Author: CNBC Online news

Buy Tesla shares ‘even with drama,’ Baird analyst says after factory tour

David Paul Morris | Bloomberg | Getty Images
Elon Musk, chairman and chief executive officer of Tesla Motors

Investors should still buy Tesla's stock in spite of all the “drama” surrounding the electric car maker and its management, an analyst at Baird said after touring the company's factory.

“We recently toured the Fremont factory and came away incrementally positive” about the company, analyst Ben Kallo wrote in a Monday note titled “Tesla, Inc.: Buy Even with Drama in LBC.” “Gigafactory 1 creates a significant barrier for competition and manufacturing capability should be a competitive advantage for TSLA over the long term. We believe TSLA's Gigafactory enables the company to drive down costs through an industrialization of battery pack assembly and economies of scale.”

Tesla needs a Sheryl Sandberg or Tim Cook, says Dean Crutchfield
4:01 PM ET Fri, 7 Sept 2018 | 05:43

Kallo also reiterated his buy rating and stuck with his $411 price target, an implied upside of 56.1 percent from Friday's close of $263.24. The stock rose 3.2 percent in the premarket Monday.

Tesla off 25%

Tesla shares have been under pressure lately amid key departures from the company's management team, as well as CEO Elon Musk's erratic behavior. Tesla is down more than 25 percent over the past month and has dropped 15.5 percent this year.

On Friday, Tesla announced Chief Accounting Officer Dave Morton had resigned. Morton — who had accepted the job less than a month earlier — said in a statement he left Tesla because of “the level of public attention placed on the company.” Separately, Bloomberg News reported on Friday the company's head of human resources, Gaby Toledano, is also leaving the company. These two departures pushed Tesla's stock down more than 6 percent on Friday.

The departures came after video surfaced of Musk smoking marijuana and sipping whiskey during an interview with Joe Rogan, fueling worries about his recreational drug use. They also come about a month after Musk tweeted he would take the company private once the stock reached $420. Musk would later back out of taking Tesla off the public market.

But Kallo thinks Tesla's stock should still go higher. “While negative headlines around management turnover and executive leadership could be an overhang, we are labeling TSLA a 'Fresh Pick' as we believe strong fundamentals should drive shares higher,” he writes.

Kallo said improving margins and increasing Model 3 production, more information about additional factories, possible introduction of future products, and “ramp of the gigafactory and additional Tesla Energy project announcements” should propel Tesla's stock.

‘The wheels are coming off’ Tesla and we’re watching in real time, Tesla bear says

If a company depends on one person it's not investing, it's gambling: Tesla bear Tengler
4 Hours Ago | 04:13

Tesla CEO Elon Musk's personal saga is “ugly and uncomfortable” and could scare away even loyal investors, Tesla bear Nancy Tengler told CNBC on Friday.

“Look, you've got executives leaving, he doesn't have a lot of backup, there's not a succession plan. He's super busy and exhausted, but he has time to do this podcast and smoke weed, or whatever it is, and drink whiskey. And he's missed tons of deadlines,” said Tengler, who is chief investment officer at Heartland Financial.

“The valuation reflects a company that's operating at top speed and is delivering on every level, and I just don't see it. I think there's a lot better places to be invested,” she added Friday on CNBC's “Closing Bell.”

Musk took viewers by surprise late Thursday when he smoked marijuana and drank whiskey during a 2 1/2 hour livestreamed interview with comedian Joe Rogan. The two engaged in a lengthy discussion on a number of issues including humanity, artificial intelligence, Tesla, China and Musk's social media habits.

“I think it's on balance more good than bad, but there's definitely some bad, so hopefully the good outweighs the bad,” Musk said Thursday of his Twitter use.

Following the appearance came news of the resignation of two leading Tesla officials. Tesla's chief accounting officer, Dave Morton, resigned after just a month, citing “the level of public attention placed on the company.” Tesla's chief human resources officer, Gaby Toledano, took a leave of absence in August after 15 months on the job. She announced Friday morning that she would not return to work at the company, according to Bloomberg.

Tesla shares nosedived Friday, falling 6.3 percent to $263.24 during regular trading.

Tesla bull Eric Schiffer, chairman and CEO of private equity firm Patriarch Organization, said the executive departures are likely driving the stock's decline. While Musk's behavior doesn't do him or the company any good, his antics are largely priced into the stock, he added.

“These kind of clips don't help in the short run. But I also think a big component of Musk is built into Tesla. Most of the core investors, they recognize they're dealing with this eccentric, unusual figure, and I don't see many of them bailing,” Schiffer said during the same “Closing Bell” interview as Tengler.

Oppenheimer Tesla analyst Colin Rusch attributed Tesla's decline to Musk's behavior and the possibility of a Securities and Exchange Commission investigation of Musk's August go-private tweet that alleged he had “funding secured” for the maneuver.

“The real concern weighing on the stock here is not just Elon's behavior, but Elon's behavior coupled with the potential of an SEC investigation,” Rusch said on CNBC's “Power Lunch.” “And certainly when you see two [officials] leaving in the space of a couple months, that's not a great signal out to the market.”

Rusch said now is the time for the Tesla board to step in and build up the company's leadership team, adding that the board needs to “bring in additional expertise and voices to help this company execute and have a public face to investors that they can trust.”

The board has “not proven they can handle Elon when he's moving towards the downside of his behavior patterns. This is the point where they prove their worth to the company. It's now or never, in my view,” Rusch said.

He said whether Musk is still fit to lead is a “major question.”

For her part, Tengler didn't discount what Musk has done for the company but said she fears his deleterious effects on the stock.

“You start to add up the cumulative effect of all these actions, and you say: If this whole company's valuation is dependent on one person, that's not investing to me, that's gambling. So I find there's better places to be. I get the vision, I love the car. I think everything that he's done has been exceptional, but I think the wheels are coming off, and we're watching it in real time,” Tengler said.

Tesla did not immediately respond to CNBC's request for comment.

'Accumulating problems at a dizzying rate': Analyst on Elon Musk's behavior
6 Hours Ago | 03:00

Former Tesla accounting chief Dave Morton is going to Anaplan

Companies in a digital economy need to make faster decisions: Anaplan CEO
2:56 AM ET Tue, 8 Aug 2017 | 03:31

Tesla announced that chief accounting officer Dave Morton was leaving the company after less than a month on Friday. Now CNBC has learned from several people familiar that Morton is becoming chief financial officer at Anaplan, a business software company that wants to go public.

An e-mail went out on Thursday informing insiders and investors about the hire, and one of the people who read it wondered if Dave Morton was a different person with the same name as the Tesla executive. Morton had only begun work as Tesla's chief accounting officer in August.

Anaplan, valued at $1.4 billion, is backed by investors including Premji Invest, Salesforce Ventures, Shasta Ventures and Baillie Gifford. The company has raised $300 million in venture funding.

Before his stint working for Elon Musk, Morton also served as CFO of Seagate Technology, where he oversaw a restructuring initiative that saved the company half a billion dollars, according to Morton's online resume.

Morton did not reply to requests for comment. CNBC earlier reported that Morton left Tesla because executives there, including CEO and chairman Elon Musk, were not carefully considering or prepared to take his advice.

Anaplan declined to comment.

—
Ari Levy
contributed reporting.

Tesla’s accountant quit after concluding Musk was ignoring go-private advice

Tesla executive Morton left after feeling Musk ignored him
1 Hour Ago | 03:10

Tesla's now former chief accounting officer, Dave Morton, quit the company after concluding CEO Elon Musk wasn't interested in accounting details around a potential take-private transaction, according to people familiar with the matter.

Morton resigned Sept. 4, according to a company filing released on Friday. Morton said in the filing “the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations.”

Morton joined Tesla on Aug. 6 after Tesla approached him for the chief accounting job. Morton saw an opportunity to work with a visionary such as Musk and make life easier for him by helping with some of the necessary housekeeping, according to people familiar with Morton's thinking.

The day after he started, Musk tweeted he was considering taking the company private with “funding secured.” Morton, who left his role as Seagate's CFO to join Tesla, was not flustered by the tweet and met with Musk to go over various details that would make a take-private difficult. He brought up specific details such as equity change of control provisions and potential step-ups in the value of Tesla's debt associated with a new controlling shareholder.

Musk and other executives didn't seem to care about the various financial obstacles, which concerned Morton, said the people. When Morton offered advice about capitalizing the company through other means rather than going private, he was ignored, said the people.

After two weeks or so at the company, Morton concluded he wasn't being heard or understood. He then started to think about leaving, one of the people said. The Securities and Exchange Commission reportedly served Tesla with a subpoena on Aug. 15 about Musk's intentions. Musk eventually abandoned his plan to go private on Aug. 25 after CNBC reported Morgan Stanley was planning to be retained to seek financing for a transaction, suggesting funding for a deal hadn't been secured.

Morton joined the company as chief accounting officer with the expectation he would eventually take over for Deepak Ahuja as CFO, the person said. Ahuja returned to the CFO position in 2017 after retiring in 2015.

A person familiar with the circumstances around Morton's departure said that he did not bring any of these concerns up to Tesla at any time, including in his exit interview.

“I want to be clear that I believe strongly in Tesla, its mission and its future prospects, and I have no disagreements with Tesla's leadership or its financial reporting,” Morton wrote in his statement today.

Morton is the latest in a wave of execs who have recently left or announced they would leave the company, including engineering leader Doug Field and communications chief Sarah O'Brien. Also on Thursday, Bloomberg reported that HR chief Gaby Toledano, currently on leave, would not be returning to the company.

Tesla declined to comment beyond the official filing. Morton couldn't immediately be reached for comment.

Elon needs a vacation, not a couple of days at Burning Man, says NYT's Jim Stewart
5 Hours Ago | 06:10

Elon Musk smokes weed, sips whiskey on Joe Rogan’s podcast

Elon Musk seen smoking weed, drinking whiskey on podcast
1 Hour Ago | 08:17

Billionaire Elon Musk took viewers by surprise late Thursday when he briefly smoked marijuana and drank whiskey during a live interview.

The Tesla chief executive was speaking with comedian Joe Rogan, an advocate of legalizing weed, on his live internet show when he was handed the joint. A spokesperson for Tesla was not immediately available for comment when contacted by CNBC.

“Is that a joint? Or is it a cigar?” Musk asked Rogan before being told it was a cigarette containing marijuana, which is legal in California, and tobacco.

Asked whether he had tried it before, the entrepreneur said: “Yeah, I think I tried one once.”

“You probably can't because of stockholders,” Rogan said, to which Musk retorted: “I mean it's legal, right?”

The two had been engaged in a lengthy discussion on a number of issues including humanity, artificial intelligence, Tesla and China.

Elsewhere in the podcast, which ran for roughly 2 hours and 30 minutes, Musk is handed a Samurai sword by Rogan, which he observes with keen interest.

Musk also brought into the studio one of his tunneling firm's flamethrowers — which sold out mere days after they went on sale at the start of the year. He is seen wielding it in an Instagram post by Rogan.

Rogan's podcast “The Joe Rogan Experience” is one of the most popular in the U.S. Within five hours, his interview live stream with Musk on YouTube had attracted almost 450,000 viewers, and 3.2 million people are subscribed to his YouTube channel.

Musk's Twitter wars

Musk addressed his tweeting habits on the podcast, debating with Rogan whether his direct engagement and battles with people on the platform was a “good idea.”

“I think it's on balance more good than bad but there's definitely some bad so hopefully the good outweighs the bad,” he said.

Speaking about how he deals with negative comments directed at him on the social network, the businessman said he mostly ignores them.

He said: “The vast number of negative comments, the vast majority of them I just ignore them. Every now and again I get drawn in, it's not good. I make some mistakes.”

Musk, who founded X.com, a precursor to PayPal, recently got into hot water when he accused a British man involved in the mission to rescue a Thai boys' soccer team trapped in a cave of being a pedophile.

The executive called Vernon Unsworth a “pedo guy” on Twitter after the cave diver called his idea to save the trapped boys with a miniature submarine a “PR stunt.” Musk subsequently apologized, but has sunk further into the controversy, having made two more attacks on the cave explorer.

He most recently called Unsworth a “child rapist.” The Briton is preparing a civil complaint for libel against Musk, his attorney said.

Tesla shares fall

The news may be of interest to shareholders, who recently took the company's stock price through a roller-coaster ride in August after Musk said he wanted to take Tesla private — only to then row back on that position.

Musk insisted he was not on weed at the time during an extensive interview with The New York Times. The executive shocked investors when he said he was considering taking the firm off the stock market at $420-a-share — 420 being a popular code term for cannabis.

“It seemed like better karma at $420 than at $419,” he told the Times. “But I was not on weed, to be clear. Weed is not helpful for productivity. There's a reason for the word 'stoned.' You just sit there like a stone on weed.”

Traders are concerned the company may still need a capital injection to help with its cash burn problems.

Tesla shares were down 1.2 percent Friday in premarket trade.

Tesla CTO JB Straubel has a stealthy recycling start-up and it’s expanding into Nevada

Getty Images
JB Straubel, Tesla Motors chief technical officer.

Elon Musk isn't the only Tesla executive with a start-up on the side.

Tesla CTO Jeffrey B. Straubel, known as JB, recently registered Redwood Materials — his stealthy recycling venture — to do business in the state of Nevada, CNBC has learned from a filing.

Redwood Materials' chief financial officer, Andrew Stevenson, also posted a job opening for a mechanical engineer to work at the recycling venture in Northern Nevada a week ago on LinkedIn. Stevenson worked at Tesla for about 3 years until June, in a special projects office of the CTO.

At Tesla, Straubel spends most of his time at the Gigafactory 1 in Sparks, Nevada, which churns out batteries for electric vehicles and solar energy systems. He has overseen battery tech, but also power electronics, motors, software, firmware and controls, among other responsibilities at Tesla.

Redwood Materials was established in Redwood City, California, in 2017, near Tesla's headquarters in Palo Alto.

It's not clear how Redwood Materials may be working with Tesla, if it is at all. But Tesla seems to need a little help with its waste management in general.

Tesla's Gigafactory and its main auto plant in Fremont, California, typically generate large amounts of scrap, cardboard and waste from construction, according to multiple former employees. In late June, a fire broke out at Tesla's Fremont factory, where cardboard was being prepared to go off to a recycling center.

At an annual shareholder's meeting for Tesla in June, Straubel answered a question from a Twitter user about the company's approach to battery waste. He said:

Tesla will absolutely recycle, and we do recycle, all of our spent cells, modules and battery packs. So the discussion about is this waste ending up in landfills is not correct. We would not do that, these are valuable materials. In addition, it's just the right thing to do.
We have current partner companies– on every major continent where we have cars operating– that we work with to do this today. And in addition, we're developing internally more processes, and we're doing R&D on how we can improve this recycling process to get more of the active materials back. Ultimately what we want is a closed loop, right, at the Gigafactories that reuses the same, recycled materials.

Straubel has also repeatedly spoken about recycling minerals, which are used in electric vehicle batteries and motors, and can be both costly and subject to shifting tariffs.

CNBC reached out to Redwood Materials and Tesla, but neither immediately responded to requests for further information.

Tesla CTO: Not just a 'feel good sustainability project,' this means saving money
7:52 PM ET Wed, 8 March 2017 | 06:02

Tesla will meet its Model 3 goal so buy the stock, Oppenheimer says

Stephen Lam | Reuters
A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018.

Oppenheimer believes Telsa will meet its third-quarter targets for Model 3 production and profitability.

The firm reiterated its outperform rating for the electric car maker's shares, citing strong third-party August sales estimates.

Tesla shares rose 1.3 percent Thursday after CEO Elon Musk tweeted that the company was “1st, 2nd & 3rd in August sales,” pointing to a report by InsideEVs.

“While Inside EVs' estimates are just that, estimates, we believe the service has been effective in identifying directional and order of magnitude trends on monthly shipments for Model 3 in lieu of verified data from the company,” analyst Colin Rusch said in a note to clients Thursday. “We believe TSLA is tracking toward achieving its 3Q:18 guidance.”

Rusch reiterated his 12-18 month $385 price target for Tesla shares, representing 37 percent upside to Wednesday's close.

Previously, Tesla gave production guidance for the third quarter of 50,000 to 55,000 Model 3 cars and a gross margin of “roughly” 15 percent for the vehicle.

The analyst noted that InsideEVs estimate for second-quarter Model 3 deliveries was 18 percent below the actual number the company reported. He said if Tesla consistently produces 4,300 Model 3 cars per week, it can reach the high end of its guidance for the third quarter.

“We believe TSLA has the potential to be a transformational technology company and deliver outsized returns,” he said.

Tesla did not immediately respond to a request for comment.

Disclaimer

Toyota is investing $500 million in Uber at a valuation reported at $72 billion

Toyota reportedly set to invest $500 million in Uber at a valuation of $72 billion
5:23 PM ET Mon, 27 Aug 2018 | 00:51

Toyota is investing $500 million investment in ride-hailing giant Uber in a bid to accelerate autonomous ride-sharing, the companies announced on Monday afternoon.

The investment values Uber, one of the world's most valuable privately held companies, at $72 billion, according to a report in the Wall Street Journal. That's a significant jump from Uber's most recently stated valuation of $62 billion, based on a self-reported tender offer at the end of the first quarter. The company lost $659 million last quarter, marking a wider loss than its first-quarter figure, according to its own report.

Under the deal, the companies will incorporate self-driving technology into vehicles based on Toyota's Sienna minivans, and the companies plan to begin piloting the program in 2021, they said. Toyota has dubbed the platform “Autono-MaaS,” standing for “autonomous mobility as a service.”

In June, Toyota invested $1 billion in Southeast Asian Uber-rival Grab.

Tesla is a ‘hope stock’ that is ‘just not real,’ fund manager says

Toyota investing $500 million in Uber to roll out a self-driving fleet
3:58 AM ET Tue, 28 Aug 2018 | 03:42

Tesla is a “hope stock” with little chance of success in the car-manufacturing industry, a fund manager told CNBC on Tuesday.

“Are we living in the real world?” Tesla is just another one of those hope stocks,” Peter Toogood, chief investment officer at The Embark Group, said on CNBC's “Squawk Box Europe.”

Tesla's share price took a nosedive Monday after the company's Chief Executive Elon Musk abruptly halted plans to take the firm private.

Musk had shocked investors on August 7 by announcing his aim to remove Tesla from the stock market at $420 per share. The firm's shares have shed almost 16 percent off their value since.

Days after that initial announcement, Musk said that Saudi Arabia's sovereign wealth fund had approached him “multiple times” about taking the firm off the public market, lifting hopes that Tesla could raise some much-needed cash to help its drive toward profitability. Such hopes of a Saudi deal have waned since Musk's U-turn on taking Tesla private.

Joshua Lott | Getty Images
Elon Musk

Despite Toogood's bearish thoughts on Tesla's auto manufacturing abilities, the analyst said there was “hope” for the firm in its self-driving technology.

“The only bit that has got hope is the autonomous driving,” Toogood said, adding, “(but) the idea to compete on a platform basis with cars; it's losing money every time it sells one.”

The investment manager said that the lack of a network for servicing Tesla cars was also a point of concern. Some international customers, for instance, have bemoaned repair waiting times, as parts need to be shipped from overseas.

“He's losing money every time he sells a car today, and he can't service them,” Toogood said. “Ask Norway, they can't actually get the car serviced because there's no network to service them. It's just not real.”

Norway is considered an electric vehicle-friendly country due to subsidies aimed at improving affordability and an overall target of going all-electric by 2025.

“Tesla continues to be a transformational company, especially on Model 3 production and demand,” Daniel Ives, chief strategy officer and head of technology research at GBH Insights, told CNBC in an email Tuesday.

“However, this last month has been a nightmare for Tesla bulls and the Street continues to put the company in the investor penalty box, given all the uncertainty surrounding the name in the near-term with the going-private fiasco front and center. At this point there are more questions than answers on Tesla.”

Tesla's stock price target was cut by a number of brokers on Monday and Tuesday, including CFRA, Independent Research and Canaccord Genuity.

Musk is the largest investor in Tesla, owning almost a fifth of the company's shares. Market observers have expressed worries over his leadership, citing the executive's presence on Twitter, involvement in public issues and general disdain for the media as causes for concern.

Tesla’s real problem isn’t its shareholders

Peter Parks | AFP | Getty Images
Elon Musk

Elon Musk made a wise decision when he withdrew his proposal to take Tesla private. While Musk's external advisors showed him a viable path to privatization, the complexities of the process would have been a great distraction from the real issue facing Tesla: its lack of an experienced leadership team to run the company.

Musk may be the most exceptional entrepreneur of this generation, but he has a long way to go from being a creative innovator to building an organization that can run a global automobile company.

In recent months Musk has become increasingly frustrated with his shareholders and the questions they were asking — so much so that he issued a simple tweet on August 7: “Am considering taking Tesla private at $420. Funding secured.”

After a flurry of activity with bankers, investors and the Tesla board, Musk announced last Friday that he had changed his mind and Tesla would continue to be a public company.

All this investor focus has been a giant diversion from Tesla's real problems. In fact, Tesla's investors have been its biggest supporters, running its market valuation to $53 billion, higher than either General Motors ($52 billion) or Ford ($40 billion). Meanwhile, Tesla continues to lose billions of dollars with a dwindling cash balance.

In the recent past Musk has lost 40 key executives, including his heads of product development (Doug Field), sales and marketing (Jon McNeill) and finance (Susan Repo), plus Solar City's Peter Rive and Lyndon Rive. As a result, Musk is trying to do it all himself, even sleeping at the factory to try to get the Model 3 up and running.

No one can run a big company like Tesla alone. Leading a global automobile business is an extremely complex task requiring a strong, diverse team of executive leaders at all levels. Building the top team is precisely what Mary Barra has done in restoring General Motors following its 2009 emergence from bankruptcy. That's what Alan Mulally did to lead Ford through the 2008-09 recession.

The playbook that Barra and Mulally each used fostered teamwork, promoted healthy collaboration and created cohesion around one team implementing one plan for the entire company's success.

Musk should stop worrying about beating the short sellers and focus entirely on rebuilding Tesla's depleted leadership ranks. Most importantly, he should recruit a partner with extensive automobile experience to run the business on a day-to-day business.

An ideal candidate would be Mark Fields, who was CEO of Ford from 2014 to 2017 and who has been in the auto business for 29 years. With his vast knowledge of the business and his proven leadership capabilities, Fields in turn can recruit top performers from auto companies all over the world to get Tesla's operations back on track.

In addition, Tesla needs a very strong CFO who can put the company's finances in order. That means stopping the cash drain and getting the company profitable. Doing so will require correcting Tesla's rampant operational problems, getting Model 3 production up and running and bringing down the cost of its vehicles.

Finally, the Tesla board needs to be upgraded to provide wisdom and insights to Musk and his team about the intricacies of the global automobile business. Tesla's current board consists of Musk, his brother, the former CFO of Tesla's Solar City acquisition, three venture capitalists, the COO of Telstra and James Murdoch, CEO of Twenty-First Century Fox. None of these board members has any experience in the automobile business.

Tesla should add two to three experienced executives who understand the business and can advise management as Tesla ramps up and prepares for the next generation of vehicles.

Elon Musk is often compared to Steve Jobs, an equally brilliant entrepreneur with the vision and drive to creative transformative products. Jobs was forced out by the Apple board in 1985 for his erratic behavior. While he was building Pixar, he learned a great deal about leadership from two extraordinary innovation leaders, Ed Catmull and John Lasseter. When he returned to Apple 12 years later, he teamed up with Tim Cook who helped him build the company and turned Jobs' vision into the world's most valuable company.

In the middle of his journey, Musk now finds himself a dark wood. Executive departures continue. The stock price gyrates. The media piles on. In these difficult times, Musk needs to transform himself, much as Steve Jobs did in the 1990s.

There are other examples of entrepreneurs teaming with superb business leaders to create great enterprises; most notably, Google's Larry Page and Sergey Brin recruited Eric Schmidt as CEO and Facebook's Mark Zuckerberg brought in Sheryl Sandberg as COO. In an earlier era, the teams of David Packard and Bill Hewlett of Hewlett-Packard and Intel's Gordon Moore, Bob Noyce and Andy Grove created the signature companies that pioneered Silicon Valley.

Only if Musk is prepared to recruit a partner to build Tesla's leadership team and strengthen his board will he be able to transform Tesla from a breakthrough entrepreneurial company to a rapidly growing automobile company with an enduring legacy.

Commentary by Bill George, a senior fellow at Harvard Business School, former Chairman & CEO of Medtronic, and the author of “Discover Your True North.” He has taught in Unilever education programs in the past decade. Follow him on Twitter
@Bill_George
.