hey it's Dave so this morning Tesla announced their Q3 delivery numbers they delivered just over 435 000 Vehicles which is a lot of cars but some people are calling this a big Miss because analysts expected Tesla to deliver about 455 000 cars in this video I'm going to question this and bring up some alternative angles so first of all delivery numbers are important for many investors because they provide the essential numbers for quarterly results meaning in order to get quarterly Revenue you just need to multiply total Vehicles delivered times average selling price and then from revenue you can work out a gross margin number which gives you gross profit minus operating expenses and you've got operating profit so in many ways the quarterly delivery number gives us the most early insight into Tesla's quarterly Financial numbers and so it's understandable why investors are so focused on this delivery announcement second the focus of Wall Street analysts are often divided and I'm not sure if their delivery estimates are really that accurate for example most Wall Street analysts that cover Tesla are covering all the automakers and think about the past few months their focus is probably mostly on the UAW strike and how it impacts automakers that's what most investors are going to be talking to these analysts about they're going to give a quarterly delivery estimate for Tesla because that's what they need to do but in context it's not something they're pinning their careers on contrast that Detroit tests like on X who really focuses on Tesla's production and delivery numbers he's not covering a ton of companies rather he's focused on Tesla and he's laser focused on production and delivery Choice delivery estimate was 441 000 so not far off if that number was 20 or 30 000 different then that would be surprising but Tesla's deliveries came in line with expectations for those who are really focused on that number there are Tesla worn in their last earnings that their production numbers were going to be down this quarter due to some Factory shutdowns required for upgrading their factories so this was a plan decrease in production numbers and not something that should surprise investors all right number four investors are different than analysts on Wall Street you've got two kind of analysts you have sell side and buy side it's a sell site analysts usually cover a large number of companies they publish their reports publicly but they're not evaluated on the profitability of the recommendations rather they're evaluated on how much business they can generate for their Investment Bank or Brokerage in other words they're trying to generate trading commissions and Investment Banking business now buy side analysts are different buy side analysts usually work in-house for one investment firm they usually research a smaller number of companies and they're trying to find the best investment opportunities for their fund whether it be a mutual fund hedge fund or Institutional Investor in other words their focus is the performance of their investment recommendations and that's how they're evaluated buy side analysts don't publish their reports publicly and they typically are much less visible than sell side analysts many people mislabel Wall Street expectations sell side analysts are public because that's their business model they need to generate business for their investment Banks and brokerages but they often aren't the most knowledgeable yet that's who's easily visible so many people call these sell side analyst expectations the same as Wall Street expectations but they're different they're just a small part of Wall Street and I would argue that buy side analysts estheticians are far more important and a better indication of true Wall Street expectations but the problem is buy side analysts estheticians are in public and they don't need to be they're not trying to attract business from others rather they're trying to make the best investment decisions for their funds alright so let's go full circle at the time of this recording Tesla's stock prices about down a dollar or so so how can we explain this if this was a big Miss simply buy side analyst expectations were probably lower than sell side analyst expectations and they should have have been buy side analysts are more focused on a fewer number of companies so they probably were paying more attention to delivery number details so just because you see a headline let's say that says Tesla missed Wall Street expectations often that isn't really accurate they're talking about public sell-side analyst expectations which could be materially different than the expectations of institutional investors and buy side analysts for a large market cap company let's say like Tesla institutional investors my opinion are really the only group that can move the stock price significantly over time Traders and algorithms are mostly just amplifying movements up and down and Retail investors don't have enough Capital to move the stock of a 800 billion dollar market cap company significantly over time but institutional investors in charge of large amounts of money especially billions of dollars and who are increasing and reducing their position size can move Tesla stock price and significantly and for this group of decision makers I don't think Q3 delivery numbers were that big of a miss and it probably doesn't change their outlook for the next year either the question is what can change that Outlook of institutional investors regarding Tesla usually it comes down to revenue and profit and profit is impacted by margins as well so will there be a significant change in revenue or margins over the next year that's what most institutional investors are focused on and based off of that changing Outlook you can see outflow or inflow into the stock but probably the bigger question for institutional investors right now is more of the overall economy the fed's looming decision on interest rates and where the overall Market is going over the next year and this is because often institutional investors are adjusting their position sizes in various types of stocks based on how they're viewing a continuously changing economic Outlook alright hope this has been helpful if it has good like And subscribe we'll see you guys in my next video thanks
