Key Morningstar Metrics for Tesla
- Fair Value Estimate: $300.00
- Morningstar Rating: ★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
Tesla TSLA held its annual general meeting on Nov. 6, after the market close. The highlight of the event was that shareholders voted to approve a new compensation package for CEO Elon Musk. Tesla shares were down slightly in Nov. 7 premarket trading.
Why it matters: The new pay package would grant Musk shares of Tesla in tranches based on operational and performance targets as well as market capitalization goals. Should Musk realize the full value of the package, he would own more than 25% of Tesla shares, which is his stated goal.
- The pay package likely keeps Musk dedicating the majority of his time to leading Tesla over at least the next decade. This removes any potential overhang on the stock from key person risk based on Musk leaving the company.
The bottom line: We maintain our $300 fair value estimate for narrow-moat Tesla, as we expected the new compensation package would pass. We think many shareholders own the stock because they believe in Musk’s vision for the company, so we thought they would vote for the package.
- We view Tesla shares as overvalued currently, trading around 50% above our fair value estimate and in 2-star territory.
- The stock continues to price in an optimistic scenario for success in Tesla’s robotaxi business. While management is guiding to a full rollout next year, we think the product will still be in testing. We point to 2028 for the full rollout, with no safety drivers and limited geofencing.
