One of the world’s biggest names in electric vehicles, Tesla (TSLA), has seen its share of controversy since it started up. The latest developments haven’t been very different. Tesla lost 4.5% in Friday’s premarket trading and is now down about 8% at the time of writing. Much of this extends back to the recent word out of Tesla about its hiring plans, or lack thereof.
Meanwhile, I’m bearish on Tesla. Though it’s made quite a name for itself in the electric car field, the price is still elevated. Buying in now is remarkably difficult, and with a slew of competitors getting involved in a market that circumstances are about to make much tighter, it may not be a good plan to buy in now anyway.
The last 12 months for Tesla share prices have been up and down, but ultimately, up. Tesla kicked off the last 12 months just under $600 per share. Today, TSLA is around $712, but well off its highs for the year when it breached $1,200 per share back in November 2021.
The latest news won’t be much help. Elon Musk issued a message to Tesla executives, which was then spotted by Reuters and passed on from there. The message, titled starkly: “pause all hiring worldwide,” suggested that not only was a pause in hiring called for but that Tesla should also engage in mass layoffs.
The message called for a literal decimation, reducing the workforce by around 10%. Most of the matter seems to trace back to Musk getting a “super bad feeling” about the macroeconomic situation.
Wall Street’s Take
Turning to Wall Street, Tesla has a Moderate Buy consensus rating. That’s based on 14 Buys, 10 Holds, and six Sells assigned in the past three months. The average Tesla price target of $920.55 implies 29% upside potential.
Analyst price targets range from a low of $67 per share to a high of $1,500 per share.
Investor Sentiment Also Has a Super Bad Feeling
Musk is hardly alone in his “super bad feeling,” as Tesla currently has a Smart Score of 2 out of 10 on TipRanks. That’s the second-lowest level of “underperform,” suggesting the stock is likely to lag the broader market. Several investor sentiment measures seem to agree.
Hedge funds, for example, agree with that feeling. The TipRanks 13-F Tracker, which reports hedge fund movement, reflected a further loss in hedge fund involvement with Tesla. “Further” here has been going back for some time; hedge funds have been continually reducing their involvement with Tesla every quarter since March 2021.
Insider trading, meanwhile, is no better. Insiders have been divesting Tesla shares for most of the last 12 months. In the last three months alone, there have been 15 Sell transactions valued at around $8.5 billion.
There were no insider purchases in that entire time. In the last 12 months, there has only been one recorded purchase of Tesla shares by insiders, which puts the ratio at 89 to one.
As for retail investors who hold portfolios on TipRanks, they seem pretty eager to buy up the shares hedge funds and insiders are selling. TipRanks portfolios that held Tesla shares were up 0.2% in the last seven days and up 2.5% in the last 30 days. Tesla’s dividend history is also flat, as Tesla pursues growth through improving its share price and establishing its product line.
The Super Bad Feeling Heard Around the World
Musk’s note of a “super bad feeling” comes at a time when many business leaders are sounding alarms about the state of the economy. John Waldron at Goldman Sachs certainly has one. JPMorgan Chase’s Jamie Dimon noted there was a “hurricane” coming, economically speaking.
Dimon also noted that JPMorgan was planning to be “very conservative with [its] balance sheet.” As for individual investors? Dimon only said, “You’d better brace yourself.”
There are some who question the timing of Musk’s “super bad feeling.” After all, the word about layoffs came just two days after Musk issued further word requiring everyone who was working remotely to return to the office.
It stands to reason that many who were working remotely will not want to stop. Several good reasons exist for this; whether it’s fear of disease or just enjoyment of the sheer flexibility of it all, work-from-home options have been welcomed by the workforce.
Thus, Musk’s “super bad feeling”—which followed the workforce ultimatum—may be simply stage dressing to justify firing a whole bunch of people whose only real crime was wanting to work from home. Some, like Cadre talent agency founder Jason Stomel, consider this an excellent plan to make a cheaper layoff, as no severance packages would be required for those who leave voluntarily.
However, Musk has reason to have a “super bad feeling,” a feeling echoed throughout the world, especially at the gas pump or the grocery store. Inflation soaring wildly out of control on multiple fronts doesn’t exactly bode well for future car sales. The ongoing supply chain problems that keep goods out of customers’ hands altogether don’t help.
Musk and Tesla might have been able to make some hay while the sun shined, selling electric cars to people who wanted new cars but couldn’t get them due to some parts shortage or another. Yet, with prices on the rise, simply switching cars isn’t within many people’s realm of possibility right now.
However, Musk might have been able to make some headway here with proper marketing. What better way to beat the soaring prices at the gas pump than with a car that needs no gas?
Of course, some would point out the costs of such a car, to begin with. It takes a lot of $50 fill-ups to match the price tag on a Model 3 – just under 940 of them. In fact, a 2022 Model 3 starts at around $46,990.
Concluding Views
Things do not look good for Tesla. The CEO has a “super bad feeling,” and he’s hardly alone. Hedge funds have been jumping ship for two years. Insiders have been doing likewise for the last year. Inflation is skyrocketing. The idea that anyone will go out tomorrow and buy a $47,000 car is almost as preposterous as the Loch Ness Monster.
There doesn’t look like a lot of upside potential for Tesla right now. Sure, it’s got room to grow before it hits its average price target, and that low price target looks almost laughable. However, the idea of Tesla recovering to its $1,200 per share levels just doesn’t look plausible.
There are entirely too many factors working against Tesla right now. Electric cars can be a wonderful thing, but when people are pinching pennies at the grocery store, looking for them to turn out for electric cars just seems like a bridge too far. That’s much of why I’m bearish on Tesla.
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