Back in 2015, a report came out that Tesla had recruited at least 150 ex-Apple employees. At the time, many of those employees cited Elon Musk being like Steve Jobs as the reason they chose to work for Tesla. History repeats itself, and Apple is now on an ex-Tesla-employee hiring spree, taking on “dozens” of former Tesla employees into its fold, and not just for its autonomous vehicle initiative, Project Titan.
This time, though, they’re not leaving because they want to work for Tim Cook. These employees are citing “lagging compensation” and “stock price growth,” which is quite interesting because Tesla is poised on the verge of some massive success.
The Model 3 is just getting off to a great start, and we believe it will be the reason Tesla posts profits in Q3-18 and beyond. It might happen in Q4 but we have a feeling Q3 is either going to be breakeven or slightly profitable. Either way, this is probably the last year that Tesla will struggle to make a buck. When that happens, employee compensations are going to come thick and fast, and those who leave Tesla at this point are very likely going to regret it.
As for the question of stock price growth, I’m not sure they understand how the capital markets work. Sure, Tesla is a volatile stock, and nobody is denying that. It doesn’t mean that it’s not a value stock – and a deep value one at that. Ark Invest’s Catherine Wood made that explicit in her open letter earlier this week to Musk urging him to keep Tesla public. It might be a coincidence that a couple of days later Musk posted a blog article about why he’s not taking the company private.
The point is, this is indeed a deep value stock. Musk isn’t going to sit on his laurels after the Model 3 washes over multiple markets across the globe and gets a stranglehold on the world’s EV sedan segment over the next 5 years or more. There’s the Model Y, the Tesla Semi and possibly even a $25,000 EV coming in the next year to three years. The company’s solar panel business hasn’t yielded as much as expected, but you can’t hope to win at everything.
But forget all that for a minute and let’s look at what these ex-employees might be missing out on in terms of stock price growth. If you had invested in Tesla in January 2013, by January 2018 your investment would have been worth ten times as much. That’s a 1000% return in a five-year period. Admittedly, the stock price has been moving sideways for more than a year now, but that’s a very short-sighted view, in my opinion.
Each time Tesla has made a breakthrough on some front the stock has shot up. It happened in 2013 about a year after the Model S was launched, and it happened again in 2016, nearly the same number of months after Model 3 reservations opened up. The stock is not going to keep moving sideways forever. The moment Tesla announces a profitable quarter – maybe two – the stock is very likely to see a new plateau. It will always trade in a wide range because of how news always moves the stock sharply, but it will invariably trade at higher levels than before.
And that’s what those who have given up their options at Tesla are going to see in a few months to a year. Will they be happy at Apple? We certainly wish them well, but there’s also going to be a tinge of regret for some of these employees that are leaving Tesla for Apple by the “dozens.”
