Tesla's Q4 Model 3 Miss: Adam Jonas Says Buy The Dip

Tesla Inc TSLA reported a miss in Model 3 deliveries and delayed production ramp Wednesday, triggering a sharp sell-off.

But even in its weakness, the emerging automaker impressed some of the Street’s more skeptical analysts.

The Rating

Morgan Stanley analyst Adam Jonas maintained an Equal-Weight rating on Tesla with a $379 price target but advised buying on the pullback.

The Thesis

Tesla exceeded Morgan Stanley estimates for Model S, Model X and even Model 3 deliveries, the last of which outperformed by 55 percent. The aggregate deliveries suggest a 10-percent revenue beat for the fourth quarter.

At the same time, Tesla closed the term with a Model 3 production rate more than 50 percent above Jonas’ first-quarter delivery forecast, heralding another potential earnings beat.

As anticipated, the firm delayed its 5,000-unit-per-week production goal, and while the new second-quarter projections still double Morgan Stanley’s expectations, the firm’s bullishness doesn’t resonate with Jonas, even when compounded by recent success.

“While there is a ton of attention around the ramp of Model 3 in early 2018, we continue to believe the greater risk to the stock involves encroachment from tech firms with adjacent data monetization opportunities in the mobility ecosystem,” Jonas wrote.

He anticipates extreme volatility in 2018 as Tesla alleviates bottlenecks and drives cash inflow while suffering increased competition.

Price Action

At time of publication, shares were trading down 1.7 percent at a rate of $311.81.

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