Shares of Tesla Motors (TSLA) have dropped 4.6% this month, as investors expressed disappointment over the upstart automaker’s earnings. That drop, says Morgan Stanley’s Adam Jonas and team, has revived what they call the bear case in the stock, as investors fret about Tesla’s giga factory, profit margins and distribution, among other issues.
Associated Press Jonas has a few words for Tesla bears who say “it can’t be done.” Not only has Tesla “been doing it,” its been “doing it pretty well, actually.” Jonas offers a few examples where Tesla is doing it right:
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.
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.
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.
Shares of Tesla have gained 1.2% to $194.48 today, all the more surprising considering that the S&P 500 has dropped 0.2% today, while General Motors (GM) has fallen 1.1% to $33.87 and Ford Motor (F) has dipped 0.1% to $15.90.
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