Former Tesla board member on why stock ‘might be a sell’ this year
Tesla urgently needs to meet two key targets to justify its valuation or investors should sell the stock, the company’s former board member Steve Westly told CNBC on Thursday. Westly, founder of venture fund The Westly Group, said Tesla’s fourth-quarter results published Wednesday were a “lackluster end to a challenging year.” Tesla reported a 2% increase in year-on-year revenue to $25.71 billion over the period, below the $27.26 billion expected in an LSEG poll of analysts. Automotive revenue dropped 8% to $19.8 billion in the fourth quarter, of which $692 million came from regulatory credits, while overall operating income slid 23% year-on-year to $1.6 billion. The firm said that reduced average selling prices across its Model 3, Model Y, Model S and Model X lines were a major factor in the declines. “This is a company that grew 71% year over year in 2021, 51% in 2022, now is barely growing at all,” Westly said, adding that the fall in automotive revenue was a “shocker.” One saving grace across the results was Tesla’s “sizzling” energy division which shored up overall growth, he continued. The business’s energy generation and storage revenue soared 113% in the final three months of the year to $3.06 billion, according to the company results. However, “most people are investing because it’s a car company,” Westly said. “This is a make-or-break year.” Tesla was not immediately available for comment when contacted by CNBC. TSLA 1Y line Tesla share price. Tesla has long held an advantage as one of the first movers in the electric vehicle market, with a leading charging network. Long a beneficiary of the favorability of U.S. growth stocks, Tesla’s value has also rallied following the re-election of U.S. President Donald Trump , who was strongly backed by Tesla CEO Elon Musk . However, EV competition grows hotter each year — particularly from leading Chinese player BYD , but also as traditional automakers from Japan to Germany pivot to focus on new electric models and sales. 1. Cheaper model To hold onto its $1.2 trillion market capitalization, Westly told CNBC, Tesla must urgently get more products onto the market, including a model for under $30,000 and a fully self-driving vehicle. “The good news is, battery prices are dropping, and they’re dropping quickly. They’re expected to drop another 50% by 2030, the world’s going all electric … and Tesla’s kind of the name you know in that EV space, so there’s a lot of tailwinds there,” he said. “The flip side is they haven’t launched new products for a while. The Cybertruck ‘s largely been a flop. They desperately need the new sub-$30,000 Model Q in the market ASAP,” Westly added. He pointed to lower-cost EV offerings from China coming in with a $10,000-$20,000 price tag, with BYD building plants across Thailand, South America and Hungary. It means Europe is about to experience a “tidal wave” of Chinese options,” he added. “So this is all going to put pressure on Tesla. They’ve got to get a low-cost vehicle out,” Westly said. 2. ‘Fix full self-driving’ Tesla has also “got to fix full self-driving,” Westly added. “Elon’s promised this for the last three years in a row. They’re lagging behind [ Google ‘s self-driving car project ] Waymo, so [there is] a lot of catching up to do.” A key achievement will be gaining regulatory approval for Tesla’s unsupervised self-driving system in Austin and other cities, according to Westly. Musk said during the company’s earnings call that Tesla would be “launching unsupervised Full Self-Driving as a paid service” in Austin in June. In September, the automaker said it would launch its existing Full Self Driving (FSD) product in Europe in China in early 2025. FSD is a paid add-on that enhances the current Autopilot driver assistant and still requires a driver to supervise the vehicle behind the wheel. In the U.S., the technology is facing a National Highway Traffic Safety Administration safety probe . Tesla’s current forward valuation will be “awfully hard to justify” unless it can bring these new products to market, Westly said. “For me, [the stock] might be a sell for now, unless they can show some pretty striking results in Q1 or Q2, we’ll see,” he flagged, referring to the first and second quarter. — CNBC’s Lora Kolodny contributed to this article.
