Tesla (TSLA) Keeps Proving the Naysayers Wrong - Morgan Stanley

Morgan Stanley analyst Adam Jonas weighed in on Tesla Motors (NASDAQ: TSLA) Tuesday with the stock’s momentum broken and investors quickly dusting off the bear-case. Despite deep skepticism and lectures in the past and present that ‘it can’t be done,' Tesla has been "doing it… doing it pretty well, actually," Jonas comments. The analyst highlights six issues, both past and present, where Tesla has proven the naysayers wrong:

1. Aluminum. “It’s really tough to work with.” It sure is - as anybody in Tesla’s advanced stamping and body shop making the aluminum space-frame can attest to. Tesla is on course to be the world’s highest volume manufacturer of all aluminum passenger cars by 2016.

2. Fires. “Safety issues will sink the company.” The Model S has suffered 3 incidents of fire, roughly 1 for every 100 million miles traveled. This compares to 1 for every 15 milliion miles travelled for the US car park on avg. They just don’t seem to catch on fire very often.

3. Connected cars. “What if they hack your car?” Tesla is the only OEM with 100% of its fleet connected to the internet. The roughly 35k Model S’s on the road today receive over-the-air firmware updates that can alter most of the electrical and physical attributes of the vehicle. Those meddling hackers need to keep trying.

4. Distribution. “The dealer lobby is too powerful.” Yet the CEO of the America’s largest dealer group spoke publicly in support of Tesla’s captive strategy. Now the FTC has voiced concerns that state laws prohibiting Tesla’s stores may be harmful to competition.

5. 25% Gross Margin. “They’ll never do it.” Not only did Tesla do a 25% margin in each of the past 2 qtrs, but it achieved a 100% variable gross margin YoY in 1Q. Tesla targets a 28% gross margin by 4Q. Nearly there.

6. Gigafactory. “You mean giggle-factory? Economies of scale don’t exist with batteries.” If Panasonic signs up to support Tesla’s vertical integration of battery manufacturing at 10x scale, one would have to wonder how Tesla could possibly convince them to do such a thing.

The firm maintained its Overweight rating and price target of $320.00

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $196.09 yesterday.

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