Tesla Motors Inc Looks Solid Despite Negative Morgan Stanley Report

Tesla stockBlomst / Pixabay

A new report on Tesla Motors Inc (NASDAQ:TSLA) from Morgan Stanley warns that the company’s first quarter vehicle shipment share likely to come in below expectations. The company’s earnings report for the first three months of 2014 is due to arrive on May 7 after the market closes on Wall Street. Trading is likely to be frantic after the company’s release.

Adam Jonas, the Morgan Stanley analyst who authored the report on Tesla Motors Inc (NASDAQ:TSLA), says that though the company’s numbers might be a little bit off in its next earnings release, that doesn’t affect how the investment bank feels about the electric car maker’s prospects in the long term. The report reiterated an Overweight rating on the company, though it did remove the price target.

Tesla likely to miss vehicle shipments in May

The May 7 earnings report will cover the period from the tart of 2014 through the end of March. According to Jonas “Investors are increasingly concerned about how the market will react to a possible YoY decline in N. American deliveries of the Model S in 2014. We believe a decline in NA deliveries is not only possible, but is likely… and reasonable.”

The analysts continued by pointing out that “anyone with a FY14 global delivery forecast of less than 35k units has a global geographic split that clearly implies a YoY decline of Model S volume in N. America, if not a severe deceleration to near 0% growth.” It seems that Tesla may be destined for a decline of some kind in its North American sales figures, and that will likely be a big decline the morning after the release of the company’s report.

Tesla Motors Inc (NASDAQ:TSLA) shareholders didn’t react too much to the Morgan Stanley report yesterday, signalling what might be a growing resilience to headline pressure. The company’s stock was up slightly at time of writing. Perhaps investors listened to the advice from the Morgan Stanley analysts. The team wrote “Will the headlines matter for how the stock trades? Very possibly. Are we fundamentally concerned? No.”

Tesla brings volatility home

As one of the companies with the most dangerous mix of a huge following and a massive valuation Tesla Motors Inc (NASDAQ:TSLA) could see some serious volatility in the wake of any miss in its coming earnings report. Even after warnings of headline pressure landed softly on the market this afternoon, real numbers could push the positions of some of the less dedicated Tesla Motors Inc (NASDAQ:TSLA) shareholders.

Morgan Stanley thinks that Tesla Motors Inc (NASDAQ:TSLA) is set to miss on a headline number when it reports its earnings. That miss, assuming the analysts are correct, would likely cause a rupture in the company’s stock directly after the earnings report. Momentum stocks have suffered in 2014, and Tesla Motors Inc (NASDAQ:TSLA) is no different. It’s valuation means there’s probably a wide berth for losses if the company’s report is poor.

Tesla Motors Inc (NASDAQ:TSLA) is a risky bet, and it always has been. Investments in the company have likely lost as much investor money as it has sealed in paper gains. The firm’s volatile reaction to headlines is unlikely to change until it turns a solid profit. Given current constraints, that’s likely to take a long time.

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About the Author

Paul Shea
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3 Comments on "Tesla Motors Inc Looks Solid Despite Negative Morgan Stanley Report"

  1. 37k+ miles on mine… loving every minute :)

  2. Alan Dean Foster | May 2, 2014, 2:49 pm at 2:49 pm |

    Name another scalable manufacturer that sells every unit it can turn out…without any advertising.

  3. Tesla is production-constrained, not demand limited. All Model Ss are being sold on geographic allocations. A reduction in N.American sales simply tells investors that Tesla is allocating more cars to Europe and Asia than it did last year, which is hardly surprising given that deliveries to Europe were small in Q1’13 and nonexistent in Asia.

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