Why Tesla bear Ross Gerber says he's even more 'disturbed' after the latest earnings

• Ross Gerber doubts the EV maker can mount a comeback even with Elon Musk back at the helm.
• The early Tesla investor said he's not confident in Tesla's self-driving tech or robotaxi business.
• He's using the pop in Tesla stock since earnings as an opportunity to keep trimming his position.

Investors this week cheered Elon Musk's planned return to Tesla as he steps back from the White House, but one investor isn't convinced it will result in a comeback.

Shares of the car maker surged 20% through Friday afternoon since reporting quarterly results on Tuesday, but longtime investor Ross Gerber told Business Insider that Tesla's first-quarter earnings don't give him any reason to hope.

Investors looked past the company's bleak financial results, choosing to focus on Musk's pledge to spend less time with the Department of Government Efficiency starting in May.

But in an interview with BI this week, Gerber, president of Gerber Kawasaki Wealth and Investment Management, said that investors' optimism over Musk's pledge to spend more time at Tesla is misguided and that his return to the company could actually be bad for the business.

Gerber said he was even "more disturbed" after the earnings call.

Musk's popularity is down

Gerber thinks a big problem is Musk himself, even as he steps back from his work with the government.

When rumors first began swirling that Musk was poised to step back from DOGE, Gerber told BI it wouldn't matter and that the brand had already suffered.

Survey data from Silver Bulletin shows 53.4% of Americans view Elon Musk unfavorably, while 39.2% have a favorable opinion of the world's richest person.

Gerber said that as protests against the company continue, the billionaire's return could further damage the brand and weigh on EV sales.

"Customers who have a choice on how they vote with their money are voting against him," Gerber said.

Robotaxis could be a tough business

Gerber's dismay while listening to the earnings call has to do with the fact that the company has a history of failing to meet its own timelines.

Tesla's semi-truck and second-generation Roadster are two delayed products that come to mind.

Gerber said he's not confident in the timeline for the robotaxi launch in Austin, scheduled for June. His skepticism is based on his own experience with the company's full self-driving software.

"It doesn't see the people," Gerber said of his recent experience using the self-driving feature in Los Angeles, adding that he has had a better experience using Waymo's self-driving cars in his three-mile drive to work.

Gerber also questioned the business sense of the robotaxi initiative.

Even if Tesla's technology works, Gerber sees ride-hailing as a tough business. Comparable ride-hailing networks have a net profit margin of about 10%, below the mid-teens margin for Tesla's automotive business.

"They're better off selling cars," Gerber said.

What would turn Gerber bullish?

For one, Tesla's valuation needs to come down. The stock is trading at a price-to-earnings ratio of more than 150x, and Gerber thinks it could be even higher as earnings continue to decline.

Considering the company's lack of growth, Tesla stock isn't a buy at its current valuation.

"I just don't see sales going up, and sales are down 20% on automotive, so kind of the way I see it is that Tesla is in decline at this point," Gerber said.

Gerber pointed to fast-growing companies, including Costco, Netflix, and Nvidia, as more attractive than Tesla based on their valuation multiples.

Gerber would also like to see Musk step back from the company and become its Chairman, and for Tesla to hire a new CEO who can take over the day-to-day responsibilities and help salvage the brand reputation.

Gerber thinks such a move would allow Tesla to keep its premium valuation tied to Musk's involvement with the company.

Gerber keeps selling Tesla stock

Gerber said he is using the recent increase in Tesla's share price as another opportunity to trim his position in the EV maker.

His firm first added Tesla to its portfolio in the fourth quarter of 2015 and, as of December 31, held a $106 million position in Tesla stock.

But over the past two years, the firm has been taking profits for its clients by selling about 5% of its Tesla position every quarter.

According to its latest regulatory filing, Gerber's firm sold another 28,481 shares of Tesla in the fourth quarter of 2024. Investors will receive an update on the firm's first-quarter trading activity in mid-May.

Tesla did not respond to a request for comment from Business Insider.