Good morning.
As earnings season continues, Elon Musk’s Tesla will be up to bat today to report Q3 results, and the new CFO will be in the spotlight.
“Investors aren’t really embracing this quarter because of the softer delivery number,” Dan Ives, managing director and senior equity analyst at Wedbush Securities, tells me. Tesla’s third-quarter delivery numbers came in below Wall Street’s targets with the longer than expected downtimes of factories in Shanghai and Austin, Ives wrote in a Monday note to investors.
There’s a “laser focus” on auto gross margin being above 17%, Ives says. “And investors want to know if the price cuts are mostly now in the rearview mirror,” he says.
Amid an uncertain economy, increased EV competition, and rising production, Tesla has undergone several rounds of price reductions this year. Its top-selling electric vehicles now compete directly with gasoline cars on price. Earlier this month, the EV company marked down the starting price of the base Model 3 by $1,250 to $38,990, and discounted the long-range version of the sedan by the same amount to $45,990, Bloomberg reported.
“The margin sacrifice over volume has been the right move,” Ives says. However, “they need to start to go back in the other direction,” he says. If not, it will become, “a premium brand that continues to cut prices,” Ives says. “That’s a difficult perception to get over for the consumer.”
Tesla’s most recent C-suite change happened in August when Zachary Kirkhorn stepped down as CFO. “Zach has been a key part of the Tesla story for years,” Ives says.
Kirkhorn joined Tesla in March 2010 as a senior analyst in finance and was promoted to finance chief in 2019. At the time, Tesla was valued at $50 billion, and today, it’s worth about $773 billion, Fortune reported. Before Kirkhorn took on the CFO role, Tesla had a long history of losses and occasionally burned more than $1 billion of cash per quarter, but during his tenure the company experienced profitability.
Vaibhav Taneja succeeded Kirkhorn as CFO in August. Taneja previously served as Tesla’s chief accounting officer since March 2019. Before that, he was corporate controller and assistant corporate controller. Prior to joining Tesla, Taneja served in various finance and accounting roles at SolarCity Corporation.
What does Ives think Taneja should prioritize?
“I think he has to show that he has his arms around the margin story, price cuts, and the forecast going forward,” Ives says. “Because with Zack no longer running the show, investors are going to be cautious to make sure the new CFO can deliver.”
He adds, “It’s a vetting period [for Taneja] in an economy that’s very shaky, coming off delivery numbers that were nothing to write home about. This isn’t exactly roses and champagne time.”
But Wedbush, a longtime Tesla bull, maintains an outperform recommendation.
And the Street is watching.
Sheryl Estrada
sheryl.estrada@fortune.com
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Leaderboard
Nicolette Turner was promoted to CFO at Headspace, a mental health and meditation app company. Turner was most recently SVP of finance. Since joining the company in 2020, she has mentored and advanced the careers of the tenured finance and accounting professionals at Headspace, while recruiting several other individuals. Turner played a key role in the negotiation of Headspace’s $3 billion merger with Ginger in 2021. Before Headspace, she held finance roles at Cardinal Health, Hillrom, McKinsey, and KPMG.
Shawn Guertin, EVP, CFO and president of health services at CVS Health will be taking a leave of absence from his role due to unforeseen family health reasons, according to the company. Tom Cowhey, SVP of corporate finance at CVS Health, has been appointed interim CFO. And CEO of Oak Street Health, Mike Pykosz, has been named interim President of Health Services.
Big deal
A new S&P Global Market Intelligence report finds that global private equity and venture capital deal value and volume booked year-over-year declines in both September and the third quarter. In September, total deal value decreased 22.3% to $28.55 billion from $36.74 billion a year ago. The number of deals also went down to 864 from 1,418 the year prior, according to the report.
Going deeper
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Overheard
“Music was not a distraction from David’s work. The media attention became a distraction.”
—Goldman Sachs representative Tony Fratto told Fortune regarding the news that Goldman Sachs CEO David Solomon, who is also known as EDM DJ “D-Sol," will officially no longer DJ at high-profile events, according to a Tuesday Financial Times report. “David hasn’t publicly DJed an event in well over a year," Fratto said.
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