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Why Tesla (TSLA) Is Tanking Despite Reaching Model 3 Production Goal

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Shares of Tesla (TSLA - Free Report) were down more than 5% through morning trading hours Tuesday, just one day after the electric car giant said it reached its weekly production target of 5,000 Model 3 cars for the final week of the June quarter.

Tesla has struggled to reach the 5,000-per-week target for the affordable Model 3, so investors might have considered Monday’s announcement as a moment of relief. However, a closer look at the news clearly shows why Wall Street is still disappointed in Tesla.

Notably, Tesla fell significantly short of Q2 delivery estimates, tallying 40,740 vehicles delivered against the Street consensus of about 51,000. There were also reports from Reuters which suggested that Tesla pulled workers from other departments—including the Model S production line—to meet the Model 3 goal.

One of Wall Street’s top analyst firms was not encouraged by the headlines and reiterated its sell rating for Tesla stock.

“Model 3 deliveries did miss our bearish estimates and we see the incremental color on Model 3 net reservations (where the company showed its first declining data point) as incrementally negative,” said Goldman Sachs in a note Tuesday.

Goldman also reiterated its $195 price target for TSLA—a 42% decline from Monday’s close—and pointed to a decline in Model 3 reservations as another reason to be hesitant.

Negative analyst reactions and disappointing overall delivery results sent Tesla shares to an intraday low of $315.90 late Tuesday morning. The stock is now about 19% off its 52-week high.

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