Mohit Oberoi
Tesla stock (NYSE: TSLA) stock fell 4.7% on Friday which took its weekly losses to 16.1%. The stock closed below a market cap of $500 billion for the first time in two years as markets get increasingly wary of Elon Musk’s Twitter antics.
While US stock markets too fell last week amid recession fears, Tesla underperformed by a wide margin and had its worst day in two years. Incidentally, if we leave the Q1 2020 crash where the broader markets fell amid the COVID-19 pandemic, it was the worst week ever for Tesla stock.
Talking of Tesla, there wasn’t any company-specific news last week that we can blame for the crash in the stock. However, at least two Musk moves seem to have spooked investors.
Last week, Musk sold another $3.6 billion worth of Tesla stock which spooked markets. He had previously said that he was done selling TSLA stock and would not sell any more shares. It is yet another U-turn for Musk who has now lost his crown as the world’s richest person.
Twitter also suspended the accounts which track Musk’s jet. The social media company also suspended many journalists, post which the EU warned Musk of sanctions. Musk subsequently restored many accounts.
Tesla Stock Falls amid Musk’s Twitter Antics
Tesla stock is now down 55% for the year, and while the broader market sell-off is certainly to blame, the stock’s price action suggests that the decline is also related to Musk. A few months back, markets saw Musk as the biggest asset for Tesla. Now, many see him as a “risk” for the EV giant.
KoGuan Leo, who is the third largest TSLA stockholder has now called for Musk’s ouster from the company. He tweeted, “Elon abandoned Tesla and Tesla has no working CEO.” The Indonesian billionaire added, “Tesla needs and deserves to have working full time CEO.”
Incidentally, Wall Street analysts also find Musk’s Twitter antics as a risk for Tesla stock. It is not only the bears who have pounced on the opportunity to criticize Musk and Tesla. Several TSLA bulls like Dan Ives of Wedbush Securities and Adam Jonas of Morgan Stanley have grown wary of TSLA stock in the short term.
Ives 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.” Ives has also said that Twitter should have a new CEO.
TSLA Stock Nears Jonas’ Bear Case Target Price
Jonas said that Tesla stock would be a good buy at his bear case target price of $150. After last week’s crash, TSLA stock barely managed to close above $150. Cathie Wood of ARK Invest, another perma TSLA bull, also bought more Tesla shares last week for ARK ETFs. We have a guide on how to buy Tesla stock.
Meanwhile, bears see TSLA stock sliding even further. Catherine Faddis, senior portfolio manager at Fernwood Investment Management believes TSLA stock has room to run downwards. She said, “Elon Musk has damaged his reputation with this Twitter business and all the negative news flow.”
Tesla Stock Falls as Musk Loses in Popularity
Tesla and Musk are indeed losing popularity. Morgan Stanley conducted a survey of institutional investors where 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.
A YouGov survey in November also showed that more people view the Tesla brand negatively.
US-based consulting firm Morning Consult’s findings also showed that consumers’ negative perception of the Tesla brand is on a rise.
Kelley Blue Book’s quarterly Brand Watch Report showed that 64% of electric car shoppers considered a Tesla last quarter, which was below the 75% that did so a year back.
Musk is almost synonymous with the Tesla brand and has been the de facto marketer in chief for the EV company. As brand Musk stands tarnished after the Twitter drama, TSLA stock is also feeling the heat.
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This article was written for Business 2 Community by Mohit Oberoi.
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