Proactive Investors - Analysts at Jefferies expect an eventful three months ahead for Tesla Inc (NASDAQ:TSLA), notably “more governance drama” at its annual general meeting (AGM) coming up on June 13.
At the meeting, shareholders will vote on whether CEO Elon Musk should receive an approximately $56 million pay package.
Top proxy advisor ISS on Thursday recommended shareholders vote against ratifying the pay deal, following a similar recommendation from proxy advisory firm Glass Lewis last week.
The Jefferies analysts wrote in a note that denying CEO Elon Musk his past compensation “however ill-designed the scheme was... would look like misplaced buyers remorse.”
They added: “Recent events have indicated how much Elon Musk is driven by tech innovation and keen on market domination but uninterested in competing to deliver sustained value creation.
“It is up to the Board to find ways to reward Musk for technology milestones and introduce metrics for sustainable performance, both of which could argue for breaking up Tesla into more focused entities. We continue to think the Energy mission of Tesla transcends Mr. Musk.”
They added that the company’s shift away from a low-multiple OEM business model “makes sense.”
“Sadly, the transition no longer builds on an edge in cars,” they wrote. “Reliable Full Self-Driving (FSD) and viable robotaxi business models are distant enough to keep bulls and bears busy.
“Beyond some recurring subscription, meaningful earnings from FSD or robotaxis look years away with unclear business models in terms of capital intensity and cost-permile advantage over existing ride share operators. Securing approval of FSD in China looks encouraging, and a reminder of how China has, in the past, leveraged Tesla to stir domestic competition.”
The analysts awarded the stock a ‘Hold’ rating and a $165 price target.
Shares of Tesla traded hands at about $175 on Friday afternoon.
“Shares should be volatile but supported during an eventful three months ahead,” the analysts wrote.
“Valuation remains disconnected from the auto business but, as long as it funds diversification, supports our ‘Hold.’”