The first quarter saw a bigger-than-expected drop in its deliveries, dominated by fall in demand for its luxury Model S and X vehicles of Tesla which raised questions about the finances of the company. The investors also reacted resulting in a 11 per cent drop in its shares on Thursday.

Following the company reporting drop in deliveries of the higher-priced luxury cars by about 50 per cent in the first quarter compared to the fourth quarter last year, the price targets on the company’s stock was cut by at least four Wall Street brokerages, because of concerns about the revenues and profitability of the company.

The deliveries of Model S/X deliveries were termed to be “very disappointing” by RBC analysts who also said that the drop would ultimately mean that the company would have a shortfall of revenues of about $1 billion against earlier estimates.

With the launch of its cheaper $35,000 version of the Model 3 sedan, Tesla had already warned of its expectations of a loss for the first-quarter of the current year.

According to IBES data from Refinitiv, 50,900 Model 3s, which is crucial to Tesla’s growth strategy, were delivered in the first quarter while the analysts expected the number to be around 58,900 vehicles.

Longer transit time was blamed for the first-quarter delivery drop by Tesla. According to analysts, this drop could impact the cash flow of the company despite the company stressing that it possessed enough cash at hand.

There were still 10,600 vehicles in transit at the end of the quarter, the company said while stating that half of the deliveries for the quarter was completed by March 21. In comparison, at the end of the fourth quarter last year, there were only 1,900 vehicles in transit.

Tesla had recently paid off a convertible bond worth in $920 million in cash at the beginning of March. Now considering the potential drop in cash, the company would likely be in a position where it would have dangerously low volumes of cash, said Cowen and Co analysts.

However, no new downgrades by brokerages on Tesla shares were made.

Tesla however also stressed that by the end of the current year, it would be able to complete delivery the previously forecast number of cars of between 360,000 and 400,000 units. It also added that the demand for the new Model 3 form its US customers were more than the company could cater to in the first quarter.

The numbers were called “more shocking than disappointing” by Nord LB analyst Frank Schwope who also added that questions about Tesla’s ability to deliver 400,000 cars this year still persists.

Tesla Chief Executive Officer Elon Musk has embroiled himself in a public battle with U.S. SEC over alleged violation of the agreement between Musk and the SEC over his tweets without the company oversight and permission. He most recent controversial tweet of Musk was about the production estimates of the company.

“With Musk due in court to face the SEC imminently, Tesla remains one of the most absorbing companies we cover, and one which for good or ill, never ceases to surprise,” Hargreaves Lansdown analyst Nicholas Hyett said.

(Adapted from Reuters.com)