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Tesla announces new lower-cost Model 3; 4Q vehicle deliveries seen very strong says Morgan Stanley

Prices for the Model 3 could hit $60,000 per unit or more

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Tesla may offer strong guidance for 4Q, says Morgan Stanley

Tesla Inc (NASDAQ:TSLA) CEO Elon Musk announced the release of a lower cost Model 3 while an investment bank said fourth quarter deliveries will probably run at a strong clip.

Musk said the company will begin selling the mid-range version of the Tesla Model 3 at a price of $45,000, before savings knock it down to about $31,000, the company claimed. 

Tesla has the potential to issue an "extremely strong" guidance for vehicle deliveries in the fourth quarter of the year, a report by investment bank Morgan Stanley (NYSE:MS) said.

Morgan Stanley analyst Adam Jonas forecast in a research note to clients a 20% sequential improvement in Model 3 deliveries and sees them being heavily weighted to top-of-the-line mix.

Given his understanding that the vast majority of Model 3 production is dual-motor, Jonas added that he would not be surprised to see average transaction prices for the Model 3 to approach $60,000 per unit or more.

READ: Tesla starts off 4Q with strong production numbers; Musk tweets about climate change

Given his thinking that the company's working capital terms could drive a cash flow surprise, Jonas said he sees conditions supporting Tesla offering "extremely strong" guidance for 4Q profit and cash flow. 

He also believes Tesla will use the momentum to potentially tap the equity market and continues to forecast a $2.5 billion equity capital raise in 4Q. Jonas kept an Equal Weight rating on Tesla shares with a $291 price target.

Tesla shares rose 1.17% in Friday's premarket to $267, having closed on Thursday 2.9% lower at $263.91.

Reporting by Rene Pastor, contactable on [email protected] 

 

 

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