Morgan Stanley's Adam Jonas: Tesla's Huge Sales Beat Might Bring A Market Discount

Tesla Motors Inc TSLA announced Q3 deliveries significantly ahead of expectations, driven by both Model S and X. The company’s sales strength will likely continue through Q4, Morgan Stanley's Adam Jonas said in a report. He maintained an Equal-weight rating on Tesla, with a price target of $245.

Tesla announced its quarterly deliveries at 24,500 units, 28 percent ahead of the Morgan estimate and 10 percent higher than the consensus expectations.

Related Link: Tesla Beats Shipment Estimates, But PacCrest Is Worried About Margins

Sales Performance

Model X volumes, at 8,700 units, accounted for two-third of the beat, while Model S volume, at 15,800 units, accounted for the remaining one-third.

“The tilt towards Model X should be particularly positive for average transaction price in the quarter,” Jonas noted. He expects Q4 deliveries to be in-line with to marginally higher than the Q3 units, which implies more than 78,000 units in the full year.

The annualized Q3 delivery volume isn't only higher than our forecast for Tesla volume for all of 2017 (83,790), it’s also higher than Morgan's combined Model S and X volume for 2018.

Market Discount

Taking these figures into account, the market can be expected to “apply a reasonable discount to the level of commercial momentum demonstrated in 3Q,” Jonas mentioned.

He added that investors may focus on details of the SolarCity Corp SCTY transaction, Gigafactory investments, Model 3 development and investments and Tesla’s pace of cash consumption rather than the Q3 deliveries.