Elon Musk still wants to acquire Twitter despite the lengthy procedure.
While this is good news for Twitter shareholders, Tesla investors worry that the business mogul still has time to deal with them. They also need a little help.
Of course, Musk continues to be appreciated by Wall Street and behind the wheel. But some are losing patience with the fact that the richest man in the world can no longer turn his attention to the company that brought him the nugget of wealth.
Tesla announced its results after the close of trading on Wednesday. Shares have tumbled more than 35% this year on concerns over Tesla’s recently released third-quarter production and delivery numbers that were more murky than expected.
Wall Street continues to expect strong earnings and earnings growth, as consensus forecasts call for earnings and revenue growth to exceed 60%. However, analysts have lowered those forecasts in recent weeks.
Firming Competition
Part of the reason is increased competition for Tesla in the US from GM, Ford, Volkswagen and other electric vehicle startups such as Rivian and Lucid.
Meanwhile, Tesla’s Chinese subsidiary also faces huge hurdles as it faces home-grown electric vehicle competitors including Nio, Xpeng, and Li Auto. Also on the list is BYD, a Chinese auto company backed by Warren Buffet’s Berkshire Hathaway.
But Tesla’s fight is not in vain. The automotive industry is facing challenges this year due to the global recession, rising energy prices and growing concerns about fierce competition.
Major US, European and Japanese automakers are facing stock declines of around 20% to 45% this year. Moreover, the proportion of pure electric vehicle enterprises in the United States and China has dropped from about 60% to 80% in 2022.
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Tesla Investors Concerns on Musk
Tesla Investors are concerned about Musk’s recent business take.
Tesla shareholder Gary Black, also a managing partner at the Future Fund, has been tweeting that worries over Twitter are a strain for Tesla investors for the past few weeks.
In one of his tweets, Black stated that there are many issues for Tesla because of Twitter. Among them are two of the biggest: The extension from an eventual Tesla stock sale by Musk to back the agreement and the distraction it’s causing for Musk, mainly because “Elon’s core competency is engineering/tech,” and Twitter is more of an ad-supported media company.
Furthermore, the seat for Tesla’s chief operating officers remains empty. Meaning, Musk must be compelled to take on a hands-on approach at Tesla amid his other commitments in multiple ventures, like SpaceX, The Boring Company, Neuralink, and possibly Twitter.
The insufficient deliveries and production numbers underline how a weakening global economy (and potential recession) could injure Tesla.
“Are we sure the problem is only supply and not (partially) related to demand?” queried Adam Jones, an analyst at Morgan Stanley, in the latest report.
Jonas continued that it “would be unreasonable to assume” that the firm can stick to its prices without demand lessening, specifically if the economy is weakening.
Moreover, this could impact demand since Tesla is amid growing competition in the US.
“To enhance its competitive competition, Tesla will need to expand its range of products to contend with a substantially higher number of models from established global automakers and star-ups by the end of 2025,” stated an analyst at S&P Global Ratings in a new report.
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