Tesla shares fell to a new 52-week low on Tuesday, closing around $138 per share, or 8% lower for the day, in an otherwise mixed day for stocks.
CEO Elon Musk attempted to blame the falling price on macroeconomic factors.
“Tesla stock price now reflects the value of having no CEO,” said long-time Tesla supporter Ross Gerber in a tweet. Excellent work, Tesla. BOD – It’s time for a change. $tsla.” Gerber has started an informal campaign to get fellow shareholders to vote him onto Tesla’s board of directors.
“As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop,” Musk replied, in a tweet.
However, Tesla’s stock has fallen more than that of other major automakers since Musk announced his plans to buy Twitter in April 2022. Tesla shares have fallen 59% since that date, compared to 26% for Ford and 12% for GM. The S&P 500 has fallen 14%.
As Gerber points out, the Tesla CEO is surrounded by distractions: Musk has sparked controversy as the new owner and CEO of Twitter, the social media giant he purchased in a leveraged buyout in late October, as well as the CEO of SpaceX, a major defense contractor.
Musk sold billions of dollars in Tesla stock to fund the Twitter acquisition, including a $3.6 billion sale earlier this month.
He told Twitter employees that he sold Tesla shares to “save” their company, then proceeded to lay off more than half of the company’s employees and implement a slew of product and policy changes, some of which he later reversed.
While Musk has been focused on his new role as “Chief Twit” since late October, Tesla has been offering discounts and incentives to sell cars in China, where it operates a major factory in Shanghai; fighting to make its new factories in Austin, Texas, and Brandenburg, Germany, efficient; and dealing with persistent supply chain challenges common in the auto industry, as well as soaring energy prices in Europe, which may reduce the appeal of a battery electric vehicle for many.
These and other factors prompted Mizuho Securities and Evercore ISI to lower their Tesla price targets on Tuesday.
According to Mizuho Securities analysts, “near-term, we see potential weakness in Tesla sales as macro headwinds and a weaker consumer may drive lower demand for higher-priced EVs.” The firm remains bullish on Tesla in the long term, citing the company’s new factories as a competitive advantage, as well as new electric vehicle tax credits on the horizon in the United States, which could “accelerate demand” domestically. Some EV credits in China will expire at the beginning of 2023. Tesla stock has a $285 price target and a buy rating from the firm.
According to Joshua White, an assistant professor at Vanderbilt University who previously worked as an economist for the US Securities and Exchange Commission, ′′only a portion of the drop in Tesla’s value can be attributed to interest rates. One important factor is Twitter overhang. China is another significant contributor. We still don’t know if China will be completely open, and we see supply and demand pressures here as a result of the increased number of covid cases and disruptions.”
He also stated that Elon Musk may have lost shareholders’ trust when he stated in April that he had no plans to sell more Tesla shares, but then proceeded to sell billions of dollars’ worth.
“He seems to sell equity in really large blocks, say ‘I’m done and I’m not selling anymore.’ But talk is cheap. He says that and then sells more shares. So the more you say that and investors think he’s probably not done? The less confident they will be that the price is going to bounce back.”
(Adapted from CNBC.com)