Tesla Motors Inc (NASDAQ:TSLA) doesn’t have a good year ahead of it, at least not in the view of Morgan Stanley. The investment bank released a new report on the electric car maker today that lowered its price target to $165 and kept an Underperform rating on the company’s shares.
The most shocking estimate in the report was the assertion that the company will sell just 50 units of the Model X SUV by the end of the third quarter. That number falls well short of the analyst’s previous estimate of the company’s SUV production and could be a damper on the firm’s stock price should it turn out to be accurate.
Just 50 Tesla Motors Model X units
Ryan Brinkman, who authored the Tesla Motors report, says that the company will fall well short on Model X production in 2015, as it has consistently done so far. After much delay the electric SUV is due to debut this year. Brinkman reckons that Elon Musk’s company will only be able to deliver 50 of them by the end of September, however.
That’s down from a previous estimate of 1,900 and will form a major disappointment for shareholders and fans of the company should it come to pass. The analyst sees Tesla Motors delivering 5,050 units of the Model X for the full year 2015, behind the 6,400 previously modeled.
This all adds up to what Brinkman characterizes as higher than normal executions risk. If Tesla Motors is regularly unable to do what it says it’s going to do, how is the company going to take advantage of market opportunities when they arise?
Tesla runs up costs
There’s two major factors that will hold the stock back in 2015, according to the Morgan Stanley analysts. The company isn’t able to get the Model X onto the road quickly enough, and it’s not able to control its expenses. These factors together could lead to a shock for the firm’s stock in the year ahead, and support a lower overall price target on the company according to Ryan Brinkman.
The delay in the Model X notwithstanding, the real downside for Tesla Motors in the coming year is from higher expenses. Those expenses, which will come from areas like Gigafactory production, and research and development, are going to force Tesla Motors to make some hard choices in the months ahead. Investors may not be comfortable with all of those choices.
Brinkman is looking for higher costs to lead to a loss per share of 38 cents in the company’s next earnings report. That’s up from a previous estimate of 31 cents per share. Tesla Motors stock has been faltering since the start of the year and lower than expected earnings could cause massive movement in the firm’s stock in the days immediately following the delivery of its earnings report.
Tesla earnings raise tension
Those earnings are going to be dramatic no matter the direction they drag the stock. With approximately 20% of the company’s shares held short, it’s clear that quite a few people are betting on difficulties in the months to come.
Some of that tension will be relieved next week, but questions about the company’s Model X production will continue until the firm proves it’s able to get the SUV onto the road in large numbers. With only 50 to be sold in the first three quarters of this year, there’s little hope of outstanding unit sales by January, and expectations for production of the Model 3 are likely to be cut.
At time of writing shares in Tesla Motors finished at $204.98, down 0.88% for the day so far.