Tesla's (TSLA) Model X is 'Very Cool' and 'Very Expensive', Says Morgan Stanley; Analyst Lowers Delivery Estimates and Trims Price Target

(Updated - October 6, 2015 12:01 PM EDT)

Analyst Morgan Stanley analyst Adam Jonas described Tesla's (NASDAQ: TSLA) Model X as 'very cool' and 'very expensive', and he said its high sticker price of $120-$130 thousand makes 2016 volume targets difficult to achieve.

"We had very high expectations for the technical capabilities of the vehicle and it appears Tesla has met these expectations. However, the Model X price appears to have an as much as $25k higher average transaction price (ATP) than the Model S and easily $10k to $15k higher than we had expected, based on early list pricing/specification options. Even allowing the Model X ATPs to decline over time through the introduction of lower-spec models leaves what we believe to be a higher-priced vehicle than we expected that may struggle to meet the volume expectations of the market and our forecasts," said Jonas.

"Unless Tesla introduces significantly cheaper versions soon, we do not expect the company to delivery more than 20k units of Model X in 2016 (70k units in total in 2016 including Model S), particularly when considering an increasingly difficult environment for imported luxury vehicles into China," continued the analyst. "This view of potential Model X volume may prove to be too conservative, but we would rather err on the side of being conservative until we can see the company's ability to ship units at this price or the path to augment the model offering with lower-priced versions."

Morgan Stanley now assumes 1,506 Model X unit deliveries in 2015. For 2016, Morgan Stanley's 2016 Model X delivery forecast was reduced to 20 thousand units (from 25 thousand). For 2017, Morgan Stanley reduced its Model X delivery forecast to 34 thousand units (from 42 thousand). For 2018, analysts now assume 45 thousand Model X units (prior 55 thousand.).

Morgan Stanley also trimmed its forecast of Model S annual volume by between 2-3 thousand units due to cannibalization and slightly slower volume uptake in China. Morgan's 2020 volume forecast (S, X, and Model 3) now stands at 287 thousand units.

"The combined impact of lower Model X and S unit volume with higher Model X ATPs is a 2% reduction of group non-GAAP revenues in 2016 and 2017," Jonas added.

Morgan Stanley maintained an Overweight rating on Tesla Motors (NASDAQ: TSLA) and lowered its price target to $450.00 (from $465.00).

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

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