, Jefferies, JPMorgan, Mizuho, Morgan Stanley, New Street Research, Oppenheimer, Piper Sandler, RBC, Truist, Tudor, UBS, Wedbush and Wolfe.
Of those, there are 15 Buy ratings, six Hold ratings and four Sell ratings. That is a Buy-rating ratio of 15 over 25, or 60%. That ratio is higher than the 53% Buy-rating ratio among all 47 analysts tracked by FactSet. (The average Buy-rating ratio for a stock in the S&P 500 is about 58%).
Perhaps having more bullish analysts pushes down the consensus number. Bulls like it when companies beat numbers. Setting a low bar to jump over is a possibility. That’s a stretch. Analysts, and their clients, like accuracy too.
First-quarter deliveries, based on Bloomberg and Tesla estimates, were a “beat.” Maybe that means Tesla’s price cuts are working and EV demand remains strong.
Investors should be careful not to build narratives around a single data point. Overall, the first-quarter delivery number looks fine. That’s the view of Barron’s based on all the numbers published and all the research we’ve seen recently.
Our opinion of the consensus confusion isn’t all that important though. The market will decide what happens to Tesla stock in the short run and in the long run. Shares could be weak Monday. Big moves raise the stakes for any stock and Tesla has been up a lot lately.
The stock rose 6.2% on Friday, while the
S&P 500
and
Nasdaq Composite
rose 1.4% and 1.7%, respectively. What’s more, Tesla shares rose 68% in the first quarter.
In premarket trading Monday, Tesla stock was down 1.4% at $204.49 a share. S&P 500 futures fell 0.1%, while
Dow Jones Industrial Average
futures rose 0.3%.
Write to Al Root at [email protected]
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