Wall Street lowered their price estimates for the electric car manufacturer Tesla on Tuesday, sending the stock down 8.12%. Analysts worry that COVID-19 sales in China may suffer after the Chinese government reversed its position on severe limits, and CEO Elon Musk is preoccupied with his aggressive purchase and micromanagement of Twitter. At the time of writing, Tesla's stock had fallen to $138, its lowest price in almost two years.
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The Reasons For The Decline
Analysts claim investors are worried that Musk would sell additional Tesla shares to finance Twitter and that his antics on Twitter are damaging the EV manufacturer's reputation. Musk dumped another $3.5 billion worth of shares last week, making this one of numerous stock sales the CEO made so far in 2018.
To prevent further damage to the company's stock price, some shareholders demand that Tesla's board of directors remove Musk as CEO.
Having no CEO has been reflected in Tesla's stock price. "Great job, tesla BOD - Time for a change-up," tweeted Ross Gerber, financial planner at Gerber Kawasaki.
Although Teslas are still generally regarded as excellent autos by all parameters of battery range, performance, technology, and safety, it has yet to be known whether public attitude over Musk's Twitter activity has hurt Tesla EV sales. The results for the last quarter of 2022 will be available in January.
Tesla’s Relation With China
However, Gordon Johnson, CEO/founder of GLJ Research and a Tesla bear, thinks that concerns regarding sales in China are justified. At a Twitter Spaces event on Tuesday, Johnson said that China is Tesla's biggest and most profitable market.
Quarterly sales figures for Tesla vehicles are not readily available; however, the China Passenger Car Association (CPCA) tracks monthly sales. According to the CPCA, Tesla sold 188,317 electric cars in China during the third quarter, with 28,217 delivered from the company's Shanghai plant in July (a low amount owing to assembly line modifications), 76,965 in August, and 83,135 in September. About half of all units sold in the globe during the third quarter were in the United States, totaling 343,830.
Because of the greater EV adoption in China compared to the United States and Europe, the Chinese market accounts for a bigger percentage of Tesla's worldwide sales. Following the Chinese government's total reversal of its earlier stringent regulations, investors expect a reduction in sales in the coming months as COVID-19 threatens to destroy the nation. If this occurs, Tesla will have to emphasize the Western market more, where the Twitter conundrum may provide difficulties.
Musk’s Response
In a recent Twitter poll, Musk asked users whether he should resign from his position as CEO of Twitter, and he promised to respect the results. In response to the overwhelming majority of votes supporting his leaving, Musk said he thinks the poll was manipulated by automated software. Despite rumors to the contrary, Musk has not confirmed that he is searching for a new CEO.
Black claims that investors are dumping Tesla shares because they are skeptical that Musk will deliver as promised.
In line with many other investors, Black has urged Musk and Tesla to repurchase some of their shares, arguing that there is no better way to show that the price is too low.
According to Johnson, the stock is expensive because of the innovations Musk has promised but has yet to deliver. The company is now valued greater than General Motors, Ford, and Stellantis combined.
Johnson said that investors might understand that Tesla is simply another carmaker at the end of the day and that its stock price should reflect that, given the recent decline in the stock price.
Featured image: Tesla
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