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Could Wall Street’s love bond with Elon Musk be over? Tesla CEO Elon Musk’s recent investment in Twitter has not been well-received.
While Tesla CEO Elon Musk’s recent investment in Twitter may not have been well-received, the company was valued at $1.1 trillion six months ago and announced plans for a proposed stock split.
Since Tesla’s shares have declined, investors are concerned that CEO Elon Musk is not focused on the company. However, this is not the only problem Tesla is facing.
Even though Tesla fell short of expectations in the third quarter, they are still working hard to improve production. Supply chain delays and shutdowns in China have been a struggle for them, but they continue to do what they can to resolve these issues.
Musk’s investment in Twitter was disclosed on Friday, and shares dropped 27%. Another 8% was lost in midday trading Monday following the sales report.
Some critics have argued that Tesla’s stock price increase from fall 2018 to early April 2019 was unjustified. They say that current problems are signs of future issues the company will face.
“Things tend to perform awry when production slows, prices drop, and the market is pricing in a very high forward price-to-earnings multiple,” said Gordon Johnson, an analyst who is bearish on Tesla’s stock.
Many Tesla fans believe that the company is still doing well and that electric vehicles are in high demand.
“Overall, this quarter wasn’t that successful, and investors will be disappointed by the weaker delivery numbers in the third quarter,” said Daniel Ives, a tech analyst with Wedbush Securities. “However, we believe this is more of a logistical issue than the beginning of a trend.”
Tesla is committed to delivering the finest products possible, and Musk’s tweets showcase its dedication to improving sales and profitability. Ives said that though the timing for Tesla’s AI day wasn’t ideal, the company is still working hard to succeed.
“I get that this is a visionary move, but I don’t think it’s what people are looking for right now,” said Ives. “People want something that shows he’s focused on the immediate future. Doing an AI Day on Friday and then having a delivery miss on Sunday doesn’t look good to Wall Street.”
The stock’s value has suffered from Musk’s comments before, too
CEO Elon Musk has described Tesla’s recent openings of plants in Texas and Germany as “gigantic money furnaces.” The newly opened locations are having difficulty with production, costing the company billions. In one interview, Musk even mentioned the risk of bankruptcy for Tesla.
Additionally, Musk announced plans to reduce salaried staff in June, citing a “super bad feeling” about economic conditions.
Tesla delivered 343,000 cars in the third quarter, missing expectations.
“Musk has put fuel into a fire,” Ives said, referring to the Twitter fiasco. This event has added to a difficult six months for Tesla’s stock value.
It’s not unique to Tesla shares.
Similar declines have been seen in other high-flying tech stocks. Central banks worldwide sent interest rates soaring, prompting fears of a global recession.
Apple shares dropped 21%, 31%, and 39% in Alphabet (GOOG) and Meta (FB) shares over the past two quarters. (AMZN) shares fell 31%.
Tesla must improve its execution to assure investors its stock value is not all smoke and mirrors.
Ives said that to keep your investor’s faith, you must execute. “They haven’t lived up to that standard the last two quarters.”