High Risks-High Rewards for Tesla (TSLA) Investors; Morgan Stanley Sees Buying Opportunity

Morgan Stanley analyst Adam Jonas was out pounding the table on Tesla Motors (NASDAQ: TSLA) this morning, saying if the Model X launches in August and does as well as they expect the stock can set new highs by year end.

Jonas notes investor mood have shifted negatively to the pre-Model S launch days given the "staggering’" levels of capex and R&D planned for 2015 and the pace of cash burn exhibited ($450mm in 4Q). Tesla plans on spending nearly 1/4 of what Ford is planning on spending this year, while Ford is 40x larger by revenue and 200x larger by volume. But Jonas asks - who would you rather give $1.5 billion to invest: Elon Musk or your average auto company?

"We’ll gladly take the pain of cash burn at Tesla for the next 12 or 18 months than the pleasure of positive cash flow and buybacks from many other auto manufacturers," Jonas said. "If we weren't so convinced of the magnitude of industry disruption facing the auto sector and Tesla's unique abilities to affect such change, we’d be far more concerned. We’re not saying that the cash flow dynamics facing Tesla don't pose real risk to investors – they surely do. We’re just recognizing that investors have a choice here. Invest in cash-rich traditional auto companies at low valuations doing BMW-style margins in a 17+ million US SAAR environment, or invest in the company we believe has the best opportunity to change the industry fundamentally despite burning cash and having no near-term valuation support. It’s a question of style and an interpretation of risk-reward. As usual, the Tesla investment case will not be for everyone."

The firm maintained an Outperform rating and price target of $280 on TSLA

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $204.46 yesterday.

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