Tesla (NASDAQ:TSLA) has proposed what may be the most over-the-top pay package ever: $1 trillion for Elon Musk. Yes, trillion – as in one followed by twelve zeros. For perspective, his 2018 deal was ‘only’ $56 billion. Musk has been angling for a bigger stake to tighten his grip on Tesla, and the board apparently responded with: “Sure, how about half the GDP of Mexico?”
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However, Musk will have to resist getting the celebratory ketamine out just yet, because the proposed compensation is contingent on Tesla hitting a set of ambitious milestones over a 10-year period. These include delivering 20 million vehicles, securing 10 million active FSD subscriptions, generating $400 billion in annual EBITDA, deploying 1 million robotaxis and Optimus robots, and significantly increasing Tesla’s market cap.
Yet, while $1 trillion might sound like a fantastical number, Morgan Stanley analyst Adam Jonas thinks it is “rather modest compared to the size of the market opportunity.”
Global GDP currently stands at around $115 trillion, while the world’s workforce of four billion people earns nearly $40 trillion in total wages. “If you can find a bigger TAM than that… please call me. Day or night,” suggests Jonas, who has “entertained scenarios where the humanoid robot market can exceed the size of today’s global labor market… by a significant multiple.” Jonas’ calculations suggest that converting just 1% of the U.S. labor force into humanoid robots could be worth roughly $320 billion, or about $100 per Tesla share. “Contemplating future global GDP before AI robots is like contemplating global GDP before electricity,” he goes on to add.
Jonas also thinks the pay package will finally lay to rest concerns about Musk’s long-term commitment to Tesla. As Tesla increasingly moves into commercializing sensitive “dual-purpose” physical AI, Elon Musk has indicated he wants to maintain at least a “blocking minority” stake – around 25% – to retain influence over any potential change of control. Over the past few years, some investors have raised concerns about Musk’s dedication to Tesla, wondering if his other ventures, such as xAI and SpaceX, could divert his time and attention away from the company. “In our view,” Jonas added, “on the eve of scaling physical AI and advanced AI-enabled manufacturing on US shores, we believe Elon Musk has an incentive to focus on Tesla more than ever.”
Furthermore, over a ten-year period, Jonas thinks the performance targets “appear achievable.” The goals for vehicle deliveries, FSD subscriptions, and operational Robotaxis are similar to Morgan Stanley’s projections for 2029 through 2036.
As for Tesla shareholders, Jonas thinks the deal makes sense too. “While the proof is in the execution, at face value, the proposed compensation package aligns Tesla minority shareholder interest with those of Elon Musk in a way that incorporates operational milestones, profitability milestones and value creation milestones (market cap) while cementing a long-term commitment to the company,” he summed up.
To this end, Jonas reiterated an Overweight (i.e., Buy) rating on the shares, backed by a $410 price target. There’s potential upside of 18% from current levels. (To watch Jonas’s track record, click here)
Jonas is one of the Street’s 13 TSLA bulls, but with an additional 13 Holds and 8 Sells, the stock receives a Hold consensus rating. Going by the $306.42 average target, a year from now, shares will be changing hands for an 11% discount. (See TSLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.