Tesla Rips Following Unit Figures Release; Morgan Stanley's Subsequent Commentary Focuses On Safety

Tesla Inc TSLA shares received a significant boost from the company's preliminary first-quarter unit delivery results announced Sunday. Reviewing the results, Morgan Stanley said the first-quarter volume was surprisingly strong and that Model 3 and safety remain the focus.

Q1 Unit Delivery Results

Analysts Adam Jonas and Paresh Jain noted that the company reported deliveries of 25,000 units, 6 percent higher than their forecasts. The upside, according to the analysts, came from Model X, which belied expectations of being cannibalized ahead of the Model 3 launch.

This is despite the very high price point and complex features inherent in Model X.

The analysts conceded that they had not modeled over 25,000 quarterly run-rate for the company even in the fourth quarter when Model 3 is likely to be launched.

"We had not expected more than a 25,000 run-rate for S and X until the middle part of 2018, at least 1 year from now," the analysts added.

Underselling The Safety Features

In a bid to prevent cannibalization of its other models, Morgan Stanley said it believes Tesla may be downplaying the all-new hardware architecture of the upcoming Model 3 in terms of improved occupant and pedestrian safety.

"The Autopilot update showed an image of a vehicle immersed in a field produced by at least 19 sensors. The information collected by these sensors will be analyzed by a liquid cooled NVIDIA Corporation NVDA supercomputer that is 40x more powerful than the original Autopilot system," the firm said elaborating on the new hardware features.

The firm sees the multi-passenger SUV market as a critical segment for Tesla's long-term growth but would not be surprised to see the doors redesigned at the earliest possible opportunity. However, a potential redesign of the doors would take time and resources, the firm added.

Morgan Stanley has an Overweight rating on the shares of Tesla and it has a $305 price target.

At last check, Tesla shares were rallying 6.76 percent to $297.12.

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Tesla's 2016 In Review: From Model 3 To Gigafactory And Acquisitions Understanding Tesla's Need For Fresh Funding As Model 3 Launch Approaches ________ Image Credit: By Sarah Larson from Ann Arbor, MI, USA (Tesla Model X Uploaded by tm) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons