Just as the Tesla story has always elicited comments from both well-informed and uninformed writers, TSLA stock attracts investors of wildly varying levels of sophistication – or, to put it colorfully, “smart money” and “dumb money.” While the dumb money periodically causes large temporary tumbles in the stock price, triggered by Elon Musk pretending to smoke a joint, or a legacy automaker announcing its intention to someday consider producing a new EV, the smart money has long shrugged off such sideshows, saying things like, “When demand for Tesla’s vehicles falls, that’s when I’ll get worried.”

Now, breaking a long streak of growth, Tesla’s deliveries have fallen, and the smart money is getting worried. Do the disappointing quarterly figures represent inevitable growing pains as Model 3 sales expand to Europe and China, or are they a sign that demand is slowing down?

Tesla told the story succinctly in a press release:

In the first quarter, we produced approximately 77,100 total vehicles, consisting of 62,950 Model 3 and 14,150 Model S and X.

Deliveries were approximately 63,000 vehicles, which was 110% more than the same quarter last year, but 31% less than last quarter. This included approximately 50,900 Model 3 and 12,100 Model S and X.

Due to a massive increase in deliveries in Europe and China, which at times exceeded 5x that of prior peak delivery levels, and many challenges encountered for the first time, we had only delivered half of the entire quarter’s numbers by March 21, ten days before end of quarter. This caused a large number of vehicle deliveries to shift to the second quarter. At the end of the first quarter, approximately 10,600 vehicles were in transit to customers globally.

Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted. Even so, we ended the quarter with sufficient cash on hand.

In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up. Inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2-3 months.

Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what we were able to deliver in Q1. We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019.

Given that Tesla vehicle production currently occurs entirely from one factory in the San Francisco Bay Area, but must be delivered to customers all around the world, production could be significantly higher than deliveries, as it was this quarter, when production exceeded deliveries by 22%.

We’ve just begun the global expansion of Model 3, and we want to thank our employees for their hard work and our customers for supporting our mission. We are doing everything we can to deliver cars globally as quickly as possible and look forward to continuing to scale deliveries throughout the year.

The news caused TSLA stock to drop 10% at the next morning’s open, and many analysts waxed pessimistic.

JP Morgan analyst Ryan Brinkman said that, even if some of the drop could be explained by delivery delays, “the choppiness and inconsistency of this communication would still in our view erode investor confidence.” Brinkman also thinks the numbers may undermine Elon Musk’s case in his ongoing dispute with the SEC, which accuses him of throwing around overly optimistic production predictions.

Goldman Sachs analyst David Tamberrino said, “We think the delivery results will put pressure on TSLA’s shares, and corroborate our belief that volume expectations for the company’s products in 2019 are too high with consumer demand likely lower as subsidies phase out in the US.”

Wedbush Securities was a lonely voice of optimism: “The Street was expecting an apocalyptic quarter, and Model 3 deliveries were slightly better than feared by many with 50k Model 3 vehicles the line in the sand, although the overall number was clearly rocky and represents an air pocket quarter in our opinion.”

Sources (delivery numbers): Tesla, Electrek. Sources (analysts): Electrek, CNBC