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Tesla can rebound with these 10 turnaround ideas: Wedbush

Credit: Tesla Asia | X

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Tesla (NASDAQ: TSLA) can rebound with 10 turnaround ideas, according to a new note from Wedbush analyst Dan Ives.

Tesla reported Earnings for Q4 and Full Year 2023 on Wednesday, and after what was widely considered to be a weak conference call, the stock dropped over 12 percent on Thursday.

Dan Ives, an analyst at Wedbush who has been routinely bullish on the stock, was one of the most vocal personalities on Wall Street yesterday as varying ideas surrounding the narrative of the Earnings Call circulated.

Ives called the call a “train wreck,” and talked about the lack of information Tesla reported during Earnings. There was no indication of what investors should expect in terms of margins or outlook in production.

Instead, Tesla stated it expected a “notable” drop in growth rate in 2024 as it gears up for its next-generation platform, which it plans to launch in the second half of 2025.

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“This was 101 how to not to do a conference call,” Ives commented on Thursday morning. Wedbush removed Tesla stock from its “Best Ideas List” as well.

Tesla Can Rebound with These 10 Things: Wedbush

However, Ives is back with a note on Friday, which he shared with investors. According to the analyst, there are ten ways Tesla can turn around its stock:

  1. Announce a $10 Billion Share Buyback With Roughly $30 Billion of Cash on hand. Walk the walk, not just talk the talk and show confidence to investors
  2. Create an “X Holding” Structure That Will Include AI Initiatives (Dojo, Optimus, FSD) to give Musk More Control and could get him to ~25% voting level
  3. Stop the price cuts now and maintain margin leverage over other auto players
  4. Hold an AI Day before the summer timeframe so investors can better understand the goals for Dojo, Optimus, FSD
  5. Get outside capital for X/Twitter with assurances of no more Musk stock sales
  6. New comp package with the proxy to lock in Musk as CEO Through 2030, along with settling Delaware legal issue holding things up
  7. Hittable production/delivery timeline for Model 2 and sub $30k vehicle in 2025
  8. With Zach (former CFO) gone, conference calls have been horror shows; return to formal guidance and goalposts and make messaging changes on calls
  9. Do an aggressive AI acquisition spree and bring in outside capital to build out the AI component of Tesla…~$30 Billion of cash to fund deals
  10. Give long-term targets around AI revenue to the Tesla ecosystem. We believe Tesla could be the biggest AI company in the world around FSD, autonomous, Dojo, Optimus, robotaxis…give this key AI framework to the Street/investors

Several of the ideas Ives lists would clarify some skepticism investors may hold after the Earnings Call.

One of the more notable things to recognize on the list is the price cut narrative, which investors continue to focus on. While they are great for consumers, they put pressure on Tesla’s profits, which is why it has continued to be so strong for years.

Additionally, offering CEO Elon Musk a new comp package could alleviate pressure on the stock from his comments last week, where he said he would be “uncomfortable” moving Tesla into more development of AI without greater control.

RELATED:

Elon Musk explains why he wants 25% voting share at Tesla: “I just want to be an effective steward of very powerful technology”

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Ives reduced his price target on Tesla from $350 to $315 but still holds an ‘Outperform’ rating on the stock.

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

Investor's Corner

Tesla investor Calpers opposes Elon Musk’s 2025 performance award

Musk’s 2025 pay plan will be decided at Tesla’s 2025 Annual Shareholder Meeting, which will be held on November 6 in Giga Texas.

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Credit: Tesla China

One of the United States’ largest pension funds, the California Public Employees’ Retirement System (Calpers), has stated that it will be voting against Elon Musk’s 2025 Tesla CEO performance award. 

Musk’s 2025 pay plan will be decided at Tesla’s 2025 Annual Shareholder Meeting, which will be held on November 6 in Giga Texas. Company executives have stated that the upcoming vote will decide Tesla’s fate in the years to come.

Why Calpers opposes Musk’s 2025 performance award

In a statement shared with Bloomberg News, a Calpers spokesperson criticized the scale of Musk’s proposed deal. Calpers currently holds about 5 million Tesla shares, giving its stance meaningful influence among institutional investors.

“The CEO pay package proposed by Tesla is larger than pay packages for CEOs in comparable companies by many orders of magnitude. It would also further concentrate power in a single shareholder,” the spokesperson stated.

This is not the first time Calpers has opposed a major Musk pay deal. The fund previously voted against a $56 billion package proposed for Musk and criticized the CEO’s 2018 performance-based plan, which was perceived as unrealistic due to its ambitious nature at the time. Musk’s 2018 pay plan was later struck down by a Delaware court, though Tesla is currently appealing the decision.

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Musk’s 2025 CEO Performance Award

While Elon Musk’s 2025 performance award will result in him becoming a trillionaire, he would not be able to receive any compensation from Tesla unless aggressive operational and financial targets are met. For Musk to receive his full compensation, for example, he would have to grow Tesla’s market cap from today’s $1.1 trillion to $8.5 trillion, effectively making it the world’s most valuable company by a mile. 

Musk has also maintained that his 2025 performance award is not about compensation. It’s about his controlling stake at Tesla. “If I can just get kicked out in the future by activist shareholder advisory firms who don’t even own Tesla shares themselves, I’m not comfortable with that future,” Musk wrote in a post on X.

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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

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.

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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