Key Morningstar Metrics for Tesla
- Fair Value Estimate: $300.00
- Morningstar Rating: ★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
On Dec. 19, after the market close, the Delaware Supreme Court overturned a lower court’s ruling that had voided Tesla TSLA CEO Elon Musk’s 2018 pay package. Tesla shares were up 2% in early Dec. 22 trading.
Why it matters: Most Tesla shareholders voted for the pay package twice, once in 2018 and again last year. So while the compensation is not in line with traditional executive pay, the firm’s shareholders are in favor of it.
- The pay package, which is entirely share-based compensation, is also key to keeping Musk as CEO. Musk has said he would like a greater ownership percentage of Tesla over time, and this could allow him achieve this goal.
The bottom line: We maintain our $300 fair value estimate for narrow-moat Tesla. At current prices, we view Tesla shares as overvalued, trading in 2-star territory and more than 60% above our fair value estimate.
- Following the 2025 pay package, we see little key-person risk that Musk would leave Tesla. We expect Musk will remain as a key executive for at least the next decade, as this is the period in which Musk must meet the targets in the new pay package.
- Tesla’s stock reflects market optimism for its autonomous driving software, which will power its robotaxi ride-hailing service and full self-driving subscription software. While we think Tesla will successfully develop the software, we think the market is assigning it too high a valuation.
