Shares of Tesla Motors Inc (NASDAQ:TSLA) declined 4.5 % toward the end of the trading day on Wednesday after some new analyst reports. One came from a group that’s fairly bullish on the stock. They think the volatility will even out after this next report.
Time to chill out on Tesla?
Morgan Stanley analysts Adam Jonas, Ravi Shanker, Yejay Ying and Paresh Jain have an Overweight rating and $149 per share price target on Tesla Motors Inc (NASDAQ:TSLA). They’ve remained fairly positive on the automaker for some time, although they’re rather cautious for a group with an Overweight rating on it, particularly because Tesla shares remain above their target price.
They believe that when Tesla announces its third quarter results, its stock will actually stabilize rather than continue on the volatile path it has seen all year long. The automaker’s earnings have been key catalysts as it continued to prove that the Model S is a success. The Morgan Stanley analysts believe Tesla Motors Inc (NASDAQ:TSLA) is on track for hitting its promised 25% gross margin by the end of the year, but they suggest that supply constraints might limit the potential for the company to surprise on volumes.
As a result, they think the automaker “will do just enough” in the third quarter to keep bulls satisfied and stabilize its stock through the end of the year.
Morgan Stanley’s expectations for Tesla
In the next report, they’re expecting to see a positive update on Tesla’s rollout of the Model S to the European Union. They believe the automaker will deliver 5,200 units, compared to the company’s guidance of “slightly over 5,000 deliveries.” They said this quarter the bloggers who track Tesla VINs will be put to the test since they don’t see the possibility of volume upside.
They do believe Tesla will show “convincing progress” toward its 25% margin and suggest that consensus estimates have fully caught up to, if not surpassed” 25% as a base case. After updating their model for the impact of Tesla Motors Inc (NASDAQ:TSLA)’s shift to lease accounting, they now expect the automaker to report third quarter earnings per share of 2 cents, compared to their previous estimate of a 35-cent loss per share. They also changed their 2014 estimate from $1.36 per share to $1.95 per share.