Thursday, February 9, 2023
HomeMarketTesla's Elon Musk Has a Finance Lesson For Investors. They Disagree.

Tesla’s Elon Musk Has a Finance Lesson For Investors. They Disagree.

- Advertisement -

There is little time off for investors following
Tesla
these days. The weekend before Christmas is no exception. In the past couple of days, there have been more tweets about
Tesla
‘s management. Investors have also learned where
Tesla
might put its next manufacturing plant. And Elon Musk has a finance lesson for investors.

“Securities Analysis 101,” tweeted out the Tesla (ticker: TSLA) CEO on Saturday. “As the ‘risk-free’ real rate of return from Treasury Bills approaches the much riskier rate of return from stocks, the value of stocks drop. For example, if T-bills and stocks both had a 10% rate of return, everyone would just buy the former.”

Musk is right to point out that rates impact stock valuations, but as
Future Fund Active ETF
(FFND) Gary Black pointed out in a tweet responding to Musk, longer dated Treasury bonds, not short-dated Treasury bills, matter more for stock valuations. And longer dated bond yields have been falling as investors have started to believe that the Fed’s rate increases will slow inflation and the economy.

The details of “securities analysis” aren’t what investors and Musk are really debating. What Musk and his investors are trying to do is assign blame for declines in Tesla stock. Musk wants to blame the market. Investors want Musk to acknowledge that his time spent at, and his management of, Twitter are impacting Tesla’s stock and brand.

Tesla stock was down about 36% from the end of 2021 until just before Musk completed his purchase of Twitter. The
Nasdaq Composite
was off about 31%.
Ford Motor
(F) and
General Motors
(GM) shares were down both down roughly 35%.

But since Musk has owned Twitter, Tesla shares are down another 33%. The Nasdaq is off about 1% over the same span. GM and Ford shares are off roughly 5%.

Tesla investors appear to have good reason to be concerned about both Twitter and the market. That’s bringing calls from many investors wanting Musk to name a CEO of Twitter and turn his attention back to Tesla. Investors also want Tesla’s board to initiate a stock buyback to help support the share price.

Musk has tried to reassure investors that Tesla is executing at a high level. “Tesla is executing better than ever,” tweeted Musk in response to a tweet from Ross Gerber, the CEO of Gerber Kawasaki Wealth and Investment Management and a Tesla investor. Gerber has been one of the most vocal investors advocating for some board action to help arrest Tesla’s stock decline.

There is more that just the back and forth on Twitter for investors to be concerned with. Wall Street expects Tesla to deliver more than 2.3 million cars in 2024, according to FactSet. Hitting or beating that goal will likely require a new manufacturing plant. Bloomberg reported, on Friday night, that Tesla will announced a plant in northern Mexico as early as this week.

Tesla didn’t immediately respond to a request for comment about its manufacturing plans.

A new plant would be a catalyst for Tesla stock. Just how much remains to be seen. A bigger catalyst would be changes at Twitter like a new CEO or less tweeting from Musk.

It’s setting up to be another interesting week for Tesla stock, and Tesla investors. Shares dropped about 16% this past week. The
S&P 500
dropped about 2% over the same span.

Write to Al Root at allen.root@dowjones.com


Credit: marketwatch.com

RELATED ARTICLES
- Advertisment -

Most Popular