On Friday, in an appearance on CNBC’s Squawk Box, Bernstein analyst Toni Sacconaghi shared his insights on the future of Tesla Inc. (NASDAQ:TSLA) and the implications of CEO Elon Musk’s newly approved pay package.
What Happened: Sacconaghi views the approval of Musk’s pay package as a positive development for Tesla’s stock, noting a “relief rally” following the preliminary announcement of the package’s approval.
He said, BlackRock and Vanguard, who hold 13% of the votes, broke rank with the proxy voting recommendation to vote no, resulting in a 26-point swing out of about 75% of the share base that voted, tilting the vote in favor of the package.
Despite this, Sacconaghi maintains an underperform rating on Tesla with a $120 price target. He believes that Tesla’s unit growth will be down this year and that any attempt to grow units will require a significant price cut, impacting earnings and cash flow.
“We believe the stock will do less than $2 in earnings this year, so it’s trading at about 90 times earnings, about 75 times our number for next year. And this is a company that’s not going to grow this year and will likely grow very modestly next year,” the analyst said.
Sacconaghi also expressed concern about a disconnect between Tesla’s fundamentals and its current stock price, suggesting that this disconnect is driven by Tesla’s status as an “aspirational company” with ambitious future plans, including becoming a robo taxi and intelligent robot company.
Why It Matters: The approval of Musk’s pay package comes after a previous 2018 plan was voided earlier this year. Tesla shareholders overwhelmingly approved the new package, with 77% of votes cast in favor.
Following the approval, Musk thanked shareholders and shared a company update, stating that Tesla is “starting a new book” and could potentially reach a $30 trillion valuation.
Tesla’s corporate move to Texas was also approved by shareholders, with Texas Governor Greg Abbott welcoming Musk and the company to the state.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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