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Tesla Sales Are Stagnating, a New Data Service Says. Will It Matter for the Stock?

Cross-Sell Interactive is trying to give investors a new edge on Tesla stock by tracking new-vehicle registration data in two dozen states. Cross-Sell’s third quarter report—released Monday evening—is alarming, showing lower prices and stagnant sales. Still, the report might not presage a big stock decline when Tesla reports third-quarter numbers after the close of trading on Oct. 23. Cross-Sell’s data set is new and, after all, captures only a sample of total sales.

According to the report, Tesla (ticker: TSLA) new-vehicle registrations were stagnant year over year in 22 states including California and Texas. What’s more, those registrations decelerated sharply in August and September, dropping from healthy levels in July. Overall, car owners registered about 31,000 Tesla vehicles in the third quarter—flat with a year ago.

“In California, August and September 2019 are the only two months this year where Tesla didn’t perform better than the year prior,” said Shane Marcum, vice president of Cross-Sell, in the company’s report.

The headline numbers look concerning, but this is the second quarterly report issued by Cross-Sell. It isn’t clear if the new data will move Tesla stock or, more important, if they will predict margins or income for coming quarters.

Pricing for Tesla products in Texas, for instance, declined sequentially. But features and trim levels aren’t available and Tesla manufacturing cost reductions aren’t known. That makes predicting Tesla gross margins difficult. What’s more, the Cross-Sell report shows Tesla financing more of its vehicle sales—introducing another source of profit for Tesla—and a new wrinkle for analysts trying to predict Tesla’s quarterly results.

Investors will be very focused on margins, cash flow, and profitability when the company reports full third quarter numbers since delivery figures have already been disclosed. Telsa disclosed 97,000 deliveries for the third quarter earlier in October. It will take about 105,000 deliveries in the fourth quarter—a company record—to meet the full-year guidance given earlier in 2019.

The Cross-Sell report might result in more stock volatility between now and Oct. 23, when results are reported. After all, Tesla is a controversial stock.

Consider, Tesla target prices from major Wall Street brokerages range from $140 a share—down 45% from recent levels—all the way to $530 a share—up more than 100% from Monday’s closing price. The $390 target-price spread is more than 150% of the current stock price. The average bull-bear spread for stocks in the Dow Jones Industrial Average is less than 50%, based on Barron’s calculations.

The controversy also manifests itself in short interest. Bearish investors have borrowed and sold short more than 25% of Tesla stock available to trade in the marketplace. That’s about 8 times the average short interest for S&P 500 stocks.

“We are excited to see what Q3 has in store for [Tesla],” David Wall, Cross-Sell director of sales and product, said in the report. So is Wall Street.

Tesla stock is down 23% year to date, worse than the 5% gain of the Russell 3000 Auto & Auto Parts Index and the 15% gain of the Dow over the same span.

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