Tesla stock (NYSE: TSLA) continues to languish near two-year lows amid Elon Musk’s Twitter antics. While many analysts see the stock getting attractive after losing around $500 billion in market cap over the last two months, others have a more nuanced view.
TSLA stock has underperformed the markets badly ever since Musk acquired Twitter last month. Even some of the TSLA bulls like Dan Ives of Wedbush Securities are apprehensive over the near-term outlook amid the drama over Twitter. Ives removed TSLA stock from his top ideas list but maintained an overweight rating on Tesla.
Now, Morgan Stanley, which is among the most visible Tesla bulls, has 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.
Tesla Bears Also Believe the Valuation is Getting Attractive
Amid the crash in Tesla stock, some of the bears also find the risk-reward attractive. Citi upgraded TSLA stock to a neutral, pointing to the balanced risk-reward. It also raised the stock’s target price to $176.
Bernstein analyst Toni Sacconaghi finds the valuations getting reasonable now even as he is still bearish on TSLA stock.
Notably, Sacconaghi has long been a TSLA bear and wasn’t too impressed after Tesla’s Q3 2022 earnings call. “Answers to many questions on the earnings call were curt and almost dismissive, with CEO Musk instead repeatedly making very bold prognostications about Tesla’s future and capabilities,” he said in his note.
He also expressed concerns over demand for Tesla cars, something which Musk denied categorically. However, since the earnings release, TSLA has lowered car prices in China and offered other incentives to spur sales, a sign that demand is probably not as strong as the company is touting.
TSLA is Losing Market Share as EV Competition Heats Up
Tesla is the market leader in the US EV market by a wide margin even as it lost the crown on the global level to BYD. However, the company seems to be losing its dominant market position in the US. 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. It said, “Tesla’s position is changing as new, more affordable options arrive, offering equal or better technology and production build.”
The S&P added in its report “Given that consumer choice and consumer interest in EVs are growing, Tesla’s ability to retain a dominant market share will be challenged going forward.”
Notably, Bank of America has an even bleak forecast and expects Tesla’s US market share to drop to 11% by 2025. BofA expects General Motors and Ford to increase their market share substantially by then.
Legacy Automakers Are Ramping EV Production
Ford has set ambitious plans for its EV business. It expects its annual EV production run rate to reach 600,000 by the end of 2023 and 2 million by 2026.
Ford also partnered with CATL for global battery supply. The company is also looking to localize battery production in the US. We have a guide on how to buy Ford stock in 2022.
General Motors (NYSE: GM) is also targeting a 2025 EV production capacity of 1 million vehicles and has secured the required raw materials for the same.
GM also said that it expects its EV portfolio to generate a positive EBIT margin in the low to mid-single digits by 2025, before the impact of tax credits. It also predicted that its sales would rise 12% annually until 2025 led by higher EV sales. In 2025, it expects EV sales of $50 billion and total revenues of $225 billion.
Musk’s Twitter Takeover is a Hangover for Tesla Stock
Coming back to Tesla. markets are wary of Musk’s Twitter ownership for multiple reasons. Firstly, it is set to consume a lot of Musk’s bandwidth at a time when most of his energies should be focused on Tesla.
Second, Twitter has been a PR disaster of sorts so far for Musk and by his extension for Tesla. Musk has fired half of Twitter employees and many contractors. Twitter chaos is having an impact on Tesla stock also. Notably, Tesla is the most valued automaker. Apart from the growth prospects, the valuation premium also comes due to Musk’s association with the company.
Now, with brand Musk getting somewhat damaged due to the troubles at Twitter, Tesla stock is also feeling the heat.
Musk Restored Trump’s Twitter Account
Musk has restored Donald Trump’s Twitter account which has irked many. Trump meanwhile is not keen on joining Twitter. He has launched his own social media business which has announced a merger with Digital World Acquisition (NYSE: DWAC). We have a guide on how investors can buy DWAC stock.
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. With competition heating up in the EV industry, the last thing Tesla investors would have wanted is Musk devoting time to Twitter rather than Tesla.
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