ZINGER KEY POINTS
Musk and Tesla have significantly miscalculated the demand challenges in China and the overall demand weakness for EVs globally: Ives
The Tesla CEO should now layout the growth strategy, give realistic delivery and margin goal, discuss why significant layoffs now, he says.
Tesla, Inc. on Wednesday filed itsproxy statement for the annual shareholder meetingto be held on June 13. Bullish analyst Daniel Ives from Wedbush weighed in with his take on the contents of the filing.
Challenging Meeting Ahead: One can expect fireworks into the shareholder meeting, as Tesla stock has been a “disaster” this year, said Ives in a note. “Musk and Tesla have significantly miscalculated the demand challenges in China and the overall demand weakness for EVs globally with competition rising from all areas,” he said.
The lack of guidance and communication to the Street on the previous two earnings calls has added “fuel to the raging inferno around the stock and story,” the analyst said.
Ives’ Read Of Proxy Filing: Tesla has asked shareholders to vote once again on Musk’s 2018 compensation package after a Delaware court nullified a $56 billion award, Ives noted. Expectedly, the Tesla board has asked for a vote on moving the company’s state of incorporation from Delaware to Texas, he said.
The analyst said he expects shareholders to reapprove the 2018 package. The Delaware court decision would be a moot point as Tesla would be moving to Texas, he said. The board slate, which includes Kimbal Musk and James Murdoch, will also be voted on, he added.
Tesla investors, including Ross Gerber, have turned markedly bearish amid the company’s fundamental challenges and what they see as strategic missteps. Gerber in particular has been very vocal in blaming Musk for the predicament and has called for the replacement of the board on the grounds that it has not performed its fiduciary duties.
Task Cut Out For Musk: Ives said the “clock has struck midnight for Musk to now layout the growth
strategy, give realistic delivery and margin goal posts, discuss why significant layoffs now, and most importantly give a clear outlook to the Street around Model 2.”
The billionaire should clarify whether the Model 2 is scrapped or delayed and whether robotaxi and autonomy or the major focus and not a low-cost vehicle, he said.
If the Model 2 does not roll out in the next 18 months, it would be a “disaster gamble” that would likely change the growth story of Tesla in the next few years, Ives said.
“The proxy and shareholder meeting combined with the current state of affairs at Tesla all sets up for more fireworks over the coming months,” the analyst said. Musk should commit all AI initiatives to be under Tesla and needs to recommit himself as CEO of the company for the next three to five years, he added.
As such, Ives maintained an Outperform rating and $300 price target for Tesla, premised on the company’s longer-term growth and the massive value creation the full self-driving software will bring in over the coming years.
“However if Musk does not turn things around at Tesla darker days could be ahead,” he warned.
