Elon Musk’s ability to defy the critics has ended. Ever since the $420 going private tweet hit, the skies have darkened for Tesla (TSLA). The stock has fallen over 30% in the past month, versus no change in the NASDAQ Composite.
Needham’s top analyst Rajvindra Gill attributes TSLA’s decline squarely to issues with management credibility, namely the reversal of the public-private decision in just 17 days and the recent departures of key executives.
“Based on our count, eleven various level managers, directors and executives have left Tesla in the past year alone, including the notable departures of Mr. Dave Morton, Chief Accounting Officer (former Seagate executive), Ms. Gabrielle Toledano, Chief People Officer (former Electronic Arts executive) and Doug Field, Senior Vice President of Engineering (former Apple executive.). In the past two years alone, an unprecedented 23 executives have left Tesla. We are concerned with this level of employee turnover, especially at these key levels of management,” the analyst stated.
Gill points out that even with the steep decline, the stock trades at 131x P/E 2019E, nearly 2x that of AMZN and NFLX, 4x of NVDA, and 7x of FB, all considered “technology/AI plays”, an area in which the TSLA bulls argue that the company should be placed. When comparing the valuation to the automotive sector, TSLA trades at 17x that of the major auto OEMs.
As such, Gill remains bearish for TSLA with an Underperform rating.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rajvindra Gill has a yearly average return of 19.2% and a 62.5% success rate. Gill has a 9.7% average return when recommending TSLA, and is ranked #82 out of 4869 analysts.
Net net, most analysts on Wall Street are gravitating on a fine sidelined line when it comes to the electric car giant’s prospects, with TipRanks analytics demonstrating TSLA as a Hold. Based on 27 analysts polled in the last 3 months, 7 rate a Buy on Tesla stock, 11 maintain a Hold, while 9 issue a Sell. The 12-month average price target stands at $321.82, which actually implies a 15% upside from current levels. (See TSLA price targets and analyst ratings on TipRanks)