Tesla (TSLA) Investors Restless Into Tonight's Q3 Results

Tesla Motors (NASDAQ: TSLA) investors are very anxious into tonight's third quarter earnings results, according to Morgan Stanley analyst Adam Jonas. In fact, Jonas said they have never had more incoming inquiries ahead of a TSLA quarter than we've had over the past week. He said sentiment appears nervous/cautious, particularly regarding N. American Model S demand. Jonas is advising clients to be prepared to buy the dip.

"It's anybody's guess how Tesla trades following 3Q results," Jonas said. "We talk to buyers, sellers… folks who want to buy and want to sell. The conversation is coming from all different directions. When thinking about the substance of 3Q results, we definitely pick up a heightened sense of concern over the earnings momentum, much of which is perfectly valid."

The analyst sees many reasons why Model S volume in the US could be under pressure through the remainder of 2014:

1. Cannibalization ahead of the 4WD Model S. Who in the Northeast or Midwest of the US market would want to buy a RWD version of the Model S after last winter's polar apocalypse?

2. Model X is getting closer to launch (even if a bit delayed) and promises to offer a more complete package of utility, performance, safety and comfort enhancements. Will Model X be the best Tesla money can buy?

3. Tough prior year comps. This time last year, Tesla was only beginning to ramp up deliveries of Model S to the European market with the meat of shipments to fanatical early adopters.

4. If given the option, Tesla will prioritize deliveries in key export markets where a greater portion of customers are eagerly awaiting delivery. Markets such as RHD countries like the UK and Japan, and of course, China, where we expect demand to far exceed Tesla's ability to deliver for many quarters (if not years) to come.

5. Tesla is trying to build brand authenticity, not focusing on expanding volume just for the sake of YoY volume growth. If that means they 'tap out' on early adopters, so be it. There's more product coming.

Asking if Tesla is beginning to act like a 'stock' for the first time, Jonas said "For sure, yes.

"Ambitious projects such as the Gigafactory, Model X and autonomous cars have attracted widespread attention from the broadest array of investors we have seen since we have covered the company," he commented. "While TSLA is our top OEM pick in our US coverage universe (we also recommend Fiat Chrysler), we believe the stock is one of the least understood stories in global autos. We are astonished by how many investors we speak with who believe Tesla is a play on democratizing EVs to the mass market with the Model III later this decade. In our opinion, this is not the case at all - at least not in this decade. While products like the Model III should extend into significantly lower price points, we still expect ATPs in the $50 to $60k range or more with the emphasis squarely on performance and driving pleasure (think 0 to 60 in 3 seconds or less… performance that can surpass that of a 2018 BMW M3). We think it's critical that Tesla keeps the product focus on performance above all else (rather than greenness or fuel savings) particularly given the pace of internal combustion engine improvement in a $3-a-gallon gasoline price environment."

He added, "The market may need some time to adjust to a different vision of Tesla's future as a niche OEM pushing the envelope on connected and autonomous technology, rather than going for a home-run Model T like moment. We can't rule out breakthroughs on battery cost ($ per KwH) or energy density (KwH per Kg)… we just don't think investors should take this for granted with Tesla shares."

Despite the cautious comments, the firm is maintaining Overweight rating and price target of $320 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 $238.93 yesterday.

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