Just getting this note from Adam Jonas at Morgan Stanley.
Tesla Motors Inc.
Cutting 2015 Model X Deliveries
to 5k from 15k
Following 3Q results, updated outlook and Model X
launch delay, we are making significant adjustments
to our 2014 and 2015 earnings forecasts, leaving our
target unchanged at $320. Tesla has some execution
hurdles to surmount, but we’d still be buyers.
Cutting our 2015 Model X delivery forecast to 5,000 units from 15,000
previously. We have adopted our Model X forecasts not only for a 3Q launch (which weexpect to belate 3Q), butalso for a slow ramp once deliveries begin. Our forecasts apply what we believe to be reasonable execution risk on this important model to ensure uncompromising quality of initial units.We recently raised a question about whether a seemingly mundane attribute of thecar, thefalcon doors,could prove to be a technical challenge at scale. See our November 17th report: Tesla Motors: Will Tesla Ditch the Falcon Doors on the Model X?
2015 EPS forecast reduced by 44% to $2.45 vs.consensus at $2.99.
The shortfall vs.consensus for 2015 is driven by our non-GAAP revenue
assumption of $5.6bn (consensus at $6.2bn). We have partially offset the
Model X shortfall with an increasein our Model S delivery forecast to 48,000 from 45,000 previously (management target of around 50,000 units).
We believe the Model X is critical to the Tesla story and execution on
this product is critical. There is a lot about the Model X which may be easier to execute upon vs. the Model S given high levels of commonality and experience with thefactory. However, there are still some unique attributes to the vehicle that could present a near-term challenge. We would look for any hiccups/delays as an opportunity to increase exposure to what we believe is the most important manufacturer in global autos.
We argue Tesla cannot bevalued on near-term multiple metrics like traditional auto companies given that we expect Tesla to multiply revenues by morethan 10x from 2013 to 2016 by nearly 30x by 2020 and around 60x by 2028.We havethus chosen a 15-year time horizon for our DCF which captures thefull maturation of the Model S, Model X (and top-hat derivatives) and also theramp up of its mass market electric vehicle (the Gen 3). We have applied a 11% WACC with a range of 9% to 13%.Theterminal value,calculated on a midpoint of 10x EV/EBITDA accounts for roughly 50% of thetotal DCF value across the range of methodologies we have applied to arrive at our PT.