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Since his ill-advised efforts to privately take Tesla (TSLA) failed in August, CEO Elon Musk has come under increasing pressure and criticism. Charges of more and more irregular behavior and an inability to cope with the management requirements of the rapidly growing car manufacturer have multiplied. Elon has barely helped his case, making a number of missteps in recent weeks, including a tearful New York Times interview, smoking the camera and renewing his unfounded accusations of pedophilia against Vernon Unsworth.
Recent transgressions at Elon have prompted a quick reassessment of his ability to lead Tesla. Many investment analysts and financial media personalities who have already supported him unequivocally have turned against him. Elon became a serious leader for the company that he helped to create. This is clear from the analysts' new commentary released this week: Some of the most optimistic analysts have taken a tough turn, calling for a new direction and redesign of Tesla's governance.
As analysts turn against him and become increasingly skeptical about Tesla's talk of growth in which he played a role in the craft industry, the prospect of a negative market correction is becoming more and more likely. .
The time has come for the board of directors
Monday, September 10e, Gene Munster of Loup Ventures has released a re-evaluation of Tesla and its direction. Munster has long been a major player in Elon, its vision and growth prospects for Tesla. In his latest update on the company, the outlook is much darker. He does not mince words, declaring:
"If Tesla does not reorganize the board right now, it could spell the end for the company."
Munster calls for a radical review of Tesla's board, which analysts and bullish and bullish investors would argue would be in the company's interest. Tesla's board has been asleep for a long time. The impulsive Iron tweet and the resulting flood of lawsuits created a nightmare scenario for a board that had been unusually lax in its corporate governance. As Elon continues to struggle and makes unforced errors, the silence of the painting has become deafening. Getting rid of most or all of these yes-men, who allowed Elon's worst impulses and failed to control him, is certainly a good idea.
Munster sees Tesla lose the race to acquire and retain talent, a problem he poses at the feet of Elon. He considers that Elon's actions and behavior have a negative impact on Tesla's support:
"More recently, Musk's aura seemed a jolt, a daunting part and a liar part. He surely has not gained new fans with his way of acting. It is more likely that he is losing supporters and, as he is Tesla's face, it means that Tesla is losing supporters. "
Tesla's share price is based on his story of massive future growth. Much of this story is related to the individual character of Elon Musk. If Elon is unable to control himself, he risks destroying the mark he has helped to transform into power. Munster calls on Elon to step down from his role as president and the day-to-day responsibilities of the CEO, to refocus on the "visionary" who can guide Tesla's grand strategy.
Munster has clearly not given up on Tesla, and he still firmly believes in Elon's visionary role, but his critics are overwhelming. He sees a real risk that Tesla can not survive without root management and corporate governance. Unfortunately for this point of view, Elon has shown a deep refusal to give up power. Unless you have to do it one way or another, Elon will not follow Munster's lead.
From "strong buy" to "more investable"
Nomura's Romit Shah had one of Tesla's most optimistic analysts for some time. That changed on Tuesday, September 12e when he reduced his price target from $ 400 to $ 300. Although it is still technically higher than the one in which Tesla shares were traded in recent days, this indicates a major reassessment of the company's outlook.
Like Gene Munster de Loup, Shah views management issues as a fundamental concern that overrides what he always sees as an improvement in operations:
"Despite improving fundamentals, we believe that Tesla needs better leadership and goes out of the way until we see what's going on with management."
Shah goes so far as to say that Tesla "can no longer invest," given the fundamental problems that society faces in terms of leadership. Once again, Elon is the culprit here. The "erratic" behavior of the beleaguered CEO pushes even the most ardent supporters of Tesla out of the way.
But Elon is not a CEO or an ordinary businessman. Analysts' criticism and growing criticism of the press should not shake his determination or his grip on society. As things are no longer in control, Elon's reluctance to share his power or his spotlight could be the loss of Tesla.
Investor's Eye View
The consequences of the loss of support from analysts are quite clear. This means less air cover when the company runs out of projections or strikes operational and financial difficulties. It also reduces Elon's ability to direct the story. The importance of Tesla's story can not be overstated. Tesla is basically a story. Its valuation is not based on profitability in the third quarter or the fourth quarter, but on its ability to become a printing machine in a few years.
The gap between expectations and reality widens, the production of model 3 is still lagging behind, the first signs of a softening of demand, increasing financial and operational tensions Without analysts to pick up the ball and run with his history, Elon will be confronted with the current reality. Of course, he is not without ally in the community of analysts, and Ben Kallo of Baird is always eager to express his full support. But Kallo is now one of the last influential and influential investment bank analysts yet to fully support Tesla's current growth talk.
It boils down to this: if the market starts to evaluate Tesla on the basis of its current financial situation and medium-term growth prospects, a sharp downward correction of stock prices becomes inevitable. This seems to be the road that Tesla is following now. Current shareholders would be well advised to find a new solution.
Disclosure: I am / we are short TSLA.
I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I have no business relationship with a company whose stock is mentioned in this article.
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