Morgan Stanley's Jonas Remains a Steadfast Bull on Tesla (TSLA)
With the bears pounding their chests today on Tesla (NASDQ: TSLA), on the bull side Morgan Stanley analyst Adam Jonas was just on CNBC discussing how he remains steadfast on the stock with the company pushing the "insane button" on capex and growth. Below is a summary of today's note from the analyst:
Jonas reiterated an Overweight rating and price target of $280, saying "Tesla is preparing to be a much larger company than we have forecasted... leaving us with nervous excitement."
The analyst said when assessing Tesla financial results, they ask 2 main questions: (1) How does demand look? And (2) how much is it costing them to supply current and expected demand? The pace of demand appears to be quite good and the cost to supply the demand is looking eye-wateringly high, he said.
On demand, he commented: "The pace of demand appears to be quite good under some challenging circumstances (slowing international markets, US$ strength, China commercial expansion stuck on the launch pad). 4Q deliveries of 9,834 were in line with our forecast despite a 1,400 supply slippage into 1Q. The customer deposit balance increased 14% sequentially and was 80% above our forecast, suggesting there’s a lot of wealthy people who still want what Tesla is selling. The company’s 2015 volume guidance of 55k units is 7% above our forecast. Interestingly, Elon seemed confident that they would be able to achieve 55k units even if sales in China were zero.
On the cost to supply the demand, he commented: "On the call, Elon said "We're going to spend staggering amounts of money on capex." Specifically, the company is targeting capex of $1.5bn in 2015, a figure nearly double our expectation and up 50% YoY. Guidance for operating expenses up nearly 50% YoY is more than 40% above our forecast (mostly due to rising R&D expenses). While 4Q cash burn of $86mm was roughly in line with our expectations, we look to our 2015 forecast expecting far, far greater levels of cash consumption than the $40mm we have currently modeled.
Tesla's expected spending levels reflect a company with ambitions to achieve at least 500k units of volume by 2020… not the 295k units they have forecasted, the analyst notes. "We have long viewed Tesla strategy as focusing on the very high end, high performance end of the car market to help generate the excess returns necessary to fund ambitious growth projects to eventually expand into lower price points (affluent mass-market) and/or adjacent technology projects (stationary energy storage). The assumptions in our earnings model seem to be at great philosophical odds with Tesla’s much more ambitious growth aspirations. When thinking about the share price development, the key question we are left with is whether investor appetite can keep up with Tesla’s growth journey and the alignment of forward looking expectations with the capital markets… a balance so important to firms at this early stage of development."
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 $212.80 yesterday.