But one man has always understood the true value of Elon Musk’s futurist dream car factory: the factory is objectively shitty but the real product is belief. And Morgan Stanley analyst Adam Jonas knew that because he’s not a just watcher of Elonism, he’s also a member.
Or had been. Today, Adam Jonas released his latest note on TSLA, and it’s one of the saddest documents that we have ever read. Behold, Adam Jonas losing his religion:
While 1Q18 results were broadly in line with consensus expectations (and slightly above our forecasts), we are making material reductions to our earnings estimates to reflect lingering manufacturing issues with the Model 3 – most recently at Fremont final assembly. While our volume forecasts are largely unchanged, we have reduced our medium and long-term gross margin assumptions for Tesla’s passenger car operations.
That’s right, you guys, Adam Jonas cut his price target on Tesla, by a lot. In fact, Jonas cut it from $376 to $291, and we can practically see the tears streaming down his cheeks as he did so.
It seems from the note that even Jonas cannot live another day pretending that Elon can make all those shiny new cars quickly enough to justify people buying Tesla stock. And if someone like Jonas is bailing out with a 23% price cut, that it is maybe the worst news Elon has gotten in…well, hours?
But we also can’t underestimate the potency of Elonism, because Adam Jonas is leaving the door to his heart slightly ajar should Musk fix himself and his car company. In a section titled “Why not Underweight?” Jonas pens this poem of regretful doubt:
There are 3 primary reasons why we reiterate our Equal-weight at this time: (1) It is difficult to judge the true underlying profitability of the automotive operations until Model 3 production is ramped to a higher level and until current bottlenecks are surmounted. (2) We want more discovery around Tesla’s potential capital raising execution, including the instruments of capital (debt, equity, ABL facility, etc.), the genre (strategic or financial investor), size and, of course the price. (3) Potential strategic value – our $291 price target is driven by our DCF of the auto business and mobility as a service business. We believe there is significant potential strategic value within Tesla, including its invested capital, design, brand, technology, relationships with key stakeholders (suppliers, governments, commercial partners) and its people.
We only have this to say to Adam Jonas:
Oh, life is bigger. It’s bigger than you and you are not us. The lengths that we will go to. The distance in your eyes. Oh no, We’ve said too much.
We set it up