Tesla stock (NYSE: TSLA) stock fell to a two-year low on Friday amid the Twitter chaos. Here’s what Elon Musk’s Twitter acquisition means for TSLA stock.
Musk completed the Twitter acquisition last month. Tesla stock, which was anyways under pressure this year amid the rout in tech stocks extended its decline following Musk’s Twitter acquisition.
Several Wall Street analysts, including some of the long-time Tesla bulls, are also getting apprehensive about the stock after Musk’s Twitter acquisition. Dan Ives of Wedbush Securities, who is among the perma Tesla bull camp, removed TSLA stock from his “Best Ideas List” and lowered the target price from $300 to $250.
“They [shareholders] remain the ones that have been punched again and again by the Musk Twitter antics and the stock now is deep in the investor penalty box until deliveries hit in early January and we get a better sense of the 2023 delivery/production trajectory,” said Ives in his report.
Ives said that Musk “tarnished” the Tesla story which coupled with his frequent selling of TSLA stock is an “albatross” for stockholders. He said, “More worrying is that this Twitter ‘Money Pit’ situation will never end and continue to take up money, time, and attention from Musk instead that could be focused on Tesla.”
He also believes that the Tesla brand is also getting damaged as Musk gets involved with Twitter.
Wall Street Analysts Get Wary of Tesla but See the dip as Buying Opportunity
Morgan Stanley, which is among the most notable Tesla stock bull also believes that Musk’s ownership of Twitter could affect how some consumers perceive Tesla. However, the brokerage advised buying the dip in TSLA stock and is “constructive” on long-term EV adoption. We have a guide on how to buy Tesla stock.
Notably, beginning next year, Tesla cars would be eligible for the federal EV tax credit in the US. Also, later this year, it would start delivering the Semi while Cybertruck deliveries are expected next year. Musk has also predicted an “epic” fourth quarter. For the long term, TSLA expects its deliveries to rise at a CAGR of 50%.
During the third quarter earnings call, Musk said that Tesla’s market cap would surpass the combined market cap of Apple and Saudi Aramco, the world’s largest and second-largest company respectively.
Legacy Automakers Are Ramping Up Their EV Production
Musk has previously said that TSLA could sell as many as 20 million EVs by 2030. That goal might look lofty though as legacy automakers ramp up their EV production. General Motors, for instance, predicted that its sales would rise 12% annually until 2025 led by higher EV sales. In 2025, it expects EV sales of $50 billion and total revenues of $225 billion. The company has said that it would sell only zero-emission cars by 2035.
Ford has set ambitious plans for its EV business. It expects its annual EV production run rate to reach 600,000 by the end of 2023 and 2 million by 2026. Morgan Stanley finds Ford stock as a buy amid its EV pivot.
What does Musk’s ownership of Twitter Means for Tesla Stock?
Markets are wary of Musk’s Twitter ownership for multiple reasons. Firstly, it is set to consume a lot of Musk’s bandwidth at a time when most of his energies should be focused on Tesla.
Second, Twitter has been a PR disaster of sorts so far for Musk and by his extension for TSLA. Musk has fired half of Twitter employees and many contractors. Twitter chaos is having an impact on Tesla stock also. Notably, Tesla is the most valued automaker. Apart from the growth prospects, the valuation premium also comes due to Musk’s association with the company.
Now, with brand Musk getting somewhat damaged due to the troubles at Twitter, Tesla stock is also feeling the heat.
Elon Musk’s Personal Brand Has Been Getting Damaged
Also, Musk, who had anyways shifted his political allegiance to Republicans by declaring that he would vote a Republican in the 2024 presidential elections, has irked many by restoring former President Donald Trump’s Twitter account.
Trump meanwhile is not keen on joining Twitter. He has launched his own social media business which has announced a merger with Digital World Acquisition (NYSE: DWAC). We have a guide on how investors can buy DWAC stock.
While it’s not uncommon for business leaders to be vocal with their political affiliations, Musk has been drifting towards conservatives which might alienate some consumers on the other side of the political divide.
The issue gets even more problematic if we consider that many conservatives, including Trump, see climate change as a hoax. Musk had even pulled out of Trump’s Economic Advisory Council after the former President withdrew the US from the Paris Climate Deal. A lot of potential Tesla buyers are liberals who might now have second thoughts about buying a Tesla car given Musk’s political affiliations.
There are Concerns Over the Demand for Tesla Cars
Meanwhile, there are also concerns over the demand for Tesla cars. The company is offering several incentives including on car insurance to buyers in China.
Notably, last month, Tesla announced a price cut in China and lowered prices by as much as 9%. The company has reduced the starting prices for Model Y SUV from 316,900 yuan to 288,900 yuan. It cut prices for Model 3 sedan from 279,900 yuan to 265,900 yuan.
Tesla faces competition from Chinese EV companies like NIO and Xpeng Motors. BYD Motors has been another tough competitor and it has overtaken Tesla to become the largest seller of NEVs (new energy vehicles) in China as well as globally.
All said, at a time when Musk should have been razor focused on Tesla including elusive projects like robotaxis, he is entangled with fixing the troubles at Twitter. Tesla stock is trading lower in US premarkets today also as investors get increasingly wary of the Twitter drama.
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