Why Tesla stock jumped today

Tesla investors seem to want to keep CEO Elon Musk happy.

| More on:
Three exuberant runners dash towards the camera. One raises her arms in triumph; another jumps in the air with arms raised. The third runner gives a satisfied smile.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) stock gained in Thursday's daily trading session, with the electric vehicle (EV) innovator's share price up almost 3% as of the close.

Tesla stock gained ground following indications that CEO Elon Musk's latest compensation package is likely to be approved. After the market closed yesterday, Musk indicated that shareholders were poised to give the green light for a hotly contested pay package valued at roughly $56 billion. He also indicated that shareholders were voting in favor of moving the company's place of incorporation from Delaware to Texas. Wall Street is apparently feeling bullish about both news items.

Musk's big payday moves closer to reality, but there's a catch

In 2018, Tesla board members approved a performance-based compensation package that would potentially award Musk with as much as $56 billion worth of company stock. But a Delaware judge struck down the pay package this January on the grounds that the company's board had not shown that the compensation was fair or provided evidence that they had engaged in meaningful negotiations about the CEO's pay. Shareholders have been voting on whether to reauthorize the deal.

While most of the votes on Musk's pay package were submitted yesterday, a small remainder will be submitted later today. The pay package appears likely to pass, but some legal experts think that the Tesla CEO's compensation will once again wind up being challenged in court.

What comes next for Musk and Tesla stock?

There's no doubt that Musk's leadership has been instrumental in Tesla's incredible rise and stock performance. On the other hand, the EV company has been facing some significant challenges lately. Further complicating the question of Musk's compensation, Tesla stock has seen big sell-offs this year despite an overall bullish backdrop that has powered explosive gains for many tech stocks.

TSLA Chart

TSLA data by YCharts

Valued at roughly 72 times this year's expected earnings, Tesla continues to trade at highly growth-dependent multiples despite somewhat sluggish performance for the business. With the company facing pressure from the rise of Chinese EV makers and other players in the space, it may be hard to justify the company's valuation when viewing it through the lens of a traditional automobile maker. But Musk has continued to invest heavily in innovation initiatives, and some investors are willing to assign a premium to the stock based on his vision and the company's track record of disruption.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
International Stock News

The CEO of Nvidia just sold 700,000 shares of his company's stock. Here's what investors need to know

What could it mean?

Read more »

A man in a business suit peers through binoculars as two businesswomen stand beside him looking straight ahead at the camera.
International Stock News

Where will Nvidia stock be in 1 year?

You might be late to the party.

Read more »

asx share price boosted by us investment represented by hand waving US flag across winning athlete
International Stock News

Is it too late for ASX investors to start buying US shares?

Should ASX investors start taking the gains from US shares like Nvidia off the table?

Read more »

A US flag behind a graph, indicating investment in US shares
International Stock News

Which US shares are ASX investors buying in 2024?

The ASX's most popular US shares contain some familiar names...

Read more »

A man and a woman sit in front of a laptop looking fascinated and captivated.
International Stock News

Prediction: 2 US stocks that will be worth more than Nvidia 5 years from now

These US stocks have a shot at surpassing Nvidia over the next few years.

Read more »

Digital rocket on a laptop.
International Stock News

Is Nvidia stock going to $150 in the wake of its high-profile 10-for-1 stock split?

Wall Street analysts are reviewing their models in the wake of Nvidia's stock split.

Read more »

A woman walks along the street holding an oversized box wrapped as a gift.
International Stock News

Better megacap stock: Nvidia vs. Microsoft

Megacap stocks have ruled the year so far. Is Nvidia or Microsoft better positioned for the second half of the…

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
International Stock News

Is Nvidia stock a buy now?

Nvidia investors are looking ahead. But there is risk in counting on things that haven't happened yet.

Read more »