Elon Musk's Twitter mission turns Tesla's edge into danger

Elon Musk’s Twitter mission turns Tesla’s edge into danger

Many Tesla Inc investors watched in dismay as Elon Musk plunged into a fight to buy Twitter that drew his attention away from the electric car maker.

Many Tesla Inc investors watched in dismay as Elon Musk plunged into a fight to buy Twitter that drew his attention away from the electric car maker. Now that the deal has closed, some worry that Twitter is an even bigger burden on Tesla than before.

Tesla stock is down 46% this year, compared to a 28% drop for the Nasdaq 100. However, unlike big tech companies that have seen similar or bigger trajectories, such as Meta Platforms Inc. Tesla’s earnings estimate is already higher than it was a year ago.

Many Tesla bulls see Musk’s unique management style as the company’s biggest advantage over century-old automakers around the world. However, he’s been so deeply involved in overhauling the social media company, that this week he said he had a lot on his plate and was working “from morning to night, seven days a week.”

“The question some investors ask is, how many balls can he keep in the air while juggling all these responsibilities?” said Brian Mulberry of Zacks Investment Management. “The concern is that there are only so many hours in the day to manage all these projects, and we’re starting to see a deterioration in the stock price because of that.”

Tesla did not respond to a request for comment on Musk’s workload. However, during a Tesla pay package trial in Delaware on Wednesday, Musk said he now spends almost all of his time reorganizing Twitter. The “fundamental organizational restructuring” is expected to be completed by the end of next week.

Aside from Tesla and Twitter, his other ventures include Space Exploration Technologies Corp. Or SpaceX, the Boring Co. tunnel builder. and Neuralink Corp.

While Tesla investors are very concerned about Musk’s focus deviating from the electric car maker, there are other risks as well. For example, after the Twitter takeover, Musk asked engineers from Tesla to review the code of the workers at Twitter.

Mulberry told Zacks that although Musk is expected to devote a lot of time to the latest acquisition for the first month or so, “if he continues to use employees from other companies like Tesla or SpaceX, to continue to help Twitter, there will obviously be a deterioration in productivity of those other firms.” Zacks owns shares of Tesla through the All-Cap Core Fund.

These latest uncertainties have also dampened hopes that once the Twitter deal closes, and Musk finishes his sale of related Tesla shares, the cloud over the automaker’s shares will rise. For example, it’s hard to say with any certainty that Musk won’t sell more shares soon, given that the latest dump of nearly $4 billion in Tesla came despite the CEO’s assurances that he was done with the sale.

“Elon Musk has never squandered the idea that he is the man, the person behind Tesla,” said Mark Stoeckl, CEO of Adams Funds. “Because of that, the market cannot give the other incumbent managers at SpaceX, Tesla, or Boring Co. enough credit to operate those who Musk does not have.” Adams owns about 143,000 shares of Tesla.

Even without the Twitter chaos, Tesla has a lot to deal with. The threat of a recession has dragged US stocks lower this year, with valuations of growth companies like Tesla taking the hardest hit. At the same time, analysts have warned that demand for its electric cars may decline as consumers are squeezed between higher prices and slower growth.

However, investors still have a lot to look forward to once Twitter’s burden is gone and the market has stabilized. As the world leader in electric vehicles, Tesla is poised to take advantage of the auto industry’s shift to battery-powered cars from gas-powered cars. In the US, President Joe Biden’s inflation-lowering law is also expected to give electric vehicles a jolt, helping Tesla.

Meanwhile, Wall Street analysts’ average price target for Tesla suggests a 52% return over the next 12 months.

“I think the Twitter noise will die down by the end of the month as Musk deals with his Twitter issues,” said Gary Black, managing partner at The Future Fund, which advises the Future Fund Active ETF. At this point, Tesla shares are expected to be driven by increased adoption of electric vehicles and the launch of the company’s Cybertruck pickup, among other factors.

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