Key Morningstar metrics for Tesla

  • Fair Value Estimate: $250.00
  • Morningstar Rating: ★★
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: Very High

Tesla TSLA has announced a new pay package for CEO Elon Musk that’s similar to one from 2018 that was challenged by legal issues. As a result, Tesla’s stock price has increased slightly, indicating investors view it favorably.

Why it matters: A key provision of the new award is that Musk must remain in a senior leadership position at Tesla during the two-year vesting period. Assuming the award is finalized by the end of the year, this would essentially keep Musk at Tesla until at least 2028.

  • The award is designed to replicate one-third of the compensation from the 2018 award. The 2018 award is uncertain, as it was struck down by a Delaware judge. Tesla is appealing to the Delaware Supreme Court, but the appeal could prove unsuccessful.
  • Should Tesla win the appeal and the 2018 award were to be reinstated, this award would be forfeited. This ensures Musk receives at least some compensation, regardless of the ruling.

The bottom line: We maintain our $250 per share fair value estimate for narrow-moat Tesla. When the Delaware judge struck down Musk’s 2018 pay package, we thought the company’s board would eventually come up with a replacement. Our view was confirmed by a shareholder vote last year in favor of the 2018 award.

  • At current prices, we view Tesla shares as overvalued, with the stock trading in 2-star territory. We recommend investors wait for a pullback in shares before considering an entry point.
  • Last week, Tesla began testing its robotaxi product in the Bay Area. We view the testing expansion as a positive, but think Tesla will remain in testing past management’s 2026 target to begin full robotaxi service. We forecast this will occur in 2028.

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