Elon Musk is making an attempt to clarify why Tesla inventory is plummeting

Shares in an electric vehicle manufacturer Tesla dipped to a fresh 52-week low on Tuesday, closing around $138 a share, or 8% down for the day, on an otherwise mixed day for stocks.

CEO Elon Musk tried to blame some of the falling stock on macroeconomic factors.

related investment news

Oppenheimer downgrades Tesla, says Elon Musk's dealings with Twitter could harm the electric vehicle makerCNBC Pro

Longtime Tesla bull Ross Gerber wrote in a tweet: “Tesla stock price now reflects the value of not having a CEO. Great job Tesla BOD – time for a refresher. $tsla.” Gerber has launched an informal campaign to persuade fellow shareholders to nominate him to Tesla’s board of directors.

Musk responded in a tweet, “As guaranteed bank rates on savings accounts begin to converge towards stock market returns, which are not guaranteed, people will increasingly shift their money from stocks to cash, causing stocks to fall.”

Elon Musk speaks during a press conference at SpaceX’s starbase near the village of Boca Chica in South Texas on February 10, 2022.

Jim Watson | AFP | Getty Images

But Tesla’s stock has fallen more than other major automakers since Musk announced his plans to buy Twitter in April 2022. Since that date, shares of Tesla are down 59% versus 26% for ford and 12% for GM. The S&P 500 is down 14%.

The Tesla boss has plenty of distractions, Gerber notes: Musk has stirred controversy as the new owner and CEO of Twitter, the social media giant he acquired in a leveraged buyout in late October, and is also CEO of a major defense company SpaceX.

Musk sold billions of dollars of his Tesla holdings to fund the Twitter deal, including a $3.6 billion sale earlier this month.

He told Twitter staff he sold Tesla stock to “save” their business while cutting more than half the company’s workforce and implementing a series of policy changes, some of which he later reversed.

While Musk has focused on his new role as “Chief Twit” since late October, Tesla has been offering discounts and incentives for selling cars in China, where it operates a large factory in Shanghai; struggling to make its new factories in Austin, Texas and Brandenburg, Germany efficient; and given ongoing supply chain challenges typical of the automotive industry, as well as rising energy prices in Europe, which could reduce the attractiveness of a battery electric vehicle for many drivers.

These, among other challenges, prompted Mizuho Securities and Evercore ISI to reduce their Tesla price targets on Tuesday.

Analysts at Mizuho Securities wrote in a note that “we see potential weakness in Tesla sales near-term as macro headwinds and a weaker consumer could lower demand for higher-priced EVs.” The company is still optimistic about Tesla long-term, citing the company’s new factories as a competitive advantage and new U.S. EV tax credits that could “accelerate” domestic demand. In China, some EV credits will expire in early 2023. The company has a price target of $285 and a Buy rating on Tesla stock.

A Vanderbilt University assistant professor, Joshua White, who used to be an economist for the US Securities and Exchange Commission, told CNBC: Only part of Tesla’s depreciation can be attributed to interest rates. Twitter Overhang is an important component. China is another big component. We still don’t know if China will be fully open and we are seeing supply and demand pressures here given the increase in Covid cases and disruptions.”

He also said Elon Musk may have lost shareholder confidence when he said in April that he did not plan to sell any more of his Tesla stock but was going ahead and selling billions of dollars more.

“He seems to be selling stocks in really big chunks and saying, ‘I’m done and I’m not selling anymore.’ But talking is cheap. He says that and then sells more shares. So the more times you say that and investors think he’s probably not done yet? the less confident they will be that the price will rise again.”

Comments are closed.