Tesla Inc: What’s Behind the Big Compensation Plan for Elon Musk? Joseph Spak Shares Insight

RBC Capital's Joseph Spak likewise notes that the government's new solar tariffs keep him cautious on Tesla's short-term opportunity.

Tesla Inc (NASDAQ:TSLA) unveiled a new decade-long CEO performance award to the creator of the electric car giant’s empire: CEO Elon Musk. The award cheered Musk’s ability to successfully meet market cap as well as operational milestones. Yet, one cautious analyst believes this is more of a fancy feather in Musk’s cap hoped to put to rest the Street’s worries questioning just how committed the leader is to his giant.

RBC Capital analyst Joseph Spak believes the “CEO performance award [is] mostly meant to assuage investor concerns about Musk’s Tesla commitment,” adding that on a negative note: “Solar tariffs [are] a likely near-term negative” for the tech stock.

For context, on Monday, President Trump gave the nod to tariff recommendations on imported solar cells as well as modules between now and 2022.

In reaction, the analyst reiterates a Sector Perform rating on TSLA stock with a $380 price target, which implies a 7% upside from current levels. (To watch Spak’s track record, click here)

“To achieve full vesting, Tesla’s market cap would have to grow to $650bn (+$600bn from today) and meet 12 out of 16 operational milestones. The high-end of the 10-year operational milestones reach $175bn in sales (>15x 2017 levels), and $14bn in EBITDA (>21x 2017 levels),” wagers Spak.

“While this clearly ties performance to shareholder interest, we believe the ulterior motive here is to downplay concerns Musk doesn’t remain with Tesla,” the analyst explains, adding that on a positive note: “However, the plan does give leeway for CEO succession as Elon can still achieve vesting if he serves as both Executive Chairman and Chief Product Officer with all leadership ultimately reporting to him.”

By Spak’s calculations, there could be a $70 billion performance award granted to Musk, a meaningful number; and yet, considering the CEO already stands as Tesla’s biggest shareholder owning roughly 20% of shares, “his incentive was already tied to Tesla’s performance.”

If revenue and adjusted EBITDA targets are “misunderstood by the Street,” these operational targets could do more harm than good, Spak concludes, noting: the operational targets could fuel the bear case.” Consider that the implied EBITDA margins stand at around 8%, under what even bulls have projected along with traditional automakers.

TipRanks points to an apprehensive analyst majority leaning towards the bears on the electric car empire. Out of 24 analysts polled in the last 3 months, 6 are bullish on Tesla, 9 remain sidelined, while 9 are bearish on the stock’s prospects. With a loss potential of 14%, the stock’s consensus target price stands at $302.44.

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