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Surprise exit of Tesla CFO unnerves analysts: 'Significant loss of institutional knowledge'

Key Points
  • Many analysts view the loss of longtime executive Deepak Ahuja as the most significant in a string of high-profile departures.
  • Others highlight Ahuja's unseasoned replacement, Zack Kirkhorn, who will take the reins of the $53 billion public company just six years out of business school.
  • "We see the departure as a significant loss of institutional knowledge, and note that Kirkhorn is a first-time public company CFO," Bernstein's Toni Sacconaghi writes.
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Tesla's announcement that Chief Financial Officer Deepak Ahuja is retiring has unnerved Wall Street's top analysts and overshadowed the company's sales beat in the fourth quarter.

Many viewed the loss of the longtime executive as the most significant in a string of high-profile departures as the electric car manufacturer struggles to retain talent. The company said in September that chief accounting officer Dave Morton was leaving the company after less than a month on the job, while head of human resources Gabrielle Toledano decided last year not to rejoin the company after a leave of absence.

Others chose to highlight Ahuja's unseasoned replacement, Zack Kirkhorn, who will take the financial reins of the $53 billion public company just six years out of business school.

"We see the departure as a significant loss of institutional knowledge, and note that Kirkhorn is a first-time public company CFO," wrote AB Bernstein analyst Toni Sacconaghi.

To be sure, Tesla reported better sales in the fourth quarter than Wall Street analysts had expected with revenues of $7.23 billion, more than double its $3.29 billion in revenue during the same quarter in 2017. And while profit fell short of projections, the company's stock crept higher immediately following its earnings announcement based on the solid sales numbers and a decent 2019 outlook.

However, the equity quickly declined after CEO Elon Musk announced during the earnings conference call that Ahuja is leaving after almost 11 years at the company. The stock fell 3.7 percent in early trading. Tesla shares recovered those losses to trade flat by midday Thursday.

Here's what Wall Street analysts thoughts about Deepak Ahuja's departure.

AB Bernstein (Market Perform)

"Surprisingly, Tesla's CFO Deepak Ahuja announced that he was retiring, and would be succeeded by Zack Kirkhorn, Tesla's current VP Finance. We see the departure as a significant loss of institutional knowledge, and note that Kirkhorn is a first-time public company CFO, just six years removed from business school."

Goldman Sachs (Sell)

"Management announced that CFO Deepak Ahuja would be retiring from his position at the firm in 2019 and would be replaced by Zach Kirkhorn, who joined Tesla nine years ago. Mr. Ahuja had previously left his position as CFO of Tesla in 2015, but returned in early 2017. We believe the changeover may cause some uncertainty for investors as Tesla just saw two consecutive quarters of profitability and positive cash flow, and we see potential for a less stable path forward due to a sequential step-down in deliveries, working capital headwinds and convertible debt payment."

J.P. Morgan Chase (Underweight)

"We expect investors to react negatively to the replacement of Deepak Ahuja, 56, as CFO with Zack Kirkhorn, 34, Tesla's current Vice President of Finance, given Mr. Ahuja's long automotive industry experience and 11-year tenure as the firm's CFO (across two separate stints), during which he provided relative stability to the firm's finance staff that has otherwise seen a great deal of churn."

Barclays (Underweight)

"While the call had some positives around cash (largely due to under spending on capex and opex), those were overshadowed by the announcement of departure of the CFO and the absence of an experienced Silicon Valley (much less automotive experienced like ex-CFO Ahuja) vet to replace him. We remain underweight with a $210 price target."

Morgan Stanley (Equal-weight)

"At the very end of the analyst conference call, Elon Musk announced that CFO Deepak Ahuja was retiring and will be replaced by Zack Kirkhorn who is VP of Finance and has been at the company for 9 years. CFO changes are significant events and we look forward to meeting Mr. Kirkhorn."

— With reporting by Michael Bloom.