Benzinga - by Shanthi Rexaline, Benzinga Editor.
Tesla, Inc. (NASDAQ:TSLA) stock’s weakness could be in part attributed to Elon Musk’s purchase of social-media platform Twitter, which he has since then renamed as X, said Tesla investor and Future Fund Managing Partner Gary Black.
Did Twitter Hurt Tesla? Tesla has by far been the worst-performing “Magnificent Seven” stock since Musk announced his intention to buy Twitter in April 2022, Black noted. Magnificent Seven is the collective name given to seven mega-cap U.S. tech stocks.
$TSLA uberbulls won't admit it but my liberal use of the phrase "Twitter overhang" proved highly accurate to describe the negative TSLA stock action in 2022/4Q (TSLA -55% vs NDX flat) as Elon was forced to sell $ billions of TSLA shares to pay for Twitter.Now $TSLA bears…
— Gary Black (@garyblack00) November 26, 2023
“Don't let anyone fool you that $TSLA stock has done well since Elon announced he would acquire Twitter in April 2022,” Black said.
From trading around $328 ahead of the announcement, the stock has pulled back and is currently trading around $235, he noted. As opposed to Tesla’s 28% decline over the period, the Nasdaq 100 Index has risen 15%, he added.
Chart Courtesy of Benzinga
To gauge the impact of Twitter’s buy on Tesla shares, one has to measure the performance from when Musk announced plans to buy the social media platform, the fund manager said.
Giving his rationale, he noted that the billionaire began selling Tesla shares to fund the purchase soon after disclosing his intention to buy Twitter. Between April 2022 and August 2022, Musk sold $15 billion worth of Tesla stock and for 2022, the selling amounted to $23 billion, he added.
Black’s assertion came in reply to a post by Tesla influencer Omar Qazi, better known as Whole Mars Catalog, who said the weakness seen in Tesla stock was not due to Musk’s Twitter buy but due to the EV bubble popping. He made his case by sharing charts showing the one-year performances of Tesla, Rivian Automotive, Inc. (NASDAQ:RIVN), Lucid Group, Inc. (NASDAQ:LCID), and General Motors Corp. (NYSE:GM) shares.
Don't let anyone fool you that $TSLA stock has done well since Elon announced he would acquire Twitter in April 2022. $TSLA has been by far the worst performer of the Mag 7 since then, dropping from $328 to its current level of $235 (TSLA -28% vs NDX +15%; $AMZN next worst -3%).… https://t.co/WfKQzULH3Y pic.twitter.com/qwm0zn9FJE— Gary Black (@garyblack00) November 27, 2023
The Future Fund co-founder also took exception to comparing Tesla to the shares of other electric vehicle makes. None of them make money and most are headed toward bankruptcy, he said.
Other Headwinds: Sentiment toward Tesla stock also took a hit from management’s decision to cut its EV prices by an average of 18% year-over-year, Black said. He noted that the price reduction has generated almost no change in volume growth.
Tesla’s volume for 2023 is estimated at 1.8 million units, unchanged from before the price cuts, the fund manager said. The price cuts have only caused 2024 earnings estimates to collapse by 43%, he said.
The analyst is optimistic about Tesla’s Cybertruck, as he sees a “halo effect” accruing from huge Cybertruck interest. The Cybertruck will likely have a stimulative impact on sales of the entire Tesla franchise, he said, adding that it will produce a similar effect as the one Model Y had in its launch year in 2020.
“History doesn't repeat but it often rhymes,” Black said.
Tesla ended Friday’s regular session up 0.53% at $235.45, according to Benzinga Pro data.
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