Tesla shares fell 8.12% on Tuesday after Wall Street cut a price target for the electric vehicle maker’s stock. Analysts worry that CEO Elon Musk will be distracted from Twitter through his hostile takeover and micromanagement, and sales in China will be hurt by the Chinese government allowing the spread of COVID-19 after ending its stance on strict restrictions.
Tesla shares are at a more than two-year low of $138 at the time of writing this article.
Analysts say investors are concerned that Musk sold more Tesla stock to fund Twitter and that his antics on the social media platform are hurting the electric vehicle maker’s brand. Musk sold about $3.5 billion worth of stock last week, one of several stock sales the CEO has made this year.
Some investors are urging Tesla’s board to replace Musk as CEO, step in and protect shareholders from the stock’s slump.
“Tesla’s stock price now reflects the value of not having a CEO. Well done Tesla BOD – time for a restructuring.” tweeted Ross Gerber, portfolio manager for Gerber Kawasaki.
It remains unclear whether Tesla’s electric vehicle sales have been impacted by consumer confidence over Musk’s involvement on Twitter; After all, Teslas are still considered good cars in terms of battery life, performance, technology and safety. We will have to wait until January to see Q4 2022 numbers.
However, concerns about sales in China are justified, says Gordon Johnson, CEO and founder of GLJ Research and Tesla Bear. At a Twitter Spaces event on Tuesday, Johnson noted that China is Tesla’s largest and most profitable market.
It’s hard to find regional breakdowns of Tesla units sold by quarter, but the China Passenger Car Association (CPCA) tracks sales monthly. The CPCA reported that Tesla shipped 28,217 EVs from its Shanghai factory in July (a small number due to factory upgrades); 76,965 in August; and 83,135 in September, for a total of 188,317 units sold in China in the third quarter. That’s just over half of all units shipped worldwide, or 343,830 units in Q3.
The adoption rate of electric cars in China is higher than in the US and Europe, so naturally they make up a larger portion of Tesla’s global sales. Investors fear a dip in those sales in the coming months as COVID-19 threatens to sweep the country after the Chinese government completely lifted its previous draconian restrictions. If that happens, Tesla will have to rely more on its Western markets, where the Twitter dilemma could spell trouble.
“Is the Tesla EV brand affected by all this Twitter drama, I mean all the controversy?” said Gary Black, executive partner of the Future Fund, during a Twitter Spaces session on Tuesday. Black, who owns about $50 million worth of Tesla stock, said in August that Tesla was the fund’s largest holding.
“Will this cause people to cancel their orders or not order Teslas, or will it cause the brand to fall out of favor with people who buy EVs?” I don’t see it, but that’s one of the concerns I have with institutional investors.”
Black said he believes Musk’s persona, particularly his political rhetoric speaking of the “guardian spirit virus,” will ultimately have an impact on the brand “when [Musk] do not stop.” He went on to say that he would advise the board to “push Elon aside and say, look, he may have these political views, but he’s not helping the Tesla brand by articulating them.”
“I don’t know what he gets out of insulting his leftist clientele,” said Black.
Musk recently posted a poll on Twitter asking if he should step down as CEO of the social media platform and said he would follow the poll’s conclusions. Voters voted him out, leading Musk to say he believes bots rigged the election. There are reports that Musk is looking for a new CEO, but he has not yet confirmed this.
Black said uncertainty about whether Musk will keep his word is one reason investors are selling Tesla stock.
Like many other investors, Black has been urging Musk and Tesla to buy back some shares, saying there’s no better way to show he thinks the shares are too cheap.
Johnson said the stock, which is priced higher than General Motors, Ford and Stellantis combined, is largely overvalued because of progress Musk promised but failed to deliver.
“I think the reason why Tesla got so high is because Musk said he would have cars that could run with optical cameras. He didn’t,” Johnson said. “He said he has one [battery technology] that would make a $25,000 car. He no. He said he is a silicon innovator. He’s not. He said he is a world leader in bipedal robotics. He’s not. I think those commitments combined with quantitative easing drove the stock up, not Tesla’s run.”
With the share price falling, Johnson hinted that not only are potential investors concerned about the current situation on Twitter and China, but they also recognize that Tesla is a carmaker like any other until the end of the year, and your actions should reflect Which.
Source: La Neta Neta
Jason Jack is an experienced technology journalist and author at The Nation View. With a background in computer science and engineering, he has a deep understanding of the latest technology trends and developments. He writes about a wide range of technology topics, including artificial intelligence, machine learning, software development, and cybersecurity.
