Share price of Tesla Motors, Inc. (TSLA) fell 3.9% to $247.74 on Nov 19 after Morgan Stanley (MS) lowered its 2014 and 2015 earnings expectations, while leaving the target price unchanged at $320. Tesla’s 2015 earnings estimate have been reduced to $2.45 from the previous estimate of $4.39 (consensus estimate is $2.99).
Morgan Stanley decreased the estimates due to the delay in launch of the Model X and reduction in 2015 Model X delivery forecast to 5,000 units from the previous estimate of 15,000 units. Morgan Stanley reduced the 2015 earnings forecast based on revenue assumption of $5.6 billion. However, the decline in supply of Model X to 5,000 units will be nullified to some extent by the increase in Model S delivery to 48,000 units, up from the previous expectation of 45,000 units.
Tesla is aggressively working toward expanding its product portfolio to boost sales. Previously, the company had announced that Model X would hit the market early next year. However, in Nov 2014, it delayed the release of the highly anticipated Model X by a few months to the third quarter of 2015 to increase the validation testing time for the car. The company believes that this will ensure the best possible product and also prove to be beneficial in the long run, despite adversely affecting earnings in the short term.
Advance orders for Model X are strong, per Tesla. In fact, if anyone wants to book the car now, they will get the delivery in 2016 as the company has enough orders to exhaust the planned supply for 2015.
According to Morgan Stanley, Tesla has some execution hurdles to overcome. The brokerage firm expects that the Model X launch will not only be delayed but the deliveries will also be slower. In addition, the Falcon Wing doors in the Model X will be a technical challenge for the automaker. However, Tesla justifies that there is demand for Falcon Wing doors and considers this door as easy to execute, compared to others.
Tesla reported adjusted loss (excluding one-time items other than stock-based compensation expense) of 25 cents per share in the third quarter of 2014, deteriorating from adjusted loss of 4 cents in the year-ago quarter. The loss was significantly wider than the Zacks Consensus Estimate of a loss of 15 cents.
Revenues jumped 54.7% to $932.3 million in third-quarter 2014 from $602.6 million a year ago. Revenues also surpassed the Zacks Consensus Estimate of $868 million.
Currently, Tesla carries a Zacks Rank #5 (Strong Sell).
Better-ranked automobile stocks worth considering include Gentex Corp. (GNTX) and STRATTEC Security Corporation (STRT) with both sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment