Elon Musk May Soon End Up As Wall Street's Clown As Tesla Fumbles
Six months ago, Tesla shares were flying high. The company was valued at $1.1 trillion — more than a dozen other top automakers combined — and announcing plans for a proposed stock split.
Photo Insert: Tesla was down another 8% in midday trading Monday following the sales report.
Then Musk disclosed he had become the largest investor in Twitter, followed shortly by an announcement of his plans to buy control of the social media company. Things haven’t been the same for Tesla shares since, Chris Isidore reported for CNN Business.
And although Musk’s efforts to buy — then avoid buying — Twitter, have raised investor concerns about a loss of focus by the EV-maker’s all-important CEO, it’s not the only problem for Tesla.
The company has faced performance issues with supply chain delays and shutdowns in China causing production bottlenecks, leading to a disappointing third-quarter sales report Sunday that fell well short of Wall Street expectations.
On Friday, shares were down 27% from April 1, the day before Musk’s investment in Twitter was disclosed. And they were down another 8% in midday trading Monday following the sales report.
Critics of Tesla have long argued the stock’s incredible runup — shares rose nearly 1,900% from when the company finally achieved profitability in the fall of 2018 to its peak price in early April — was never justified. And they say the current problems are a sign of future setbacks to come with the stock.
“In general, very bad things happen when production slows, prices drop and the market is crediting you with a forward price to earnings multiple of 45.3 times earnings estimates,” said analyst Gordon Johnson, one of the biggest Tesla bears on Wall Street.
But Tesla fans on Wall Street predict that the company is still well positioned as demand grows for electric vehicles. “In a nutshell, this quarter was nothing to write home about and the Street will be disappointed by the softer delivery number in the third quarter” said Daniel Ives, tech analyst with Wedbush Securities.
“That said, we view this more of a logistical speed bump rather than the start of a softer delivery trajectory.”