Morgan Stanley Lowering Tesla Deliveries But Maintaining Overweight and $320 Price Target

In a note this morning, Morgan Stanley Adam Jones is cutting his expectations for Tesla TSLA 2015 Model X Deliveries to 5,000 from 15,000, but reiterating Overweight rating and the price target unchanged at $320. The firm adopted their Model X forecasts not only for a 3Q launch (which they expect to be late 3Q), but also for a slow ramp once deliveries begin. The note goes on to highlight several other pertinent points: -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 increase in 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 the factory. 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. Valuation Methodology: We argue Tesla cannot be valued on near-term multiple metrics like traditional auto companies given that we expect Tesla to multiply revenues by more than 10x from 2013 to 2016 by nearly 30x by 2020 and around 60x by 2028. We have thus chosen a 15-year time horizon for our DCF which captures the full maturation of the Model S, Model X (and top-hat derivatives) and also the ramp up of its mass market electric vehicle (the Gen 3). We have applied a 11% WACC with a range of 9% to 13%. The terminal value, calculated on a midpoint of 10x EV/EBITDA accounts for roughly 50% of the total DCF value across the range of methodologies we have applied to arrive at our PT. Shares of TSLA are lower by 2.6 percent in pre-market trading at 251.