Tesla Analysts React to Approval of Elon Musk's Pay Package

Shares of Tesla (TSLA) fell slightly on Friday after shareholders reapproved Elon Musk's record pay deal, removing a large overhang on the stock as investors blessed the controversial compensation plan.

Tesla shares jumped the day before as Musk all but declared that adopting the compensation plan was a accomplished fact. Still, with 72% of votes cast by shareholders (excluding Musk and his brother Kimbal) in favor of the $56 billion compensation package, analysts say clouds over Musk and management's future of the company have dissipated.

“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 should do everything in their power to keep them,” Nick Colas of DataTrek wrote 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 did not make 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 focusing on execution.

“This removes a $20-$25 overhang in the stock we believe has weighed on shares since Delaware's earth-shattering decision launched this Twilight Zone soap opera earlier this year,” Ives wrote in a note Thursday evening. “Our bullish case now stands at $350 for the next 12-18 months as we believe the next chapter in Tesla's growth story around autonomy and FSD is open. [full self-driving] is now short-term and expected to take Tesla's valuation north of $1 trillion in 2025, in our opinion.

CFRA analyst Garrett Nelson also expressed relief in a note Thursday evening. “We believe this news rules out a potentially disastrous scenario, in which Musk potentially left Tesla and chose to devote more time to his other (non-public) companies, which could have triggered a 'brain drain' of top talent. and had enormous implications for the future of the company (and for TSLA's stock price).”

Musk sets out his vision

Musk took the stage and gave a presentation after the amendments were passed and revealed a list of ambitious products and goals.

“If I'm not optimistic, this factory wouldn't exist,” Musk said during the presentation at Tesla's headquarters in Austin, Texas. “I have been pathologically optimistic since birth. But that's why each of these events happens. But I end up delivering. That's what's important.

The story continues

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 benefit from something akin to “Airbnb” functionality with their cars, Musk said, giving them control over the timing and frequency of their vehicles' participation in the robotaxi network.

Research firms like Cathie Wood's ARK Invest see robotaxis as the main driver of the company's long-term price target of $2,600.

“ARK estimates that nearly 90% of Tesla’s enterprise value and profits will be attributed to the robotaxi business in 2029,” ARK analyst Tasha Keeney wrote in a note. “At the same time, electric vehicles could account for about a quarter of total sales and about 10% of Tesla's profit potential, as we believe the robo-taxi business will have much higher margins.”

Tesla's robotaxi reveal event is scheduled for August 8.

As for Tesla's Optimus robot, Musk had more ambitious deployment plans. Musk said that limited production of robots would arrive this year and that Tesla itself would have “a few thousand” robots working in Tesla factories next year. This is despite the fact that Optimus has only recently been seen in a few demo videos released by Tesla.

“I think Optimus represents a $25 trillion market cap situation; It’s an immense amount of work to get there, but we’re moving very quickly down that path,” Musk said.

The combination of robotaxis, Optimus and autonomy is part of Musk's AI-driven focus at Tesla – which Musk says is the true way to think about Tesla as a company.

“We are not only starting a new chapter for Tesla; we are starting a new book,” Musk said of AI and its importance to Tesla.

“What is the new book about? AI/robotics: autonomous driving and Optimus,” wrote George Gianarikas, analyst at Canaccord Genuity, on Thursday evening.

“I could argue [Tesla] is one of the best AI plays out there, looking at the next two, three, four years,” Wedbush’s Ives added in an interview with Yahoo Finance.

Further adding to Tesla's story and its future growth, Musk revealed in a slide during the presentation that three new Tesla vehicles are planned for the future. Two of them, most likely the robo-taxi and the cheaper Tesla vehicle, have been mentioned by Tesla as being in the works, but a new van-like product is also appearing under a sheet.

On a slightly negative note for investors, Musk confirmed that near-term demand and sales will remain somewhat challenged as the industry goes through a transition period.

“It’s hard to sled there,” Musk said of the electric vehicle market, adding that competitors have also cut back on investment and production of electric vehicles.

Pras Subramanian is a journalist for Yahoo Finance. You can follow it Twitter and on Instagram.

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