Tesla Stock Falls as Investors Fear Twitter Dramas and China Sales

 

On Tuesday, Tesla stock dropped 8.12 percent after analysts at Wall Street brokerages lowered their price targets for the electric car manufacturer. Analysts are worried that Elon Musk, the company's CEO, is preoccupied with his hostile takeover and micromanagement of Twitter, which could hurt sales, and that the Chinese government will allow COVID-19 to spread now that it has softened its stance on harsh restrictions.

 

At the time this article was written, Tesla's share price had dropped to $138, a level not seen in over two years. Analysts claim that investors are worried that Musk will sell more Tesla shares to fund Twitter and that his antics on the social media platform are damaging to the EV manufacturer's reputation. Musk dumped another $3.5 billion worth of shares last week, making this one of many stock sales the CEO has made this year.

 

As a result of the recent stock price drop, some shareholders are demanding that Tesla's board of directors remove Musk from his position as CEO. The absence of Tesla's CEO has been priced into the stock price. Ross Gerber, portfolio manager at Gerber Kawasaki, tweeted, "Great job tesla BOD - Time for a shake-up."

 

Although Teslas are still generally regarded as good automobiles by all metrics of battery range, performance, technology, and safety, it is not yet clear if consumer sentiment about Musk's Twitter involvement has affected Tesla EV sales. The results for the final quarter of 2022 won't be available until January.

 

Gordon Johnson, CEO/founder of GLJ Research and Tesla bear, says the concerns about sales in China are justified. Johnson mentioned China as Tesla's biggest and most lucrative market during a Twitter Spaces event on Tuesday. However, the China Passenger Car Association (CPCA) tracks monthly sales, and quarterly sales data is not readily available. According to the CPCA, Tesla sold a total of 188,317 electric vehicles in China during the third quarter, with 28,217 delivered from Tesla's Shanghai plant in July (a low number due to factory line upgrades), 76,965 in August, and 83,135 in September. That's just over half the total number of units sold in the third quarter (343,830) around the world.

 

As a result of the country's larger population and more rapid adoption of EVs compared to the United States and Europe, China now accounts for a disproportionate share of Tesla's global sales. With the Chinese government having reversed its previously severe restrictions in response to the COVID-19 threat, investors are worried about a drop in sales in the coming months. If that occurs, Tesla will have to place a greater emphasis on the Western market, where the Twitter conundrum may present difficulties.

 

"Is all this Twitter drama, by which I mean all the controversy, having an effect on the Tesla EV brand?" In a Tuesday Twitter Spaces chat, Future Fund managing partner Gary Black made the following statement. Black, who has an estimated $50 million invested in Tesla stock, said in August that the company was the fund's largest holding.

 

Does this make potential Tesla customers hesitant to place orders, cancel their orders, or simply lose interest in the brand as a whole? That's a question I'm getting from institutional investors, and I don't see it happening.

 

Black said, "if [Musk] doesn't stop," he thinks Musk's personality, and in particular his political rhetoric that rants about the "woke mind virus," will have an impact on the brand. Later, he advised the board to "pull Elon aside and say, look, you may have these political views, but you're not helping the Tesla brand by articulating them."

 

What "he gets out of insulting his client base on the left," Black asked. Musk recently conducted a Twitter poll asking whether or not he should resign as CEO of Twitter and said he would respect the results. His departure was supported by voters, prompting Musk to speculate that the poll was rigged by automated software. Musk has not confirmed rumors that he is actively searching for a new CEO. Some investors are selling Tesla stock, according to Black, because they are skeptical that Musk will deliver on his promises.

 

Black, in line with many other investors, has urged Musk and Tesla to repurchase some shares, arguing that there is no better way to show that the stock is undervalued. According to Johnson, the stock is overvalued because of the innovations Musk has promised but has not yet delivered. The stock is currently valued higher than General Motors, Ford, and Stellantis put together.

 

Because Musk promised camera-equipped cars, I think Tesla's stock price skyrocketed. According to Johnson, "he has not done that." To paraphrase, "He claimed he would have [battery] technology that would supply a $25,000 vehicle. He has not taken that action. As far as he could tell, he was a pioneer in the field of silicon. Contrary to popular belief, he is not. He boasted about being first in the field of bipedal robots. Not him. Not Tesla's performance, but these assurances and QE are what I attribute to the stock's rise. Johnson suggested that investors may be realizing that Tesla is just another automaker at the end of the day and that its stock price should reflect that, given the recent decline in the stock price.

 

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