New York: Tesla shareholders have endorsed CEO Elon Musk’s monumental $56 billion pay package, signaling their approval of his leadership. However, despite this vote of confidence, Tesla’s stock remains highly valued, even after enduring several years of weak performance.
At Tesla’s annual general meeting on Thursday, shareholders reapproved Musk’s 2018 compensation plan, a record-setting package deemed essential to keep the billionaire entrepreneur focused on the electric vehicle company. This decision comes as Musk prepares for a prolonged legal battle to overturn a Delaware judge’s January invalidation of the pay package.
Prior to the meeting, Tesla’s stock saw a near 3% rise, following Musk’s announcement on his social media platform X that he had secured shareholder approval. Despite this uptick, Tesla shares have plunged 27% this year, with the company’s market value slashed by more than half to $582 billion from its peak in November 2021. The company faces stiff competition in China from BYD and other EV manufacturers offering more affordable vehicles.
Tesla’s shares received a much-needed boost after Musk revealed plans on April 23 to release more cost-effective models in 2025. Nonetheless, the company’s quarterly revenue experienced a downturn for the first time since 2020, when the COVID-19 pandemic disrupted production and deliveries.
In contrast, other major tech stocks have soared. Amazon and Alphabet have each gained over 20% in 2024, Meta Platforms surged more than 40%, and Nvidia’s value nearly tripled. Meanwhile, Tesla’s market capitalization has been surpassed by Eli Lilly and Broadcom.
Analysts’ outlook on Tesla has significantly diminished. The average analyst price target for Tesla is now $181, a drop from $226 at the beginning of 2024, and marginally below Thursday’s closing price of $182.47, according to LSEG.
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Musk has urged investors to view Tesla as an “AI robotics company” rather than merely a car manufacturer. This perspective has historically resulted in Tesla trading at earnings multiples higher than many tech companies. Tesla’s shares are currently priced at approximately 61 times expected earnings, an increase from about 22 in January, though significantly below the peak price-to-earnings ratio of 150 in November 2021.
For comparison, General Motors and Ford Motor trade at forward PE multiples of 5 and 6, respectively, while Toyota’s multiple is 9, based on LSEG data.
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Tesla’s high valuation is also evident in its market value per employee, which stands at nearly $6 million, a slight decrease from two years ago but still about 20 times higher than GM and Ford, which each have around $300,000 in market value per employee. Unlike GM and Ford, a portion of Tesla’s workforce operates at service centers globally, similar to the dealership networks of its competitors.
Despite its recent setbacks, Tesla remains the world’s most valuable automaker, outpacing Toyota, the largest automaker by volume. Toyota’s market value is approximately $270 billion. In 2020, Tesla’s skyrocketing stock price made it more valuable than the combined worth of Toyota, Volkswagen, Hyundai, GM, Ford, and BMW. However, in January, Tesla’s declining share price briefly caused its market value to dip below the collective value of these major automakers.
