A Low year for stocksThe 65 percent drop in Tesla’s share price reflects the evaporation of wealth and the erratic behavior of its chief executive, Elon Musk.
Tesla’s stock price collapse wiped out about $672 billion in market value. And Mr. Musk, once hailed as a genius who remade the auto industry, is increasingly distracted by the takeover of Twitter and uses the social network to vent his frustrations. He insulted one of his critics this week by describing him as having “tiny testicles”.
The scenario has stunned investors and analysts. Many are asking what will happen to the stock, the company, and Mr. Musk in 2023. The answer largely depends on Mr. Musk and Tesla’s board of directors.
Will he turn his attention to Tesla and it? Countless challenges? Or is he camped out on Twitter? Mr. to continue Twitter after spending. Will Musk Sell More Tesla Shares? $44 billion to buy that company, despite promising not to? Will D Cyberdrug, Tesla’s first new passenger vehicle in three years, will finally go on sale? And, most importantly, Tesla’s team Mr. Will anything be done to rein in Musk?
In a deteriorating economy, these uncertainties have forced investors to fundamentally reevaluate Tesla’s prospects. It is the most valuable car company and the only major automaker to be considered a growth stock. But investors don’t believe Tesla can dominate the auto industry the way Apple dominates smartphones or Amazon dominates online retail.
“Tesla’s promise is that at some point all cars in the world will be electric vehicles, and Tesla will play a key role in that,” said Ephraim Benmelech, a finance professor at Northwestern University’s Kellogg School of Management. .
But investors have reconsidered that view, and now think that traditional automakers like Ford Motor Company and General Motors can present a credible competitive challenge to Tesla.
“Some of those companies have been around for 100 years,” says Mr. Benmelech said Tesla as a case study In his classes. “They have good engineers, good management. One should not underestimate the role that competition plays.
Mr. Benmelech points out that by more standard measures, Tesla is doing well. The company has reduced its debt and has high profit margins in the business. It posted a net profit of $8.9 billion in the first nine months of 2022 General Motors Earned.
This week, there have been signs that the stock price is holding steady. Shares rose from a two-year low of $109 on Wednesday to $123 on Friday.
Because many investors compare Tesla to tech giants, it must meet higher expectations than established automakers. That’s why it’s still roughly $389 billion, compared to Toyota’s roughly $226 billion.
In retrospect, it’s clear that Tesla’s stock market value at the start of the year was more than $1 trillion, analysts say. Some of the spectacular increases in Tesla’s stock price in 2020 and 2021 may have been driven by investors hoping the company would make them as rich as others who bought shares in the $40 billion company in 2017 (and some thought the skeptics must have been too expensive at the time).
“There were times when it looked like Tesla would make a millionaire in a short period of time,” said William Goetzman, a finance professor at the Yale School of Management who studies asset prices.
As a series of issues emerged in 2022, it became increasingly difficult to sustain that hope. A temporary shutdown at the Shanghai Tesla factory due to rising Covid cases, coupled with stiff competition from BYD and other Chinese automakers, cast doubt on Tesla’s chances of dominating electric car sales. The country has the largest auto and electric car market in the world. The Shanghai factory is Tesla’s largest, accounting for 40 percent of its total production.
Tesla is expected to release its fourth-quarter and full-year sales data in the next few days. Wall Street analysts said the company delivered 420,000 cars in the final three months of the year, up from 343,000 in the third quarter. That would be impressive, but not enough for the company to meet its goal of increasing sales by 50 percent for the full year.
Rising interest rates have been a problem for all automakers, especially companies like Tesla, whose vehicles typically sell for more than $50,000. Higher prices mean higher monthly payments that many buyers can’t afford.
Rate hikes by the Federal Reserve and other central banks have led Mr. Analysts faulted Musk for not paying enough attention to Tesla at a critical juncture, though it was beyond Musk’s control.
Daniel Ives, an analyst at Wedbush Securities who has long been optimistic about Tesla’s prospects, said Mr. Musk probably spoke for many investors when he suggested 10 things he could do. High on the list: Name Twitter’s new CEO and “focus on Tesla, not Twitter.”
Investors and analysts tweeted Mr. Opinions are divided on how much Musk’s remarks have damaged Tesla’s image among left-leaning electric car buyers. Those concerns aside, Mr. Musk’s behavior highlights the lack of checks and balances at Tesla. of the company Board of DirectorsIts members, including the chief executive’s brother Kimball Musk, have remained largely silent.
Last month, several directors filed a lawsuit in Delaware court against Mr. While testifying in a lawsuit challenging Musk’s massive compensation package, they said they weren’t concerned about how much time the executive spent on Twitter. Tesla’s boss, Robin Denholm, said on the witness stand that “he will do whatever it takes to get results.”
Tesla, Mr. Musk, Mrs. Denholm and Kimball Musk did not respond to requests for comment.
Len Sherman, an adjunct professor at Columbia Business School who previously worked as a consultant in the auto industry, told Tesla’s team that Mr. He said it was very respectful of Musk.
“You don’t have efficient management to control his worst impulses,” said Mr. Sherman said. “He runs his show the way he wants to run it and nobody can stop him.”
Mr., who drives a Tesla and previously owned Tesla stock. As Sherman becomes a mature carmaker, Mr. One of those who began to question whether Musk was the right person. He noted that there has been no recent mention of a plan to create a $25,000 car that would attract more customers and increase sales.
“How do you go from where Tesla is now to being the next GM or Volkswagen,” Mr. Sherman said. “For all his admirable qualities, being the only man on the planet to accomplish what he did, Tesla is not the best leader to have going forward.”
With its visionary leader seemingly disengaged, Tesla is scrutinized more by conventional standards of revenue and profitability and less by dreams of global dominance.
“Cars are everywhere now,” said Yale’s Mr. Goetzman said, “It’s not based on long-term prospects at times in its history, but based on sales figures and things like that.”