Tesla Shares Drop as Morgan Stanley Slashes Sales Outlook and Profit Estimates
Electric car manufacturer Tesla (NASDAQ: TSLA) had its sales outlook for its new Model X and full year earnings expectations significantly cut down on November 19th by Morgan Stanley analyst Adam Jonas. Jonas slashed his sales outlook for the new Model X from 15,000 to 5,000 and sliced Tesla’s earnings expectations by almost half from $4.39 to $2.45 for the year 2015. However, Jonas still maintained an Overweight rating for Tesla with a $320.
Earlier this month, Tesla announced it was moving back the launch of its Model X, expecting deliveries of the car to start in the third quarter of 2015. It is for this reason and a possible challenge in mass producing the car’s “falcon wing doors” that Jonas cut his sales outlook for the Model X and earnings estimates for the company. The analyst’s apprehension is due to the fact that the doors are designed to have double hinges, a detail that has never been used in doors that open upwards before. He noted, “Our forecasts apply what we believe to be reasonable execution risk on this important model to ensure uncompromising quality of initial units.”
After Jonas expressed his concern on the challenge of mass producing the Model X’s falcon wing doors, Tesla CEO Elon Musk cleared the air, stating “Rumors about canceling Falcon wing doors are false. At Tesla, the production car will always be better than the show car.”
Tesla shares were down 3% on Wednesday after Jonas expressed his concerns despite maintaining an Outperform rating on the stock. Jonas said he sees the delay in vehicle deliveries “as an opportunity to increase exposure to what we believe is the most important manufacturer in global autos.”
Adam Jonas currently has a 68% success rate recommending stocks and a +22.9% average return per recommendation. In addition, Jonas has recommended Tesla 21 times, earning a 90% success rate recommending the stock.
Global Equities analyst Trip Chowdhry saw the dip in Tesla caused by Jonas’s report as a good buying opportunity and maintained an Outperform rating with a $385 price target for the stock on November 19th. He noted, “We are comfortable with our FY2015 revenue estimates of $6.2 billion and FY 2015 production estimates of 62K to 65K Auto Units… Product rationalization, including Model P85D and Model 85D will increase the Average Selling Price (ASP) by 2 percent to 5 percent.” Chowdhry currently has an 88% success rate recommending stocks and a +37.0% average return per recommendation. He has also rated Tesla 9 times with 100% success.
On average, the top analyst consensus for Tesla is Moderate Buy.