Morgan Stanley On Tesla: 'We Believe Elon Meant What He Said'

Adam Jonas of Morgan Stanley on Wednesday commented in a note that he believes Tesla Motors' TSLA CEO Elon Musk's 2020 profitability comments are achievable. Musk said at a media event in Detroit last week that the company can achieve U.S. GAAP profitability by the year 2020. By comparison's Jonas' forecasts sees the company achieving nearly $1.6 billion of U.S. GAAP profit by 2020. “Granted, Elon's comments may imply a level of leasing penetration and employee stock compensation different from our forecasts,” Jonas argued. “Or perhaps they include a level of capital expenditure and R&D spending vastly in excess of our forecasts as the company pursues ‘millions of units' of vehicle sales annually by 2020.” Jonas adds that it is possible Musk's comments were made to send a “defiant message” as oil prices continue to decline and cheaper gas prices may deter electric vehicle sales to the masses. However, the analyst does state that market sentiment surrounding Tesla's success as a mass market auto company is “healthier” today than it was three or four months ago. “There has been a lot written about how Tesla's advancement of electric mobility can make the internal combustion engine ‘obsolete' in just a few years,” Jonas also wrote. “We firmly disagree and don't need such an outcome to make Tesla a good investment today.” Shares are Overweight rated with a price target reduced to $280 from a previous $290.