A common misconception has emerged about Elon Musk and Tesla: the billionaire’s love affair with Twitter is the main reason why Tesla shares have lost so much this year. But this week’s sharp sell-off in Tesla shares has proven that the problems at Musk’s auto company go beyond Twitter.
Even as Musk has indicated that he may give up his title of CEO at Twitter, investors have grown concerned that Tesla’s sales and earnings outlook is heading for the worse. Sign of weak demand: Tesla announces a rare sale. The company has offered two discounts to buyers who receive a vehicle before the end of the year, initially offering a $3,750 discount earlier this month. Then Tesla doubled that discount to $7,500 on Thursday.
Dan Ives, a technical analyst with Wedbush Securities and a Tesla bull who cut his price target for the stock on Friday, said Friday, from $250 to $175. “The price cuts enacted by Tesla were the straw that broke the camel’s back on the stock.”
Another reason for Tesla’s stock sinking: The US economy can heading towards recession Next year, hurting car sales. Musk said in a Twitter Spaces call Thursday that he expects the economy will be in a “serious recession” in 2023.
“I think there will be some higher overall drama than people currently think,” he said, according to Reuters, adding that homes and cars would be disproportionately affected by economic conditions.
Part of the problem with Tesla’s share price is that critics are wondering if the price is worth it Trillion dollar valuation It was at the beginning of the year. At its peak, Tesla was worth more than the 12 automakers on the planet combined, despite owning only a fraction of the sales of any of them. Today it is worth $399 billion.
“It’s got ahead of itself in the near term,” said Gene Munster of Loup Ventures, a Tesla fan. “I still think this could be a much bigger company. I think he’s going to see those kinds of numbers again. But it could take a long time to get there.”
Tesla’s growth prospects—a target of 50% annual sales growth—helped drive that valuation. And it agreed in October that it would do so Miss this sales target for this year.
The stock’s climb to dizzying heights — up 743% in 2020 alone — has been fueled by Musk’s reputation as a genius who would disrupt the massive global auto industry.
“Tesla was seen as a disruptive technology company, not a car manufacturer, and a good chunk of that premium is tied to Musk,” Ives said.
Tesla’s critics said much of its high valuation was based on promises Musk made about future products, many of which came years after he originally promised.
A good example of this is the Cybertruck, Tesla’s pickup truck, Unveiled for the first time three years ago with promises that production would begin in 2021. Now production is set to begin next year, with production ramping up in 2024, putting it behind other electric pickup offerings from stronghold and an upstart EV maker Rivian, and both have electric vans available for purchase today. It can also track GM’s planned electric pickup offerings.
“Elon Musk has a pathological problem with the truth,” said Gordon Johnson, one of Tesla’s biggest critics among analysts. “When people say he’s a genius and an innovator, it’s based on all his promises that he never delivers.”
Johnson said Tesla shares will see an even steeper decline, once he starts pricing them like other automakers rather than delivering on their promises. For Tesla to meet its growth goals, he said, it needs to build new factories almost every year, but new factories in Germany and Texas that opened in the spring are still not operating at full capacity. He said its factory in China had to cut back production due to weak sales in the market in the face of Covid restrictions.
“Demand has collapsed in the United States,” he said. “Two months ago, the wait time was two or three months. Now you can have one right away. They’re going to build more cars than they’re selling for the third quarter in a row. It’s the definition of overcapacity.”
Tesla remains the largest maker of electric vehicles worldwide, although that title is being challenged in some key markets, by Volkswagen in Europe and BYD in China. And more competition comes from well-known automakers like Ford and GM.
That’s not to say that Twitter hasn’t played any part in Tesla’s share price crash this year: Tesla shares have lost 66% of their value since Musk. Pay attention to Twitter It was first disclosed in April, with a 45% drop since then closed on the deal in late October.
Investors were disappointed that Musk appeared to be paying off much of his $44 billion Twitter purchase by selling Tesla stock. Musk, Tesla’s largest shareholder, she has She sold $23 billion worth of Tesla stock Since his interest in Twitter became public in April.
On Thursday’s Twitter Spaces call, Musk promised that he had finished selling shares of Tesla stock through at least 2024, if not later. But it did not live up to the previous level Promise in April He finished selling Tesla stock, and has sold $14.4 billion of that stock since that time.
“It was Pinocchio’s position for Musk to say he’s done selling shares. Investors want to see him go down the road and not just talk the talk,” Ives said.
Another Twitter factor: Musk named himself CEO of Twitter, the third major company he leads, along with Tesla and SpaceX. Therefore, many people assumed that Musk’s loss of focus on Tesla had spooked her former fans on Wall Street.
But this week started with Musk’s run vote – On Twitter, of course – he asks if he should Relinquish the CEO position In his game on social media. He promised to comply with the outcome, and 57.5% of those who voted said they wanted him gone.
This departure may take some time, Musk tweeted will resign “As soon as I find someone foolish enough to take the job!” The same tweet warned that even if he gave up the CEO position at Twitter, he wouldn’t quit entirely, saying he plans to “run the software and server teams” after finding a new “idiot” to be CEO.
The poll results late Sunday were enough to lift Tesla shares in early trading Monday, but shares ended the day slightly lower, losing significantly more ground each day since. Tesla shares fell 9% on Thursday, ending the week down 18% after another drop of 2% on Friday.
Then there is the question of how much damage the Twitter debacle has done to the Tesla brand. Musk has fired thousands of employees, and banned journalists while he allows it Donald Trump And other previously banned online accounts The trial of Dr. Anthony Fauciembraced Conspiracy theories He made anti-trans statements in his short tenure as CEO.
It may have endeared it to some but angered other potential buyers, including liberals who might be willing to pay a premium for a greener car.
“I think it was measurable damage,” said Munster, who believes that advertising during his Twitter stint cost Tesla 5% of its sales.
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