Analyst: Musk needs brand-name CEO to right ship
Millions of Twitter users asked Elon Musk to step down as head of Twitter in a poll on the platform that the billionaire had created and promised to abide by. (Dec. 19)
Once the darling stock of many investors’ portfolios, Tesla is now a source of anguish.
At the end of 2021, Tesla was a $1.1 trillion company. But as of Dec. 28, it was worth $353 billion, a 68% decline. The stock is down over 70% year-to-date and it’s on track for its worst month, quarter and year ever.
It’s hard to believe that shares of the same company skyrocketed by more than 1,100% from the beginning of 2020 to the end of 2021.
How did Tesla go from a lucrative safe bet to a seemingly loss-churning machine? And is the stock capable of turning a corner in 2023?
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Elon Musk’s Twitter ‘side-hustle’
As if being the CEO of Tesla and SpaceX wasn’t enough to keep Elon Musk busy, the billionaire bought Twitter for $44 billion and became its CEO in late October. Over the course of 2022, Musk sold $23 billion worth of Tesla stock to help fund the purchase of the social media company.
“It’s put a massive albatross over Tesla,” said Wedbush analyst Dan Ives. He estimates that 70% of Tesla’s selloff is “Musk-Twitter driven.”
If Musk didn’t buy Twitter Ives said Tesla shares would be hovering around $200. Shares closed at nearly $113 on Wednesday.
Musk regularly posts divisive tweets like the following:
“There are brand issues related to that,” Ives said. “The last thing you want to do is alienate 50% of the population when you’re selling to the masses,” he added, referring to Musk’s staunch alignment with Republican ideology.
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Tech stocks got slammed in 2022
Tesla’s selloff this year didn’t occur in a bubble. Tech stocks were one of the hardest-hit sectors in 2022 due to the macroeconomic headwinds ushered in by the Federal Reserve’s massive rate hikes aimed at taming inflation.
The tech-heavy Nasdaq Composite is on track for a 35% loss for the year compared to the more diversely allocated S&P 500 that’s on track for a 20% loss. (Tesla is included in both indices.)
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But the tech selloff is all the more reason why shareholders “need a steady pilot to get Tesla through this storm and not a Ted Striker,” said Ives, referencing a character in the film “Airplane!” who is a former pilot that develops a fear of flying.
Tesla suspends production at Shanghai plant
To make matters worse for Tesla shareholders, the company recently suspended vehicle production at its Shanghai plant. The suspension came as COVID-19 cases surged after the Chinese government reversed its restrictive zero-infection policies, Reuters reported.
Additionally, Reuters reported that the plant will halt production from Jan. 20-31, an extended break from the Chinese New Year which is not common practice for the car maker.
The Shanghai plant accounts for the majority of Tesla’s production. The suspensions likely won’t result in a shortage of Teslas since inventory is likely piling up, causing the company to discount vehicles, according to Ives.
Will Tesla stock recover?
Analysts are optimistic that Tesla will stage a recovery in 2023.
It’s a good sign that Musk is searching for someone to replace him as CEO of Twitter, Garrett Nelson, senior equity analyst at CFRA Research, said in a recent note.
CFRA views Tesla as a “strong buy” and has a 12-month price target of $225 a share. Ives said he’s “bullish on Tesla.” However, he has one of the most conservative price targets of $175 a share among bullish Tesla analysts surveyed by FactSet.
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here