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1/ Does any sell-side analyst write more notes on a single company than @MorganStanley's Adam Jonas writes about $TSLA? He's out with another one this morning, with surprises both for what it says and what it omits.
2/ Let's first go right to the bottom line: $TSLA price target dips to $283 (from $291). The "core auto" component is up a hair, to $228, but "Tesla Mobility (Tesla Network)" is down, from $71 to $55. Tesla Energy remains at zero.
3/ Let's focus on "Tesla Mobility" for just a bit. Jonas had expected $TSLA to launch a commercial fleet of 1,000 cars this year, and expected the fleet to grow to 1,275,000 (!) cars by 2030. Yes, really.
4/ Now, though, Jonas is "negatively surprised" $TSLA has published so little news about its mobility biz. He pushes the fleet launch to late 2020 & slashes his 2030 estimate to only 1 million cars. "Well-capitalized tech companies" make their first appearance as competitors.
5/ Jonas slashes his $TSLA production estimate to 380,000 total deliveries for all three models. Of the 380k, 296k will be Model 3 while S+X will dip to 84k. (Quite obviously, Jonas didn't believe Musk's conference call forecast of 500k Model 3s in 2019.)
6/ Jonas also slashes his full year $TSLA revenue forecast from $30 billion to $28 billion. Conveniently, because Tesla has "managed expectations" for Q1, Jonas forecasts a Q1 that is well below the implied $7MM average, and backloads most of the forecasted revenue into Q3 & Q4.
7/ Despite the slash in revenues, Jonas sees lower R&D and SG&A costs, creating richer margins. He also forecasts $TSLA will recognize $400 million of regulatory credits to add another 120 bps to margin.
8/ Jonas sees small GAAP losses in Q1 & Q4 and small GAAP profits in the two middle quarters. He forecasts $TSLA's overall 2019 EPS at 30 cents per share. (So, a forward P/E ratio of about 1,050.)
9/ There's good news and bad news in Jonas forecast for $TSLA's 2019 free cash flow. The good news? He now expects only -$246MM, down from -$809MM. The bad news? Tesla conserves the cash by slashing CapEx.
10/ More "good" news: by slashing CapEx, $TSLA can push out its needed capital raise (Jonas wants only $2.5B) to Q3.
11/ The $TSLA semi? It's "real" but unlikely to "move the needle." Jonas expects "further announcements" about the semi and the unveiling of both the Model Y and the pickup.
12/ China? It "stands out as an intense area of focus." What exactly does that mean? Jonas does not elaborate, but ascribes "little long term value" to $TSLA's China operations.
13/ Not surprisingly, one of the familiar (albeit bizarre) Jonas themes make its appearance. A "potential catalyst" is the emergence of further details about the "strategic relationship" between $TSLA and SpaceX.
14/ Jonas underlines two points: First, investors should see a difference between what is "achievable" versus what is "sustainable" in terms of $TSLA's cash flow and profitability.
15/ Second, while $TSLA may have weak "fundamental" value, it is huge "strategic" value that can be "crystallized" in ways that "challenge" traditional valuation techniques. (Yes, read that again and let it sink in.)
16/ And then Jonas repeats a statement which we also saw in his note after the earnings call: "We are increasingly of the view that the confluence of economic, competitive, regulatory, political, and technological forces may potentially challenge $TSLA's status...
17/ "...as a stand-alone entity." Will the outcome be positive or negative for share price? That is "much harder to determine at this time."
18/ Not a word in the Jonas note about $TSLA's tiny European order book. The thinness of US and Chinese demand are only indirectly addressed. The new CFO is scarcely mentioned.
19/ That's the report. Now for two brief editorial comments. First, $TSLA Mobility is a fantasy, but Jonas leaves himself some running room for further price target cutting by commenting that Tesla "may never make the leap to a shared mobility model."
20/ Second, as 2019 proceeds, I expect we will see Jonas make further cuts to his forecasts for $TSLA's deliveries, revenue, and earnings. <fin>
21/ Okay, one more comment. Reading between the lines, Jonas is admitting $TSLA's growth narrative is over. Growth companies don't slash CapEx, see their disruptive opportunities (mobility, energy) evaporate, & ache for some strategic alliance to strengthen the capital structure.
