Telsa's Cash Burn Outweighed By Long-term Ambitions: Morgan Stanley

Tesla Motors Inc. investors should brace for a series of developments in 2016 that are crucial to understanding its story and "bigger mission," Morgan Stanley said Tuesday. On the one hand, the company will continue to burn cash through the fourth quarter and into 2016, nearly $1 billion worth in the next 12 months, analysts led by Adam Jonas said in a note. "3Q results demonstrated increased cash consumption, testing investor resolve of capital adequacy and raising the stakes for addressing Model X launch issues," said the note. "We think longer-term ambitions of how Tesla advances the state of sustainable transport has significant room for appreciation by the market." Morgan Stanley is prepared for lower deliveries in the fourth quarter and 2016 than currently targeted by the company, because of the complexity of making the product, high price point and challenge in accessing the mainland China market. It expects the Model 3 average transaction price to be about $60K per unit, higher than the $35K that the company has mentioned. 4. However, "we believe Tesla should eventually more clearly communicate any potential plans for a mobility service (selling miles, not cars) to investors," said the note. Morgan Stanley is sticking with its $450 price target on the stock, and believes a mobile app would be a strong catalyst for growth. Tesla shares were down 0.4% in premarket trade, but are up 1.3% in the year to date, while the S&P 500 has gained 1%.