MS on Why Tesla Motors Inc (TSLA) Not Trading Below $20 a ShareVW Staff
Tesla Motors Inc (NASDAQ:TSLA) stock surged to an all-time high of $52.92 today. Additionally, Morgan Stanley (NYSE:MS) raised its outlook of the company’s battery-powered Model S but calls Tesla Motors Inc (NASDAQ:TSLA) a ‘billionaire’s poker’.
In its April 26, 2013 report, Morgan Stanley (NYSE:MS) assigned ‘overweight’ rating to the stock. Besides, the company’s billionaire Elon Musk said on March 31, the car maker attained its first profit in the quarter that ended that day. Tesla reported a net profit on both a GAAP and non-GAAP basis for the first quarter of 2013.
Morgan Stanley states:
“What’s causing the squeeze? The tone of our recent conversations with investors has been very dark. Serious questions are being raised by some investors about the efficacy of the order book and reports of Tesla stores promising delivery times of 1 month for a new order (3 times sooner than the reservation backlog would suggest). If we didn’t have a Bloomberg screen, we’d think the stock would be testing the $20 level, not pushing beyond $50.” They give the following theories for why the stock is doing so well:
According to the Morgan Stanley report, Tesla Motors Inc (NASDAQ:TSLA) made $40.5m in selling ZEV and GHG credits to other OEM’s in 2012, or $13.9k per completed vehicle. In an April 18 research note, Morgan Stanley estimated that Tesla Motors Inc (NASDAQ:TSLA)’s ZEV credits for Q1 would be over $20 million, but fall in future quarters. In this report, Morgan Stanley (NYSE:MS) predicted the electric-car maker should deliver 18,000 Model S sedans this year, an increase from its previous forecast of 16,000 cars. However this is below Elon Musk’s goal of 20,000 deliveries this year.
Natural Resources Defense Council (NRC) hasn’t assigned a specific number to aggregate national demand for Zero Emission Vehicle (ZEV) credits during the 2012 to 2014 time frame. However, an eyeball estimate of 50,000 credits per year is pretty close. Based on NRDC data, it appears that every car Tesla delivers generates a minimum of four ZEV credits.
In today’s report, Morgan Stanley (NYSE:MS) predicts that Tesla should begin deliveries to China, the world’s largest car market and soon to be the largest premium market and EV market by year end. With pollution in China at a tipping point, a convergence of regulatory initiatives and the Chinese consumer’s bottomless appetite for luxury cars, could translate to a far larger addressable market for Tesla Motors Inc (NASDAQ:TSLA) than in the US.
In Morgan Stanley’s estimation, Tesla must fund $1.5 billion of capex through 2017 to enhance its capacity, model lineup and dealer network. The currency appreciation could give Tesla an opportunity to infuse equity with minimal dilution.
Tesla Motors Inc (NASDAQ:TSLA) co-founder and CEO Elon Musk recently expressed satisfaction at company’s growth and committed to keep fighting for the electric car revolution.
Morgan sums up with the following:
Each day that goes by where Tesla delivers 60 units without images of flaming Model S’s on YouTube offers incremental validation for what it has accomplished. At a recent presentation, we asked a room full of 30 BMW engineers if any of them thought Tesla would make it this far. Not one hand went up. These guys just won’t go away.