JP Morgan: We're Slashing Tesla Estimates Because Of These 2 Factors

In a report published Monday, JP Morgan analyst Ryan Brinkman reiterated an Underperform rating on shares of Tesla Motors Inc (NASDAQ: TSLA) with a price target lowered to $165 from a previous $175 due to higher expenses and a slower Model X ramp.

Brinkman stated that he revised first quarter models to reflect Tesla's announced delivery of 10,030 units in the quarter (versus his prior estimates of 9,500 units), but was forced to lower his earnings per share estimates. The analyst is now projecting a loss of $0.38 per share in the first quarter (from a prior loss estimate of $0.31 per share) to reflect a lower gross margin, primarily due to worsening foreign exchange exposures since guidance was issued in mid-February and higher operating expenses (combined SG&A and R&D costs) that are tracking towards the high-end of guidance issued during the company's fourth quarter report.

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Brinkman said that he is now projecting a delay in Model X ramp timing and expects the company to deliver a "relatively modest" 50 units in the third quarter, as opposed to his prior outlook for 1,900 vehicle deliveries. For the full fiscal year, the analyst is now forecasting Model X deliveries of 5,050 units versus a prior estimate of 6,400 units.

However, the analyst did note that "there is little change to our longer-term Model X volume forecasts beyond expectation for a slower ramp in 2015."

Bottom line, Tesla's "highly differentiated" business model, appealing product portfolio and leading-edge technology are more than offset by above-average execution risk and valuation that "seems to be pricing in a lot."