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Should Elon stay or should Elon go?

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09/11/2018 | 09:30am EDT

Is Elon Musk helping or hindering Tesla? The debate is gaining traction as the tech billionaire displays more and more erratic behavior.

Tesla is an object of fascination for many. Its cars represent the future and the company has taken the world by storm in a matter of months. And of course, there's its founder, Elon Musk, a genious mind capable of co-founding in a record time an online payment system (Paypal), a space launcher (SpaceX), a car manufacturer (Tesla). Unfortunately, he is also capable of displaying an erratic behaviour, especially in the past months.

It is quite tricky to question Tesla's model, given that it is rather a unique one. Its managers have succeeded in creating a real car manufacturer from scratch - a real feat in an industry that has not seen such a breakthrough innovation in recent decades.

Such breakthrough companies are often carried by a visionnary. In Tesla's case, this visionnary is Elon Musk: he has without a doubt been instrumental in the company's success. But in light of his recent erratic behavior, from bizarre tweets to smoking pot live on TV, the question that investors are now asking themselves is whether the company still needs the brilliant inventor who is erratic and unpredictable or whether it must quickly integrate the standards of the profession and the legal framework of publicly traded companies.

For some, the answer lies in between. Tesla must structure itself as a company that employs tens of thousands of people and is worth nearly $50 billion. But it also seems that it needs a visionary who can move mountains to stay at the forefront of innovation. Even if it means that Elon Musk continues to enjoy preferential treatment internally and a certain leniency externally. 

But not everybody agrees with this. Analysts at Normura Instinet, who have for a long time been in favor of keeping Elon at the helm of the company, seem to have changed their mind. "We are worried that this behavior is tainting the Tesla brand, which in terms of value is most important", the financial services group said in a report published on September 11. It believes that Tesla brand recognition is on par with Apple's and that it is one of the most important asset for the company. Because this brand recognition is now being theatened, and due to the recent departures of senior executives, it is now calling for changes in management. "Notwithstanding improving fundamentals, we believe that Tesla is in need of better leadership (an about face) and are moving to the sidelines until we see what happens with management." Nomura downgraded Tesla shares from Buy to Neutral, while lowering its target price from $400 to $300.

More tweets, more problems? (Source: Nomura report 11/09/2018)
Across the board, the current positions of analysts are a good illustration of the debate Tesla is generating. As of September 11, 2018, target prices range from $190 to $500  and opinions are very divided: 7 positive, 8 neutral and 9 negative opinions. The question is: how long will investors continue to tolerate Elon Musk's erratic behavior? 
Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.00% 27224.24 Delayed Quote.16.70%
LONDON BRENT OIL 0.72% 63.04 Delayed Quote.22.20%
NASDAQ 100 -0.59% 7858.214388 Delayed Quote.25.23%
TESLA INC. 2.30% 259.28 Delayed Quote.-23.82%
VALUE8 2.51% 5.72 Delayed Quote.17.72%

Romain Fournier
© MarketScreener.com 2018
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Financials (USD)
Sales 2019 25 024 M
EBIT 2019 -243 M
Net income 2019 -890 M
Debt 2019 8 289 M
Yield 2019 -
P/E ratio 2019 -48,9x
P/E ratio 2020 128x
EV / Sales2019 2,14x
EV / Sales2020 1,72x
Capitalization 45 178 M
Duration : Period :
Tesla Inc. Technical Analysis Chart | MarketScreener
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Technical analysis trends TESLA INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 33
Average target price 280,03  $
Last Close Price 253,54  $
Spread / Highest target 109%
Spread / Average Target 10,4%
Spread / Lowest Target -44,8%
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Robyn M. Denholm Chairman
Deepak Ahuja Chief Financial Officer
Jeffrey B. Straubel Chief Technology Officer
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