Tesla shares fell 8.12% on Tuesday after Wall Street lowered price targets for the electric vehicle maker’s stock. Analysts fear CEO Elon Musk will be distracted by his hostile takeover and micromanagement of Twitter, and that sales in China will be impacted by the Chinese government allowing COVID-19 to spread after ending its stance on hard restrictions.
Shares of Tesla hit a more than two-year low of $138 at the time of publishing this article.
Analysts say investors are concerned that Musk will sell more shares of Tesla to fund Twitter, and that his antics on the social media platform will hurt the EV maker’s brand. Last week, Musk sold about $3.5 billion worth of stock, one of several stock dumps the CEO has made this year.
Some investors are calling on Tesla’s board of directors to replace Musk as CEO, to step in and protect shareholders from the stock drop.
“Tesla’s stock price now reflects the value of not having a CEO. Well done tesla BOD – Time for a shake-up,” tweeted Ross Gerber, a portfolio manager at Gerber Kawasaki.
It’s not yet clear whether Tesla EV sales have been impacted by consumer sentiment about Musk’s Twitter engagement — after all, Teslas are still widely regarded as good cars by all measures of battery range, performance, technology and safety. We will have to wait until January to see Q4 2022 numbers.
However, concerns about sales in China are justified, said Gordon Johnson, CEO and founder of GLJ Research and Tesla Bear. Speaking 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 monthly sales. The CPCA reported that Tesla shipped 28,217 EVs from its Shanghai factory in July (a low number due to factory line upgrades); 76,965 in August; and 83,135 in September, totaling 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.
The electric car adoption rate in China is higher than in the US and Europe, so naturally it makes up a larger portion of Tesla’s global sales. Investors fear a drop in those sales in the coming months as COVID-19 threatens to wreak havoc on the country after the Chinese government completely reversed 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, meaning all the controversy?” said Gary Black, a managing partner of the Future Fund during a Twitter Spaces session Tuesday. Black, who owns about $50 million in Tesla stock, said in August that Tesla is the fund’s largest holding.
“Is it causing people to cancel their orders or not order Teslas, or is the brand just going to fall out of favor with people buying EVs? I don’t see it, but that’s one of the concerns institutional investors are asking me.”
Black said he believes ultimately Musk’s personality, particularly his political rhetoric ranting about the “woke mind virus,” will have an impact on the brand “if [Musk] don’t stop.” He went on to say that he would advise the board to “put Elon aside and say, look, you may have these political views, but you’re not helping the Tesla brand by articulating them.”
“I don’t know what he gets out of offending his customer base on the left,” said Black.
Musk recently posted a Twitter poll asking if he should step down as CEO of the social media platform, saying he would abide by the poll’s results. Voters voted for him to leave, prompting Musk to say he believes bots manipulated the poll. 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 live up to his word is one reason investors are selling Tesla stock.
Like many other investors, Black also called on Musk and Tesla to buy back some of the stock, saying there’s no better way to demonstrate that he believes the stock is too cheap.
Johnson said the stock, which is priced higher than General Motors, Ford and Stellantis combined, is overvalued, largely due to advances Musk has promised but has not yet delivered.
“I believe the reason Tesla went so high is because Musk said he would have cars that could drive with optical cameras. He didn’t,” Johnson said. “He said he was one [battery technology] that would make a $25,000 car. He didn’t. He said he was a silicon innovator. He’s not. He said he was the world leader in bipedal robotics. He’s not. I believe these promises combined with quantitative easing drove the stock up, not Tesla’s execution.”
With the stock price plummeting, Johnson suggested it’s possible that investors may not only be shocked by the current situation with Twitter and in China, but they’ll eventually realize that Tesla is a carmaker like any other, and its stock should reflect that. .