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Investor's Corner

What Elon Musk’s need to expand Tesla control looks like for bulls

U.S. AIR FORCE ACADEMY, Colo. -- Tesla Inc. Chief Executive Officer Elon Musk poses for a photograph with U.S. Air Force Academy Cadets in Mitchell Hall during a tour hosted by Superintendent Lt. Gen. Richard Clark on April 7, 2022. Musk met with Academy senior leadership and delivered remarks to a crowd of cadets and faculty. (U.S. Air Force photo by Justin R. Pacheco)

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Elon Musk’s comments about needing to expand his ownership and voting right stake in Tesla sent shockwaves through the community, offering polarizing takes from all sides. However you look at it, Musk’s needs are something that has enticed everyone to have an opinion.

Bulls are mostly interested in expanding Musk’s control to keep him around, recognizing his influence and presence are enough to keep Tesla at the forefront of EVs, but his issue is more surrounded by AI. Some believe his sale of Tesla stock to fund his purchase of Twitter should not be forgotten.

Bears, on the other hand, believe that Musk’s comments show his want to control Tesla as strong-arming the Board into keeping him around after making the decision to sell billions in stock.

Elon Musk says he’d rather build AI outside of Tesla without new comp package

Dan Ives, an analyst for Wedbush who has regularly supported Musk and Tesla in notes to investors, believes that the issue will be taken care of. However, there are absolutely risks involved.

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“It’s no secret and a key to our bullish thesis that all AI initiatives be kept within Tesla from Dojo to Optimus to FSD to various robotaxi and other robotic developments. The Street views Tesla correctly (in our view) as a disruptive tech leader, and if Musk ultimately went down the path to create his own company (separate from Tesla) for his next-generation AI projects, this would clearly be a big negative for Tesla story,” Ives wrote.

Tesla’s AI projects are a big part of the company’s stock price. Many believe that Tesla is just an automaker, which is how they argue the price of shares is largely inflated. However, counting in the Energy sector, along with its Full Self-Driving efforts and other projects, makes it more of a tech company with many different divisions than simply a car company.

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It is no secret Tesla is most recognized for its EV efforts. But if Musk were to take AI projects outside of Tesla, it would undoubtedly do damage to the stock, to the company, and to investors, all of which have waited so patiently for shares to go up in price again after promises of a complete FSD suite and a rollout of Robotaxis. None of these things have come to fruition despite Musk’s projected timetables, at least not yet.

The big question remaining is what will Tesla and the Board do to retain Musk. Although he admitted the Board is “great,” they will have to decide whether Musk is needed to attain the goals it has set for AI. Many Tesla investors would tell you without Musk, Tesla is not in the best position possible.

“At the end of the day, we believe the Board and Musk will be able to resolve this issue over the next 3-6 months, and ultimately, all AI initiatives will be kept within Tesla. The rationale for having 25% voting rights with such game-changing AI technology in the works we get from Musk’s view, but dilution and shareholder approval is a process that must be carefully managed, and this will not happen overnight,” Ives added.

Musk’s current compensation package is still under review by the Delaware Chancery Court.

Tesla is up under 1 percent on the day at the time of writing. Ives said in his note that a back and forth from Musk over such an important issue is “far from ideal for the investment community,” and could encourage some to sell.

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The firm maintained an ‘Outperform’ rating and a $350 price target.

I’d love to hear from you! If you have any comments, concerns, or questions, please email me at joey@teslarati.com. You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.

Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on X @KlenderJoey. If you're looking for great Tesla accessories, check out shop.teslarati.com

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Investor's Corner

Tesla enters new stability phase, firm upgrades and adjusts outlook

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

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Credit: Tesla China

Tesla is entering a new phase of stability in terms of vehicle deliveries, one firm wrote in a new note during the final week of October, backing its position with an upgrade and price target increase on the stock.

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

While most firms are interested in highlighting Tesla’s future growth, which will be catalyzed mostly by the advent of self-driving vehicles, autonomy, and the company’s all-in mentality on AI and robotics, Pozdnyakov is solely focusing on vehicle deliveries.

The analyst wrote in a note to investors that he believes Tesla’s updated vehicle lineup, which includes its new affordable “Standard” trims of the Model 3 and Model Y, is going to stabilize the company’s delivery volumes and return the company to annual growth.

Tesla launches two new affordable models with ‘Standard’ Model 3, Y offerings

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Tesla launched the new affordable Model 3 and Model Y “Standard” trims on October 7, which introduced two stripped-down, less premium versions of the all-electric sedan and crossover.

They are both priced at under $40,000, with the Model 3 at $37,990 and the Model Y at $39,990, and while these prices may not necessarily be what consumers were expecting, they are well under what Kelley Blue Book said was the average new car transaction price for September, which swelled above $50,000.

Despite the rollout of these two new models, it is interesting to hear that a Wall Street firm would think that Tesla is going to return to more stable delivery figures and potentially enter a new growth phase.

Many Wall Street firms have been more focused on AI, Robotics, and Tesla’s self-driving project, which are the more prevalent things that will drive investor growth over the next few years.

Wedbush’s Dan Ives, for example, tends to focus on the company’s prowess in AI and self-driving. However, he did touch on vehicle deliveries in the coming years in a recent note.

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Ives said in a note on October 2:

“While EV demand is expected to fall with the EV tax credit expiration, this was a great bounce-back quarter for TSLA to lay the groundwork for deliveries moving forward, but there is still work to do to gain further ground from a delivery perspective.”

Tesla has some things to figure out before it can truly consider guaranteed stability from a delivery standpoint. Initially, the next two quarters will be a crucial way to determine demand without the $7,500 EV tax credit. It will also begin to figure out if its new affordable models are attractive enough at their current price point to win over consumers.

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Investor's Corner

Bank of America raises Tesla PT to $471, citing Robotaxi and Optimus potential

The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.

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Credit: Tesla

Bank of America has raised its Tesla (NASDAQ:TSLA) price target by 38% to $471, up from $341 per share.

The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.

Robotaxi and Optimus momentum

Bank of America analyst Federico Merendi noted that the firm’s price target increase reflects Tesla’s growing potential in its Robotaxi and Optimus programs, among other factors. BofA’s updated valuation is based on a sum-of-the-parts (SOTP) model extending through 2040, which shows the Robotaxi platform accounting for 45% of total value. The model also shows Tesla’s humanoid robot Optimus contributing 19%, and Full Self-Driving (FSD) and the Energy segment adding 17% and 6% respectively.

“Overall, we find that TSLA’s core automotive business represents around 12% of the total value while robotaxi is 45%, FSD is 17%, Energy Generation & Storage is around 6% and Optimus is 19%,” the Bank of America analyst noted.

Still a Neutral rating

Despite recognizing long-term potential in AI-driven verticals, Merendi’s team maintained a Neutral rating, suggesting that much of the optimism is already priced into Tesla’s valuation. 

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“Our PO revision is driven by a lower cost of equity capital, better Robotaxi progress, and a higher valuation for Optimus to account for the potential entrance into international markets,” the analyst stated.

Interestingly enough, Tesla’s core automotive business, which contributes the lion’s share of the company’s operations today, represents just 12% of total value in BofA’s model.

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Elon Musk

Tesla analyst: ‘near zero chance’ Elon Musk’s $1T comp package is rejected

“There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”

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tesla elon musk

A Tesla analyst says there is “zero chance” that CEO Elon Musk’s new compensation package is rejected, a testament to the loyalty and belief many shareholders and investors have in the frontman.

Tesla investors will vote on November 6 at the annual Shareholder Meeting to approve a new compensation package for Musk, revealed by the company’s Board of Directors earlier this month.

The package, if approved, would give Musk the opportunity to earn $1 trillion in stock, an ownership concentration of over 27 percent (a major request of Musk’s), and a solidified future at the company.

The Tesla Community on X, the social media platform Musk bought in 2023, is overwhelmingly in favor of the pay package, though a handful of skeptics remain.

Nevertheless, the big pulls of this vote are held by proxy firms and other large-scale investors. Two of them, Institutional Shareholder Services (ISS) and Glass Lewis, said they would be voting against Musk’s proposed compensation plan.

Tesla CEO Elon Musk’s $1 trillion pay package hits first adversity from proxy firm

Today, the State Board of Administration of Florida (SBA) said it would vote in favor of Musk’s newly-proposed pay day, making it the first large-scale shareholder to announce it would support the CEO’s pay.

One analyst said that Musk’s payday is inevitable. Gary Black of the Future Fund said today there is a “near-zero chance” that shareholders will allow Musk’s pay package to be rejected:

There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”

He added an alternative perspective from Wedbush’s Dan Ives, who said that he had a better chance of starting for the New York Yankees than the comp package not being approved.

Black’s the Future Fund sold its Tesla holdings earlier this year. He explained that the firm believed the company’s valuation was too disconnected from fundamentals, citing the P/E ratio of 188x and declining earnings estimates.

The firm maintained its $310 price target, and shares were trading at $356.90 that day.

Shares closed at $452.42 today.

The latest predictions from betting platform Kalshi have shown Musk’s comp package has a 94 percent chance of being approved:

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