The stock of electric car maker Tesla Inc (NASDAQ:TSLA) moved into reverse in pre-market trading after a downbeat research note from Morgan Stanley.
In the wake of Tesla’s first quarter results, Morgan Stanley analyst Adam Jonas downgraded to an “equal weight” position, saying that he now expects Tesla to remain in the red on a generally accepted accounting principles (GAAP) basis until late 2019.
His estimate of annual cash burn deepens to US$3.1bn from US$2.3bn the year before.
“By itself, these changes to our model would have taken our price target to US$292. Rolling forward the starting point of our DCF [discounted cash flow] of the core business to May 1st (from Jan 1st) was an equal offset. Our price target thus remains unchanged at $305, or roughly 6% downside from the current stock price,” the Morgan Stanley number cruncher explained.
erring on the side of caution...
Jonas’s spreadsheet errs on the side of caution when it comes to forecast sales of Tesla’s eagerly awaited Model 3, which will be the first Tesla car to be targeted at the mass market.
Tesla’s boss and founder, Elon Musk, insists the company is on track to start producing the Model 3 by July of this year, and should deliver tens of thousands of units to buyers and car dealers’ forecourts by the end of this year, and hundreds of thousand next year.
Jonas is a glass half-empty guy, forecasting just 2,000 Model 3 deliveries this year and 90,000 next year, though he admits his forecasts are “far below” Wall Street’s expectations.
“Earlier this year investor expectations for Model 3 hit a trough with most investors we spoke with at that time expecting zero deliveries of the model during 2017 A series of subsequent reiterations from management and the spotting of release candidates testing on public roads have increased expectations of timing and volume significantly,” Jonas noted.
Tesla shares fell 2.56% in New York to $316.48.