Mohit Oberoi
Tesla stock (NYSE: TSLA) stock is hovering near its 52-week lows. Even some of the diehard TSLA bulls are now also apprehensive about the stock after Elon Musk acquired Twitter.
Tesla stock has lost $500 billion of its market cap in 2022 and along with Amazon and Meta Platforms, it has lost its status as a $1 trillion dollar company. Musk himself briefly lost his title as the world’s richest person. It’s been a tumultuous year for both Tesla and Musk who was the Time Person of the Year last year.
To be sure, it wouldn’t be appropriate to single out Tesla stock and there has been widespread sell-off in EV names. Stocks like Lordstown Motors, Lucid Motors, and Arrival are languishing near their all-time lows. Even Chinese EV stocks like NIO, Li Auto, and Xpeng Motors are down sharply in 2022, despite the recent rise.
NIO stock has crashed this year amid the sell-off in Chinese EV stocks. However, last month, Deutsche Bank said that the worst looks over for the company and reiterated its bullish call on the company. There is a guide on how beginners can buy NIO stock. Most analysts are bullish on NIO given its premium brand positioning.
EV Stocks Have Crashed in 2022
In absolute terms, Tesla’s crash is bound to create headlines as no other automaker, legacy or electric, comes anywhere near its humongous market cap. Take, for instance, Tesla still has a market cap of $550 billion while Toyota, the world’s largest automaker, has a market cap below $200 billion.
Tesla has always commanded a fan following among retail investors as well as Wall Street analysts. However, amid Musk’s Twitter antics even some of the perma Tesla bulls are also apprehensive of the stock’s near-term outlook.
Dan Ives of Wedbush Securities, who is among the perma Tesla bull camp, removed TSLA stock from his “Best Ideas List” and lowered the target price from $300 to $250.
Ives said that Musk “tarnished” the Tesla story which coupled with his frequent selling of TSLA stock is an “albatross” for stockholders. He said, “More worrying is that this Twitter ‘Money Pit’ situation will never end and continue to take up money, time, and attention from Musk instead that could be focused on Tesla.”
Wall Street Is Anxious about Tesla after Musk Acquired Twitter
Notably, some Tesla employees are assisting Musk in managing Twitter. While Musk has said that the number is de minimis given Tesla’s massive workforce, and the employees are doing so voluntarily, it does not reflect well as employees of a publicly-traded company are assisting Musk in his private venture.
Morgan Stanley, which is among the most visible Tesla bulls, surveyed institutional investors and industry experts and the results are not surprising. Almost three fourth of the respondents believe that Musk’s ownership of Twitter has had some impact on TSLA’s price action.
Nearly 65% believe that Musk’s Twitter acquisition would have a negative impact on TSLA’s business going forward.
Meanwhile, Morgan Stanley analyst Adam Jonas continues to remain bullish on TSLA stock and believes that there would be a good buying opportunity near his bear case target price of $150. We have a guide on how to buy Tesla stock.
Markets are Concerned Over the Demand for electric cars
For the first time in years, there are concerns over the demand for Tesla cars. There were reports that the company is looking to cut production in China by 20% but Tesla said they were not correct. Now, Bloomberg has reported that TSLA is delaying hiring and cutting shift time in China amid slowing demand.
The company recently said on its website that it would offer a credit of $3,750 to US buyers who take delivery of Model 3 and Model Y in December. Markets see it as a sign of tepid demand.
Tesla lowered car prices in China and offered additional insurance incentives in November. Notably, during the Q3 2022 earnings call, Tesla CEO Elon Musk said that China is in a kind of recession driven by the slowdown in the property market.
He however categorically denied that Tesla is witnessing any slowdown in demand and emphasized that the fourth quarter would be “epic.”
S&P Global Mobility reported that TSLA’s market share in the US fell to 65% in the third quarter of 2022—down 6 percentage points from the last year. It predicted that the company’s market share would fall below 20% by 2025
Tom Zhu to Head Tesla Texas Gigafactory amid Slow Ramp Up
The ramp-up at Tesla’s Texas Gigafactory has been slow and previously Musk said that Texas and Berlin Gigafactories were losing a lot of money. Tom Zhu, who oversaw the construction of the Shanghai Gigafactory would now head the company’s Texas Gigafactory also.
The company’s China Gigafactory was set up in record time and the quick and efficient production ramp-up impressed even TSLA bears.
Meanwhile, Tesla is now facing pressure from stockholders as the stock continues to sag. Leo KoGuan who is among the company’s largest individual shareholders said, “Tesla board is missing in action.” He also called for a stock buyback.
Tesla Might Consider a Stock Buyback in 2023
Incidentally, Musk had floated the idea of a stock buyback during the company’s Q3 2022 earnings call only. The company has ample cash on its balance sheet to carry out the upto $10 billion buyback that Musk talked about.
Tesla faces competition from Chinese EV companies like NIO and Xpeng Motors. BYD Motors has been another tough competitor and it has overtaken Tesla to become the largest seller of NEVs (new energy vehicles) in China as well as globally.
All said, at a time when Musk should have been razor focused on Tesla including elusive projects like robotaxis, he is entangled with fixing the troubles at Twitter. Markets have let Musk know in no uncertain terms that his Twitter antics are a needless distraction for TSLA stock. But, would the mercurial CEO listen to the market?
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This article was written for Business 2 Community by Mohit Oberoi.
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