Tesla Stock Reverses Amid Executive Exodus (TSLA)


The revolving door at Tesla Motors, Inc. (TSLA) spun again last week after another key executive abruptly departed just when the electric car company is gearing up to unveil its Model 3 vehicle. Analysts’ reactions are mixed about the impact of the recent executive departure, which comes a week after Tesla lost its VP of Communications.

TSLA shares closed Thursday at $227.75, up 2.32%. This move translates to a 2% decline from the prior week’s close of $232.74. And analyst Efraim Levy of S&P Global Market Intelligence sees massive downside ahead in TSLA shares, cutting his price target to $155 and issuing a sell rating. “We see significant execution and valuation risk in the premium priced stock,” he said. And Tesla’s lack of stability in its leadership team will only add to the risk. (See also, The Biggest Risks of Investing in Tesla Stock.)

 

A Small But Glaring Error and Trend

Last Week, Tesla announced that Michael Zanoni, Executive VP of Finance and Worldwide Controller, had left the company to go back to Amazon.com, Inc. (AMZN), where he worked until 2014. Prior to Amazon, Zanoni also worked at The Boeing Company (BA).
As to why Zanoni left Tesla remains unclear. According to his LinkedIn profile, he was “Responsible for the global accounting, financial reporting, SEC and technical accounting and finance operations teams based in China, the Netherlands and the US.” But we can only speculate whether the company’s mistake in its recent 10-K filing with the Securities and Exchange Commission was a catalyst.

Earlier this month, Tesla admitted the mistake via an 8-K filing.

“An immaterial error that overstated the cost and resulting net book value of the Supercharger network was included in Tesla Motors, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “Form 10-K”),” read the filing. “In Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation-Management Opportunities, Challenges and Risks-Trends in Cash Flow, Capital Expenditures and Operating Expenses, the net book value of the Supercharger network as of December 31, 2015 should have been stated as $166.6 million.”
Jason Wheeler, the CFO for less than a year, replaced long-time CFO Deepak Ahuja last year after Ahuja also abruptly left the company.

 

The Bottom Line

While the company’s reference to “an immaterial error” in the 8-K filing may play down the inaccuracy in the 10-K filing, it still opens up Tesla to future criticism and potentially more scrutiny given the lack of stability in Tesla’s finance department. Can TSLA stock still deliver in 2016? The shares have a consensus hold rating and an average analyst 12-month price target of $213.50, implying a 6% decline from Thursday’s close of $227.75.

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