By Gene Munster
We remain believers in the Tesla (TSLA) story. We think the company has the best product roadmap in tech and will ride multiple waves including the growth of EVs, autonomous vehicles, ride sharing, solar capture, and energy storage.
While we’re optimistic about Tesla’s future, the company’s board could still benefit from a major overhaul. The appointment of Robyn Denholm to chairwoman following the SEC settlement provides a potential spark for change, as will the coming two new independent directors, but more changes need to be made. We previously wrote about how Tesla could benefit from more truly independent directors on the board, and this is still true.
The company’s strong Sep-18 report demonstrated meaningful steps toward sustainability but may be blinding us from the reality that this same board did not have the ear of Elon Musk while he was engaging in multiple superfluous activities that were hurting the company. We are strong believers in Musk as the leader of Tesla, but also realize that he, from time to time, needs to be protected from himself in trying to win every battle. It seems unrealistic to believe that this same board would be able to exert meaningful influence over Musk if he veers toward meaningless battles in the future despite the change in chair and the two new voices.
We believe that turning over half of the current board plus adding the two new independent directors would be a meaningful positive step in the right direction. This would give the company the opportunity to add multiple board members with manufacturing experience that may reduce the need for Tesla to learn from its own mistakes in the future. A stronger board would mean a stronger Tesla.
There are two key pieces of the Tesla story that will play out over the next few months. Most important are Dec-18 results and the company’s ability to continue to scale production of Model 3 while increasing gross profit margin. Our belief is the Sep-18 quarter was a material step toward Tesla accomplishing its Dec-18 goal to scale production and Model 3 profitability.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.