Key analyst offers a list of steps for CEO Elon Musk to save Tesla after its 'dark day'

It wasn’t just that Tesla  (TSLA) – Get Free Report missed Wall Street’s quarterly earnings and revenue estimates. It wasn’t just that CEO Elon Musk declined to offer any legitimate guidance for the year.

It wasn’t just that Musk dismissed Tesla’s Dojo project as a “long shot,” and it wasn’t just that he had to walk back his 2023 claims regarding the pending licensing of Tesla’s full-self driving (FSD) tech.

Tesla’s roughly 12% dip in the day following its fourth-quarter earnings results was due to a combination of all those factors, in addition to the simple fact that Musk once again left the door open for more price cuts to continue throughout the year, a move that had analysts frustrated as it could continue to push down already beleaguered gross margins, eating further into the company’s earnings.

A number of prominent Tesla bulls, including Wedbush’s Dan Ives, Morgan Stanley’s Adam Jonas, Deepwater’s Gene Munster and the Future Fund’s Gary Black, expressed a similar sentiment that, though Tesla’s long-term story remains intact, near-term confidence was shaken.

Ives cut his price target to $315 from $350, and Black reduced his price target to $290 from $300.

“We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure and fluctuating demand,” Ives said in a note following the release of the report, adding that the call represented another “train wreck” for Tesla.

In a Friday note, Ives called the earnings a “dark day for Tesla,” saying that the company is currently going through a pivotal moment that might well define the future value of Musk’s flagship corporation.

Wedbush maintained its price target and outperform rating, though removed Tesla from the firm’s “Best Ideas” list.

Ives’ 10 tips to save Tesla

Musk referred to Tesla on the earnings call as an artificial intelligence and robotics juggernaut in the making, something he has been saying for months.

Yet on the call, he doubled down on earlier comments in which he said that he would like to hold a 25% ownership stake in Tesla before really ramping up the company’s AI capabilities, up from his current 13% stake.

Musk sold billions of dollars in Tesla stock to fund his acquisition of Twitter in 2022.

Tesla reported earnings of 71 cents on revenue of $25.17 billion for the quarter, slightly below Street expectations. Sjoerd van der Wal/Getty Images

Regarding the AI front, Ives suggested Tesla create an ‘X Holding’ structure that will serve as an umbrella for all of Tesla’s AI initiatives, from Dojo to Optimus to FSD as a means of giving Musk more control. He also suggested that Tesla engage in an “aggressive” AI acquisition spree to build out Tesla’s suite of AI-related products and services.

Ives believes “Tesla could be the biggest AI company in the world around FSD, autonomous, Dojo, Optimus, robotaxis … give this key AI framework to the Street/investors.”

He added that Tesla should establish long-term targets around AI revenue, and that the company should hold another AI day before the summer to allow investors to better understand the goals of these projects.

Regarding management

Regarding the non-AI side of Tesla’s business, Ives said that Tesla should start things off with a $10 billion share buyback with roughly $30 billion of cash on hand.

“Walk the walk, not just talk the talk and show confidence to investors,” he said.

The analyst said that Musk should secure outside capital for X/Twitter, alongside a clear assurance that Musk will not sell any more Tesla stock to fund the social media platform.

Ives would additionally like to see a new compensation package for Musk that would lock him in as Tesla’s CEO through 2030, hittable production and delivery timelines for Tesla’s sub-$30,000 vehicle in 2025 and a “return to formal guidance and goalposts” on earnings calls.

He additionally implored Tesla to “stop the price cuts now and maintain margin leverage over other auto players.”

The other side of guidance

Not all analysts, however, are of the same mind as Ives when it comes to a return to guidance.

Black noted Friday that the positive side of Tesla not providing guidance is that the company won’t have to keep cutting prices in order to reach its full-year volume guidance.

“It’s not written down anywhere that CEOs have to guide anything about the coming year. Tesla investors had a fit yesterday because they are used to be being spoon-fed the company’s outlook and now they have to do their own research,” Black said. “We all need to grow up.

Shares of Tesla, now down about 25% since the start of 2024, were relatively flat Friday afternoon.

Contact Ian with tips via email, [email protected], or Signal 732-804-1223.