TSLA: Shareholder Pay Vote And Leadership Uncertainty Will Undermine Near-Term Performance

Analysts have increased their fair value estimate for Tesla to about $391 from $367 per share, citing slightly improved revenue growth and profit margin expectations. Recent Street research points to delivery stabilization, record Q3 results, and continued optimism around new products despite ongoing earnings variability.

Analyst Commentary

Recent Street research highlights a mix of optimism and caution surrounding Tesla, with varying expectations for the company's growth trajectory and execution capabilities. The latest analyst perspectives reflect both upward and downward adjustments in price targets as well as commentary on key risks and opportunities facing the business.

• Bullish analysts continue to increase their price targets, with notable upward revisions following record Q3 deliveries and strong free cash flow. This indicates confidence in Tesla's ability to execute and meet delivery goals.
• Recurring themes include robust performance in energy storage, with new records being set, and the company’s ability to offset lost tax incentives by introducing more affordable, lower-priced models aimed at broadening its customer base.
• An accelerated roadmap around artificial intelligence, autonomy, and robotics is seen as paving the way for significant long-term value creation and supporting higher company valuations.
• Bullish sentiment is further supported by expectations that upcoming new vehicle models and continued innovation will drive renewed global sales momentum, even as certain market incentives expire.

• Some bearish analysts warn that profitability remains volatile, highlighting recent margin and adjusted EPS misses in spite of delivery beats, while cautioning about rising operating expenses and capital expenditures going forward.
• The upcoming shareholder vote on the CEO’s compensation package is flagged as a substantial risk, with concerns that a negative outcome could impact CEO engagement and weigh negatively on the stock.
• There are doubts that recent delivery strength represents a sustained return to growth, with suggestions that results were boosted by temporary factors such as the expiration of tax credits and may not be sustainable in future quarters.
• Expectations for rapid execution in ambitious areas, such as fully autonomous vehicles and robotics, are seen as aggressive. There is some skepticism regarding the feasibility of consensus estimates for Tesla’s newer business segments.

What's in the News

• Tesla shareholders are set to vote on a potential $1 trillion stock award for CEO Elon Musk, a pay package that has sparked controversy and strong opposition from major stakeholders, including Calpers. If approved, the arrangement would grant Musk up to 29% voting control if stringent performance goals are met (The New York Times, Bloomberg).
• The National Highway Traffic Safety Administration has escalated its probe into Tesla following a rise in complaints about inoperative doors caused by battery failures. This development is raising safety concerns and leading to additional scrutiny of Tesla’s design and engineering practices (Bloomberg).
• Tesla is reportedly planning to redesign its forthcoming Cybercab to be more like a conventional vehicle. The company signaled openness to adding features such as a steering wheel and pedals, a shift aimed at boosting sales volumes (Bloomberg).
• Elon Musk stated that Tesla might unveil a flying car as soon as 2025, noting that the company is close to having a prototype ready. No further details have been provided (The Information).
• Ongoing labor unrest with striking workers in Paris has seen Tesla showrooms occupied as protestors demand greater taxes on the country's wealthiest. This indicates rising social tensions surrounding the company’s operations in Europe (News Eye).

Valuation Changes

• Fair Value Estimate: Increased from $367 to approximately $391 per share. This reflects a moderately higher assessment of Tesla's intrinsic worth.
• Discount Rate: Decreased slightly from 10.62% to 10.61%. This suggests marginally lower perceived risk in the valuation model.
• Revenue Growth: Projected annual revenue growth has edged up from 16.58% to 16.70%. This indicates modestly improved growth expectations.
• Net Profit Margin: Updated projections show an increase from 11.03% to 11.83%. This reflects anticipated improvements in profitability.
• Future P/E Ratio: The estimated future price-to-earnings multiple has risen from 100.3x to 108.9x. This signals expectations for a higher valuation relative to future earnings.