Tesla Motors Inc (NASDAQ:TSLA) will report its first quarter results on Wednesday, May 7 after the market close. While Barclays previously said that Model S demand is slowing in the U.S., many other analysts argue that the electric vehicle maker’s North America sales would drop this year. Morgan Stanley analyst Adam Jonas said in a research note yesterday that a decline in North America deliveries is not only possible, it’s likely and reasonable.

North America accounted for 90% of Tesla’s 2013 deliveries

Anyway, a decline in deliveries doesn’t really mean a slowing demand. Tesla Motors Inc (NASDAQ:TSLA) is expanding its business in international markets. And the Elon Musk-led company is trying to reduce the waiting times internationally. Meanwhile, the company’s current annual production capacity is limited to 35K units. So, the company may not have plenty of supply to sell vehicles in the U.S. at this time. Morgan Stanley says that last year, North America accounted for about 90% of Tesla’s total Model S deliveries as the company worked through the backlog of early adopters.

Tesla Motors

Despite the possibility of a sales drop in North America this year, Morgan Stanley said it’s not concerned fundamentally. The research firm still has an Overweight rating on the stock. However, for a company like Tesla Motors Inc (NASDAQ:TSLA), which is riding on expectations of revolutionary growth, any miss in the coming earnings report may trigger some volatility. Morgan Stanley expects Tesla Motors to miss on the headline number.

Tesla Q1 earnings preview

Wall Street expects Tesla Motors Inc (NASDAQ:TSLA) to report $699 million in revenues with 6,500 deliveries, compared to the company’s guidance of 6,400. The consensus calls for 12 cents in earnings. On the other hand, Adam Jonas seems to be a bit conservative on the revenue front, but expects higher earnings. Morgan Stanley forecasts $653 million in revenues and 22 cents in EPS.

Tesla-1

Tesla Motors Inc (NASDAQ:TSLA)’s addressable market for luxury electric vehicle is very small. Moreover, Morgan Stanley said Model X would cannibalize into the Model S sales. Though the Model X is expected to have a higher price tag, it will offer superior value in terms of performance, space, utility, safety and quality.

Tesla Motors Inc (NASDAQ:TSLA) shares ticked up 0.55% to $208.88 at 10:25 AM EDT on Friday.