Seems like it would be hard enough being CEO of one company… but five?
Dave Gilbert here, Editor of Smart Money, and that’s the life of Elon Musk right now.
He is Chief Executive Officer of Tesla Inc. (TSLA), SpaceX, Neuralink, the Boring Company, and as of Oct. 27, Twitter Inc.
Only one of those is publicly traded now that Twitter is private, and it’s one of the most widely followed and influential stocks in the market.
Anyone who follows investing even a little bit knows that Tesla has some of the most passionate bulls and bears out there. A lot of money has been made and lost in the stock… most of it in the last three years.
Musk is considered one of the brilliant innovators of our time, but he is not without controversy or unpredictability.
He has been in the news a lot recently with his very public takeover of Twitter, which was on and then off a few times amid sometimes contentious negotiations. Now he is equally public with his thoughts on how Twitter should be managed – coming through tweets, of course.
As all this has played out since Musk took over Twitter two weeks ago, Tesla shares have taken a beating. His out-in-the-open and in-your-face style with Twitter seem to be impacting his electric vehicle business – at least at the moment.
Investors in Tesla must think about not just the company itself, its products, and its leading position in electric vehicles, but also a bold, unpredictable and sometimes controversial CEO with as public a platform as you can get.
The question is whether this changes Tesla’s potential as an investment …
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Did He Really Say That?
Tesla shares have fallen more than 15% since Musk stepped into Twitter’s corner office two weeks ago. And it’s not due to the market. The Nasdaq Composite is up slightly in that same time.
It seems that we are in another period of Elon Musk’s public comments weighing on TSLA, something investors have seen before.
In 2020, Musk tweeted that Tesla’s “stock price is too high imo” – in his opinion. And down it went.
One year ago at this time, Musk tweeted a poll asking his followers whether he should sell 10% of his Tesla stock.
Four years ago, Musk tweeted that he was “considering taking Tesla private at $420” per share. That number is significant because 420 is a reference to marijuana in cannabis culture. He played out the joke (assuming it was) for some time, which didn’t sit well with regulators. Musk was fined $20 million and forced to give up his role as Tesla’s chairman for three years.
In a team meeting earlier this week, Eric Fry told us that he’s fully aware of Musk’s unpredictability and potential for controversy, but that he does not necessarily think Musk is “a bad guy.” He would prefer to see him operate more as chief innovator and vision setter than the one responsible for how the company executes.
Analyzing TSLA Goes Beyond Musk
Eric’s view of Elon Musk doesn’t really impact his view on Tesla at the moment. He actually recommended shorting it more than four months ago, paired alongside another automaker that Eric is bullish on.
His reasoning has more to do with the company itself than the man company who heads it. Here’s what Eric wrote for his readers back on June 30 when he said this market darling could soon be dethroned…
Tesla Inc. (TSLA) is a technological marvel, sociological icon, and stock market darling… all wrapped into one. That’s why it sells for a stratospheric 95 times earnings, even after the stock market washout of the last few months…
For years, the company has been in a league of its own, which has inspired investors to pay almost any price to be part of the team.
But Tesla is no longer as thoroughly unique as it once was.
Although it remains the world’s leading EV brand, it faces intensifying global competition.
For example, Volkswagen AG (VWAGY) [Editor’s Note: This is not the other stock recommended in the trade.] already produces about 80% as many EVs as Tesla, and it will likely become the world’s leading EV manufacturer within the next two years.
Every other major automobile company in the world is also ramping up EV production and introducing dozens of competing models. In other words, Tesla is entering a new chapter in its corporate history, and I suspect this new chapter will be much less enriching to its shareholders than the previous one.
Tesla is about to become just a “car company” among many other car companies, which may not be sexy enough to maintain the stock’s premium valuation.
Because of the intensifying competition, Tesla will lose some of its cachet and novelty, which is probably why cofounder Elon Musk has diverted his attention to new hobbies, like launching hostile takeovers for social media companies and offering unsolicited political commentary.
To be clear, Eric agrees that the massive shift to electric power is a megatrend with lots of money to be made (and he’s given his specific recommendations). That’s why every automaker – old and new, big and small – is investing heavily to improve electric vehicles and to “electrify” their fleets. That makes it harder for Tesla to stay so far ahead of everyone else.
Could Tesla still be the king of EVs in 20 years? Sure. It seems that anything is possible with Elon Musk, and that can work both ways.
P.S. Even though Eric is bullish on the electric vehicle rollout, he isn’t targeting automakers themselves. Instead, he’s looking at the nuts and bolts of their production… pun (partially) intended. All EVs need batteries to operate, and Eric has a few choice picks for suppliers of those battery metals… Learn more about how you can access those picks here.
On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.