The Ax Weighs in on Tesla (TSLA) Post Q3
Morgan Stanley's Tesla Motors (NASDAQ: TSLA) analyst Adam Jonas, arguably the ax in the stock, weighed in on the stock post third quarter results. He noted the print featured slightly lower 2014 deliveries, materially higher cash burn and a 1 quarter delay to Model X launch. Most of these, however, were expected and everything else (margins, forward demand, product enhancements) appears stronger than expected, he said.
Jonas said if the stock does not drop below the $200 level in the next couple of days, they think it may not happen for a while.
"Many investors we speak with seem convinced of the Tesla investor thesis, but just needed to see the stock with ‘a 1 handle’ on the share price," he commented. "We think this may not happen folks. The high level of nervousness built up on N. American demand, production disruption and margin miss are either no worse than feared, or materially better. Behind the scenes, Tesla continues to take steps to build high quality performance vehicles and a level of brand authenticity unmated by the vast majority of the global auto industry. The rest of the industry (premium and mass alike) are watching what Elon Musk and his team are accomplishing with a mixture of awe and concern."
Key positives in the quarter were:
- N. American Model S demand far stronger than we expected;
- Gross margin of 23% was in line with our targets (ex ZEV credits);
- 2015 outlook for 50% Model S growth is materially stronger than we expected;
- Customer deposit balance remained stable at ~$227m.
Key negatives in n the quarter were:
- Revised down 2014 Model S delivery forecast to 33k from 35k previously;
- Cash consumption around $300m in the quarter vs. our more neutral cash flow estimate
- Model X launch delayed by 1 quarter
The firm maintained an Overweight price target of $320
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Shares of Tesla Motors are up 6% to $245 early Thursday.