- Elon Musk's $56 billion pay package is probably getting approved by shareholders, Wedbush said.
- The issue has been an "overhang" on Tesla stock, Wedbush's Dan Ives said.
- The firm reiterated its "outperform" rating and $275 price target on Tesla stock.
Elon Musk's controversial $56 billion pay package is mostly likely getting the green light from investors, according to Wedbush's Dan Ives, and it'll eliminate what's been a big "overhang" for the stock in 2024.
The tech analyst pointed to Tesla's upcoming shareholder vote on Musk's staggering comp package. The vote comes after the pay deal was struck down by a Delaware judge earlier this year.
Shareholders will most likely reapprove the package, Ives said, given that they already approved it in 2018.
"We would expect the 2018 package will be overwhelmingly reapproved, and the Delaware court ruling would be moot in essence as Tesla will now be moving to incorporate in Texas. This issue has been an overhang on Tesla's stock and this will be important to move this distraction in the rearview mirror," Ives said in a note on Thursday.
Tesla stock is down 28% this year, partly due to anemic demand for its vehicles and drama surrounding Musk's compensation. Shortly after the Delaware ruling, Musk shifted Tesla's state of incorporation from Delaware to Texas, and has floated moving AI projects away from Tesla unless he is given at least 25% ownership of the company.
Still, Wedbush analysts reiterated their "outperform" rating on the stock and their $275 price target, implying another 55% upside to shares.
That outlook assumes Musk can "recommit" to Tesla over the next three to five years as its CEO, Ives said, referring to criticism that Musk has neglected Tesla in favor of his other companies and projects.
Musk's leadership will be particularly important as Tesla makes headway on its important initiatives, such as its plans to release a low-cost vehicle and develop its full self-driving technology, Ives added.
"Clearly Tesla is going through a challenging period of delivery growth and this story will not turnaround overnight so patience is required. However, it now feels that Musk is taking tighter control of the reigns of Tesla," Ives said. "Execution of the lower cost vehicle and driving incremental demand in the key China market must be flawless … otherwise this could derail the bull thesis in the next 6 to 12 months as the pressure builds on Musk to navigate Tesla through this dark demand storm with next week removing one overhang."
Some of Tesla's largest investors have spoken out against Musk's proposed pay package. The California Public Employee's Retirement System — which is among Tesla's top 30 shareholders — said it didn't believe the package was "commensurate with the performance of the company."
Tesla, meanwhile, looks like it's trying to secure votes ahead of its annual meeting. The company is offering a potential Gigafactory tour to investors if they cast their vote in favor of Musk's pay package.
Tesla did not immediately respond to a request for comment from Business Insider.
