One of Tesla Motors Inc (NASDAQ:TSLA)’s biggest fans in the analyst world has cut his estimate for deliveries of the Model X in 2015. Morgan Stanley analyst Adam Jonas and his team reiterated their Overweight rating and $320 per share price target on Tesla. However, they significantly reduced their Model X delivery estimate for next year from 15,000 to 5,000.
Adjusting Tesla estimates
In a report dated Nov. 19, 2014, Jonas and his team said their delivery estimate cut now assumes that the Model X launch is delayed to the third quarter of next year. They are also now assuming that the launch will be late in that quarter and that ramping up production of the crossover vehicle will go slowly. In spite of these execution risks, they still like Tesla stock, even at its current high valuation.
The Morgan Stanley team reduced their 2015 earnings per share estimate 44%, bringing it to $2.45 per share, which is lower than the consensus estimate of $2.99 per share. The reason they come up short compared to consensus is because they are assuming non-GAAP revenue of $5.6 billion, which again is short of consensus at $6.2 billion.
They did, however, partially offset their shortfall in Model X deliveries by increasing their estimate for Model S deliveries from 45,000 to 48,000. Management guided for deliveries of about 50,000 Model S sedans next year.
Updates on Model X door concerns
In a second report also dated Nov. 19, 2014, the Morgan Stanley analysts provided an update to their report from Monday that suggested the Model X delays are due to issues with the falcon wing doors. They said a Tesla spokesperson contacted them and said their concerns about those doors are “misplaced” and that they haven’t been a major challenge in engineering them.
Tesla reassured them that the Model X will indeed have the falcon wing doors that were promised. The automaker also said the doors are fairly easy to execute compared to their other technical accomplishments. Additionally, customers apparently want those falcon wing doors, and Tesla has not been developing conventional doors alongside the falcon wing doors as a plan B scenario, as the Morgan Stanley team suggested on Monday.
Tesla Motors remains one of their top four picks in North American auto stocks, although the analysts note that there is a “reasonable level of execution risk on a variety of endeavors including the launch of Model X, the pace of the commercial ramp in China and the entry-level price point / total addressable market of the Model 3.