Morgan Stanley analyst Adam Jones & team thinks Tesla Motors Inc TSLA is pushing the “insane button” on its capex, according to a new research note today.
Following Wednesday’s earnings, the Morgan Stanley analysts are going back to the two fundamentals of Econ 101 – demand and supply. Specifically, the analysts ask themselves how strong demand is and whether Tesla is in a position to supply current and future demand in a cost-efficient manner.
In terms of demand, the analysts say that things are going well, despite “some challenging circumstances.” The customer deposit balance was 80 percent above Morgan Stanley’s forecast, increasing by 14 percent on the quarter. For 2015, the company guided to 55,000 units with a strong degree of confidence.
That said, the analysts note that the cost to maintain supply is “looking eye-wateringly high.” In 2015, Tesla said that it would spend $1.5 billion in capex, up 50 percent year-over-year. The analysts suggest that with this cash burn rate, Tesla will achieve 500,000 units by 2020 – two-thirds more than the 295,000 they had forecast.
The disconnect, as Morgan Stanley sees it, is whether investor appetite can be sustained during Tesla’s “growth journey.”
Morgan Stanley maintains its Overweight rating on Tesla.
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