Tesla analysts react to approval of Elon Musk's pay package
Tesla (TSLA) shareholders reapproved Elon Musk’s record-breaking pay pact, removing a big overhang on the stock as investors blessed the controversial compensation plan. Tesla shares surged the day before as Musk all but said passage of the pay plan was a fait accompli. With 72% of votes cast by shareholders (excluding Musk and his brother Kimbal) in favor of the $56 billion compensation package, analysts believe clouds around Musk’s future and leadership of the company have dissipated.
Analysts' reactions
There’s an old saying in Silicon Valley: ‘Don’t fire Steve Jobs.’ When someone truly brilliant comes along and chooses to run a company, any sensible investor must do everything in their power to keep them,” wrote DataTrek’s Nick Colas in a note Friday morning. Colas, who cut his teeth as an analyst covering Detroit's Big Three automakers, noted that Open AI broke the rule when its board fired Sam Altman late last year. “Tesla shareholders have not made the same mistake,” Colas said.
Longtime Tesla bull Dan Ives said it was a “pop-the-champagne” moment for Tesla and Musk, with the company now focused on execution. “This removes a $20-$25 overhang on the stock in our opinion that has weighed on shares since the head-scratching Delaware ruling set this Twilight Zone soap opera on earlier this year,” Ives wrote in a note late Thursday night. “Our bull case is now $350 heading into the next 12 to 18 months as we believe the next chapter in the Tesla growth story around autonomous and FSD [full self-driving] is now on the near-term horizon set to take Tesla's valuation to north of $1 trillion in 2025 in our view.”
CFRA analyst Garrett Nelson also expressed relief in a note on Thursday night. “We think the news takes a potentially disastrous scenario off the table, in which Musk could have potentially left Tesla and opted to dedicate more time to his other (non-public) companies, which could have triggered a ‘brain drain’ of top talent and had massive implications for the future of the company (and TSLA’s stock price)."
Elon Musk's vision for Tesla
Musk took the stage and gave a presentation following the passage of the amendments and revealed a slate of products and ambitious goals. “If I’m not optimistic, this factory would not exist,” Musk said during the presentation, which took place at Tesla's headquarters in Austin, Texas. “I’ve been pathologically optimistic from birth. But this is the reason why every one of these is happening. But, I do deliver in the end. That’s what’s important.”
With the upcoming Tesla robotaxi, Musk said some vehicles in the fleet would be owned by Tesla, while others would be owned by customers. Tesla owners would have something akin to “Airbnb” functionality with their cars, Musk said, giving them control over their vehicles' timing and frequency of participation in the robotaxi network.
Research firms like Cathie Wood’s ARK Invest see robotaxis as the main driver for the company's long-term $2,600 price target. “ARK estimates that nearly 90% of Tesla’s enterprise value and earnings will be attributed to the robotaxi business in 2029,” ARK analyst Tasha Keeney wrote in a note. “Meanwhile, electric vehicles could approximate a quarter of total sales and ~10% of Tesla’s earnings potential, as we believe the robotaxi business will have much higher margins.”
Tesla's future plans
As for Tesla’s Optimus robot, Musk had more ambitious plans for the rollout. Musk said limited production of the robots was coming this year, and that Tesla itself would have “a few thousand” robots working in Tesla factories next year. This despite the fact Optimus has only been seen recently in a few demonstration videos released by Tesla. “I think Optimus is a $25 trillion dollar market cap situation; it’s an immense amount of work to get there, but we’re moving very fast down that road,” Musk said.
The combination of robotaxis, Optimus, and autonomy are part of Musk’s AI-driven focus at Tesla — which Musk believes is the true way to view Tesla as a company. “We're not just starting a new chapter for Tesla; we're starting a new book,” Musk said regarding AI and its importance to Tesla.
