The bears are in the Tesla house
It has been almost exclusively bad news for the EV leader recently. There was a car crash of sorts in its Q4 earnings release and that was followed by a negative ruling for CEO Musk in a lawsuit filed by a shareholder regarding his pay package set by the board in 2018. Meanwhile, demand for EVs has stalled with many concerned the Tesla growth story has hit a brick wall.
Tesla bull refuses to join the naysayers
However, one long-standing Tesla bull is having none of it. Wedbush’s Daniel Ives acknowledges the current wave of negativity surrounding Tesla as perhaps the most severe in recent memory. He stands firm in his conviction, refusing to join the ranks of the naysayers.
“We could not disagree more with the ultra-negative Tesla narrative building and forming a black cloud over the stock,” Ives said. “While the next few months are clearly a bit cloudy for the Tesla story and overall EV demand, longer-term our view is that by the end of the decade ~20% of autos will be EV with autonomous and FSD a reality and not a dream/aspiration.”
Considering the stock’s recent poor performance, Ives believes the stock is “baking in a tremendous amount of bad news here.”
Three actions the Board must take
It is now up to the Board to outline a strategy investors can get behind, with Musk front and center of it. In Ives’ view, the Tesla Board must undertake three actions to “stop this Category 5 hurricane over Tesla’s stock.”
- Introduce a fresh compensation package to replace the 2018 one, alongside a “new package post proxy” to be voted upon at the upcoming shareholder meeting in May.
- Aim to achieve Musk’s targeted 25% voting share through the new compensation package.
- Support the idea of Tesla relocating its legal base to Texas, which would facilitate granting Musk the 25% voting rights and the implementation of a revised compensation plan.
Moving to Texas, says the analyst, will “take out the uncertainty of Musk and his AI initiatives going anywhere else except under the Tesla hood with a key 3-5 years ahead for the Tesla story.”
All in, Ives maintained an Outperform rating on Tesla shares, along with a $315 price target, implying the stock will climb 71% higher over the one-year timeframe.
Mixed ratings on the stock
Ives is certainly among the Street’s bull contingent but not all are quite as confident. The stock gets a Hold consensus rating, based on a mix of 12 Buys, 17 Holds, and 5 Sells. Going by the $220.26 average target, a year from now, the shares will be changing hands for a 20% premium.
Analyst comment
The news can be evaluated as negative as it highlights multiple challenges faced by Tesla, including negative Q4 earnings, a negative ruling in a lawsuit against CEO Musk, and stalled demand for EVs. However, Wedbush analyst Daniel Ives remains bullish on Tesla, stating that the current wave of negativity is temporary. Ives believes the stock is already reflecting bad news and suggests that the company should introduce a new compensation package, achieve Musk’s targeted voting share, and relocate its legal base to Texas. Ives maintains an Outperform rating and a $315 price target, implying a 71% increase in the stock price. However, the overall consensus rating is a Hold, with a 20% premium predicted based on the average target price.
