Investors unimpressed by the record number of cars Tesla’s (TSLA) produced last quarter sent its stock reeling, which shed over 5% on Thursday as Wall Street questioned the car maker’s valuation and ability to turn a profit.
On Wednesday, Tesla said that it produced and delivered nearly 97,000 cars in the third quarter, its best ever and higher than the comparable year-ago period. The results were bolstered by strong production of Tesla’s flagship Model 3, which spiked 43% year over year.
However, the results fell short of some of Wall Street’s more rosy estimates, and the 100,000 mark CEO Elon Musk reportedly told employees was a real possibility. Although the company has boosted overseas deliveries and incentivized sales, Tesla remains dogged by doubts about its cash flow and ability to sustain production.
Analysts at Bank of America pointed out that “although total Model 3 deliveries increased materially” at a year-over-year rate of 43%, that gain was “much less pronounced on a sequential basis, up just 2.5% from 2Q:19.”
Warning that “many challenges remain ahead” for Tesla as it burns through cash and misses estimates, the bank added that “this could reflect the still slow production ramp ... but potentially less robust demand (following a traditional spike-and-burnout pattern with new model launches).”
Tesla’s failure to explicitly reiterate earlier guidance for delivering between 360,000 and 400,000 vehicles this year suggests fourth quarter deliveries and production may also fall short of hopes, BofA said. The bank rates Tesla’s stock as an Underperform, with a price target of $225.
The shares, traded on the Nasdaq, shed nearly $17 from Wednesday’s close to trade around $226.
Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek
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