Tesla ‘will not grow this year,’ Bernstein analyst says

Tesla ‘will not grow this year,’ Bernstein analyst says

On Friday, in an appearance on CNBC’s Squawk Box, Bernstein analyst Toni Sacconaghi shared his insights on the future of Tesla Inc.  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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