Shares of Tesla Inc (NASDAQ:TSLA) took a beating last week, falling 4.5% to a low of $250.20 despite the electric vehicle company reporting broadly positive fourth-quarter fiscal 2016 earnings results after the closing bell Wednesday. While TSLA stock has recovered this week, shares still are off 10% from before its Q4 report, and 13% from its all-time closing high from mid-February.
Investors who have waited for a solid buying opportunity now have their chance.
Not only did Tesla post a narrower-than-expected quarterly loss, it also said revenues beat expectations. Notably, these positive results were the first since the company closed its $2 billion acquisition of SolarCity in November.
Plus, Tesla said the development of its Model 3 mass-market vehicle remains on track, saying “initial production” will begin in July, with volume production to follow in September.
However. Tesla also dropped a bombshell on the market, announcing that chief financial officer Jason Wheeler, who was appointed to the post in November 2015, will leave the company in April.
Wheeler, who became Tesla CFO from his role as vice president of finance at Alphabet Inc’s (NASDAQ:GOOGL) Google, is leaving to pursue a position in public policy. He will be replaced by Deepak Ahuja, who retired in 2015 after seven years at the company.
“I Told You So” Moment
Tesla critics, who have been skeptical of the company’s financial position and its rate of cash burn, took Wheeler’s departure as the “I told you so” moment. Indeed, this is a critical time for Tesla and TSLA stock, particularly as the company aims to compete with Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) in vehicle mass-market production.
But while Wheeler’s departure after 14 months might seem discouraging, it’s not the death blow to Tesla stock that the recent decline might suggest.
What’s more important is how Tesla can deliver on Model 3 production estimates and boost demand for the Model S and Model X in the quarters ahead. Plus, Ahuja, who will replace Wheeler, is described as a “very thoughtful” CFO who understands the inner workings of the company, according to Consumer Edge Research senior analyst James Albertine.
Ahuja’s appointment could also be a sign that Tesla is maturing and will begin to focus more on profitability and growing its margins, Activate CEO Michael Wolf said in an interview with BloombergTV.
Because of increased Model 3 production costs, among other growing expenses, Tesla’s gross margins showed a significant decline to 19.1% in the fourth quarter from 27.7% in the third quarter. Though the Model 3 is reported ago have a start price of $35,000, Tesla reportedly spends some $80,000 to build each car.
As such, Ahuja’s main job coming in will be to convince a jittery market that Tesla won’t lose money on each car it manufactures, which appears to be the current trend.
Bottom Line for TSLA Stock
Ahuja will rejoin the company in March ahead of Wheeler’s April departure in order to “ensure a smooth transition,” CEO Elon Musk said during Wednesday’s conference call.
Betting on Tesla is a wager on Ahuja and a belief that Musk can deliver on his promises. With TSLA stock still down double digits from its all-time high, placing a long-term bet here could pay off.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.