Tesla’s (NASDAQ:TSLA) stock rose overnight on investor hope that CEO Elon Musk will stop being distracted by Twitter, which he bought in October.
Musk posted a poll on Twitter asking whether he should leave his CEO post there, and 57% said “yes.”
Since Musk bought Twitter Tesla stock is down 33%. It opened Dec. 19 at about $154, a market capitalization of $484 billion or roughly 6.5 times its annual sales. The price-to-earnings multiple is about 49.
TSLA Stock and the Bird Site Threat
Investors aren’t just concerned about the distraction. They’re also concerned that Musk’s tweets, statements, and policies may be hurting the Tesla brand.
After claiming the be a free speech advocate Musk has banned critics and even links to competing sites. This includes Mastodon, which isn’t a site at all but an open-source protocol run by a federation of sites. As a reminder, the World Wide Web is also an open-source protocol.
Tesla looks overvalued, especially in relation to other car stocks. Its investment case was always based on it being a tech company rather than just a car manufacturer, selling electricity, renting software, and maintaining customer control over its ecosystem like Apple (NASDAQ:AAPL). But 87% of its revenue in the third quarter was automotive, and 97% of its profit came from its auto margins. Promises of big profits from batteries, solar panels and software have yet to be realized.
Meanwhile, automakers worldwide are starting to turn out competitive electric cars. The danger is greatest from China, where BYD (OTCMKTS:BYDDF) leads the market with EVs affordable to mid-market consumers. But China’s best-selling Hongguan Mini comes from a joint venture with General Motors (NYSE:GM).
Analysts on Tipranks are even starting to back away, with two of 29 now saying sell and nine more in the weak “hold” category.
What Happens Now?
Some cut in Tesla’s market premium was to be expected. Some cut in the price was also to be expected, given the 2022 bear market. But investors are now buying 2023. They want to see higher profits and focused management. If they don’t get it, the selling will continue.
On the date of publication, Dana Blankenhorn held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
