Oh, Elon.
The Internet’s favourite topic – anything to do with Elon Musk – continues to dominate column space. The enigmatic billionaire’s Twitter antics are the current subject of choice, and given some of the lunacy going on behind the scenes (or, more realistically, in plain sight), I suppose that is not surprising.
But I want to have a look at another one of Musk’s many ventures, Tesla. The car company took the market by the scruff of the neck over the last few years, battling its much-publicised short-selling doubters to print meteoric gains.
The halcyon days are over, however, its stock having tumbled from those dizzying heights.
Zooming in on 2022 shows quite how much of a plunge the stock has been on.
Macro environment is dire
First things first. The market is a bloodbath across the board. Few stocks have been spared, and in that sense, it is nothing to do with Tesla specifically. We have transitioned into a new interest rate paradigm following one of the longest and most explosive bull runs in history – which just so happened to coincidence with Tesla going public 2010.
Tech has been hammered especially hard as profits get discounted back at higher rates and investors realise that things got just a little bit overexuberant during the stimmy-season bonanza.
I have plotted Tesla’s stock against the market to show this. It is trading like a highly-leveraged bet on the S&P 500, which is not that surprising. Nonetheless, it does seem to plunge even further south than would be expected in this final quarter. So, did something happen in October?
Elon Musk is focused elsewhere
That would be Musk’s latest hobby – incensing the world over every little decision about Twitter. Casually taking over another company for $44 billion and instilling himself as CEO is not exactly how Tesla investors want to see their number one man spend his time.
The stock was trading at $230 on October 27th , when Musk appointed himself as “Chief Twit” – or as we normies like to say, CEO. It is now trading at $146, a plunge of 37%.
The immense – and highly public – responsibility that is the role of Twitter CEO may be coming to a close, however. Musk had previously intimated to investors that he would reduce his time at the company, and last week launched a poll asking whether he would step down. 57% voted yes.
He followed it up with “I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software 7 serves teams”
Musk contends macro is the only reason
Musk contends that it is merely the macroeconomic climate that is causing Tesla to sink.
As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop
Elon Musk
But it seems increasingly evident that Tesla is fighting more than macro. Ross Gerber, a longtime Tesla backer, tweeted recently that “Tesla stock price now reflects the value of having no CEO. Great job tesla BOD (board of directors) – time for a shake up”.
Comparing to other automakers, including American electric truck maker Rivian and Chinese company BYD, which makes electric vehicles and batteries, further betrays Tesla’s lagging performance.
Final thoughts
The numbers show that Tesla has clearly underperformed, with Twitter spooking the market – as it should. But the other factor in all this is the fact that Tesla nearly took on a mythical quality during the pandemic, a symbol of the stimulus-cheque-wielding Robinhood trader, a quasi-meme stock.
Its valuation was pushing unfathomable levels to begin with, and 2022 has brought all sorts of challenges. The time of the meteoric tech stock is over, the memes are no more, interest rates long gone from 0%.
Tesla is fighting many battles, and they’re not easy.
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