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Elon Musk’s ballyhooing about Tesla Inc. possibly setting another vehicle-deliveries record may have diverted attention from the potential for a less-flattering trend: falling revenue.

Analysts at Credit Suisse and RBC Capital Markets are among those predicting Tesla will post lower revenue for the third quarter than a year ago. If there is indeed a decline, it will be a first for the company since 2012 – the year the Model S started production.

A revenue drop would be a downer for Musk, who told employees last week they “have a shot” to deliver more than 100,000 electric vehicles this quarter. But the vast majority of the cars Tesla is handing over are Model 3 sedans, which start at $38,990 in the U.S., less than half the cost of the lowest-priced Model S or X.

The drastic shift in sales mix toward its cheaper sedan dogged Tesla in the second quarter, with Musk following up a record deliveries report with a worse-than-expected loss. While the company said it would aim for a profit this quarter, it planned to prioritize volume growth.

“Even if it meets consensus on deliveries, the question into third quarter earnings will be around margins, plus how the stock reacts with likely the first negative year-over-year revenue growth quarter since 2012,” Dan Levy, a Credit Suisse analyst, wrote in a report last week. He has the equivalent of a sell rating on Tesla, with a $189 price target.

Tesla’s stock has dropped 27% this year, closing Friday at $242.13. The stock was up 0.1% as of 8:51 a.m. Monday in New York, after the blog Electrek reported Tesla had communicated to employees they were “a few thousand” cars short of the delivery goal as of Sunday night.

Earnings Offset

Several analysts appear to be basing their revenue estimates on the assumption Tesla will fall short of 100,000 deliveries for the quarter. If Tesla hands over more vehicles than expected for the quarter, they may have to boost their projections. The average of 22 analysts’ estimates compiled by Bloomberg is for $6.4 billion revenue for the third quarter, compared with $6.8 billion a year earlier.

“We saw last quarter that the outperformance from strong deliveries was more than offset by the weak earnings that followed,” Jeffrey Osborne, an analyst at Cowen & Co., wrote in a report dated Sunday. “We believe a delivery beat would likely result in a more muted near-term reaction as investors wait for the financials.”

There are levers Tesla could pull to pad the revenue it reports along with earnings in a few weeks. The company had $1.18 billion of deferred revenue on its balance sheet as of the end of June, and could recognize part of that sum based on meeting certain performance obligations. One such example is the system Musk has marketed as Full Self-Driving, which was sold to consumers in advance of many features being ready with the promise that capability will improve over time.

Profitability Focus

Another factor that’s difficult for analysts to model for is the recognition of regulatory credits sold to automakers who need to offset their deliveries of gas-burning cars in markets including the U.S. and Europe. Chief Financial Officer Zachary Kirkhorn said earlier this year that credit sales will be a more meaningful part of Tesla’s business in the coming years.

“Ultimately, the quarter reaction will likely come down to a conflict between growth’ and cash flow,” Joe Spak, an RBC Capital analyst with an underperform rating on Tesla, wrote in a report last week. “We believe the market will increasingly place greater focus on profitability and will also reassess the long-term assumptions needed to justify a higher stock price.”

Musk’s deliveries email wasn’t the only potential distraction from skeptical analyst reports last week. Tesla started deploying its latest over-the-air software update to customers’ cars with new features, including the ability to use streaming services Spotify, Netflix and Hulu on the car screen while parked. The company blasted out marketing emails about all the additions in the days before the quarter came to a close.

“Transform your car into an entertainment juggernaut, with immersive sound so incredible you might consider having your next movie night in your car,” read one of the emails, promoting a new “theater” feature.

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