Stock Analysis & Ideas

Tesla Stock: The Twitter Overhang Still Looms

While never too far from stepping on another banana peel, Elon Musk’s charismatic personality, huge profile and celebrity status – not to mention, owning the title of World’s Richest Man – have been behind Tesla’s (TSLA) ascent to mega cap status, despite the company’s sales figures not being anywhere near the industry leaders. However, Musk’s recent shenanigans have now made him a bit of a liability.

Or as Wedbush’s Daniel Ives puts it, “The problem is while the PR Twilight Zone of Twitter happens for the world to see and advertisers remain at bay while the Musk wild card of content moderation is front and center, the perceived overhang of ‘key person risk’ with Musk is a real overhang on Tesla’s stock and not abating.”

Whichever way you look at it, “Musk is Tesla and Tesla is Musk,” says Ives, and right now, that is a bad thing, as evident from Tesla’s share price, which since the Twitter deal closed on October 27, is down 17% (and, in total, by 48% in 2022).

The interesting part, and not a little ironic, is that in contrast to the deteriorating share price, Tesla has been weathering the tough economic environment rather well, with the company on course for a “2 million unit number for 2023, which is very impressive and right on schedule despite the jittery macro backdrop.”

However, while Ives thinks this Musk overhang is somewhat overstated, he acknowledges that “perception is reality” and with each day, Musk keeps digging himself a deeper Twitter hole. Despite the seemingly never-ending chaos, Musk might well be able to eventually turn Twitter’s fortunes around. However, at what cost? asks the analyst.

Moreover, the issues raising concern amongst Tesla investors are unlikely to abate in the near term. What if Musk sells more TSLA stock to fund his new Twitter sweetheart? And what about Musk’s attention being continually diverted away while the Tesla brand gets further tarnished by his actions?

“We remain steadfastly bullish on the Tesla EV growth thesis over the next few years,” Ives sums up, “but as discussed over the last few weeks recognize that until this Twitter dark cloud passes it will remain an overhang on TSLA.”

For now, Ives sticks with an Outperform (i.e., Buy) rating on Tesla shares, along with a $250 price target. (To watch Ives’ track record, click here)

Turning now to the rest of the Street, where the average target is a more robust $307.72, which makes room for 12-month returns of 68%. All told, the stock claims a Moderate Buy consensus rating, based on 18 Buys, 8 Holds and 2 Sells. (See Tesla stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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