Tesla shares fell 8.12% on Tuesday after Wall Street downgraded price targets for the electric car maker’s stock. Analysts fear that CEO Elon Musk is distracting from his hostile takeover and micromanagement of Twitter, and that sales to China will be hurt by the Chinese government letting COVID-19 spread after ending its stance on tough restrictions.
Tesla shares hit their lowest in more than two years at $138 at the time of this article’s publication.
Analysts say investors are concerned that Musk will sell more Tesla shares to fund Twitter, and that his antics on the social media platform are hurting the EV company’s brand. Musk sold $3.5 billion worth of stock last week, one of the CEO’s many stock dumps this year.
Some investors are calling for Tesla’s board of directors to replace Musk as CEO, to step in and protect shareholders from falling stocks.
“Tesla’s stock price now reflects the value of not having a CEO. Great job Tesla BOD – time for a change,” chirp Ross Gerber, Portfolio Manager for Gerber Kawasaki.
It’s not yet clear whether Tesla EV sales have been influenced by consumer sentiment about Musk’s Twitter post — after all, Teslas are still widely considered good cars by all measures of battery range, performance, technology, and safety. We’ll have to wait until January to see the fourth quarter numbers for 2022.
Gordon Johnson, CEO and founder at GLJ Research and Tesla Bear, says concerns about sales in China are justified. During 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 each quarter, but the China Passenger Car Association (CPCA) tracks monthly sales. The CPCA reported that Tesla delivered 28,217 electric vehicles from its Shanghai factory in July (a low number due to factory line upgrades); 76,965 in August; and 83,135 in September, with a total of 188,317 units sold in China in the third quarter. That’s just over half of all units sold worldwide — or 343,830 units — in the third quarter.
Electric vehicle adoption rates are higher in China than in the US and Europe, so they naturally make up a larger portion of Tesla’s global sales. Investors fear a decline in these sales in the coming months as the coronavirus threatens to devastate the country after the Chinese government’s complete rollback of its earlier strict restrictions. If that happens, Tesla will need to rely more on its Western markets, where the Twitter dilemma could cause problems.
“Is the Tesla EV brand affected by all this Twitter drama, which means all the controversy?” said Gary Black, managing partner at Future Fund, during a Twitter Spaces session on Tuesday. Black, who owns about $50 million in Tesla shares, said in August that Tesla is the largest position in the fund.
“Does it cause people to either cancel their orders or not order Teslas, or, you know, cause a lack of acceptance of the brand among people who buy EVs? I don’t see it, but that’s one of the concerns institutional investors ask me about.”
Black said he believes ultimately that Musk’s personality, particularly his political rants about the “wake up virus,” will have an impact on the brand “if [Musk] Do not stop. He went on to say that he advises the board to “pull Elon aside and say, look, you may have these political views, but you’re not helping the Tesla brand by expressing them.”
“I don’t know what he’s getting out of insulting his client base on the left,” Black said.
Musk recently posted a poll on Twitter asking if he should step down as CEO of the social media platform, and he said he would abide by the results of the poll. Voters voted for him to leave, prompting Musk to say he believes the bots rigged the poll. There have been reports that Musk is looking for a new CEO, but he hasn’t confirmed it yet.
Black said uncertainty about whether Musk will keep his word is one reason investors are selling Tesla shares.
Like many other investors, Black has also called on Musk and Tesla to buy back some shares, saying there is no better way to prove that he thinks the stock is too cheap.
Johnson said the share price is higher than those of General Motors, Ford and Stellanz combined, and it was greatly overvalued because of developments that Musk promised but has yet to deliver.
“I think the reason Tesla has gone so high is because Musk said he would have cars that could drive with optical cameras. He said he would have [battery technology] A car would deliver $25,000. He didn’t. He said he was an innovator in the field of silicon. not him. He said he was the world leader in bipedal robots. not him. I think it was these promises along with quantitative easing that drove the stock higher, not Tesla’s execution.”
Now that the share price is down, Johnson noted that investors are likely to not only be dismayed by the current situations with Twitter and in China, but realize that Tesla is an automaker like any other company. At the end of the day, the stock should reflect that.
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