Investor's Corner
Tesla investors get a “window of opportunity” amid Elon Musk’s Twitter takeover
On Monday, November 14, Tesla (NASDAQ: TSLA) stock closed at $190.95, 2.56% down compared to the previous close at $195.97. However, Morgan Stanley believes the decline in TSLA’s share price over the past few weeks may not be all bad for Tesla investors.
Tesla stock has been dropping lately. Some investors and financial experts are pinning Elon Musk’s Twitter takeover as the cause of TSLA’s recent decrease.
Last Wednesday, Tesla shares dropped significantly, closing at $177.59, the lowest since November 2020. At the time, Elon Musk disclosed the sale of about $4 billion worth of TSLA stock. In an all-hands meeting with Twitter the following day, Musk explained that he sold Tesla shares to “save” Twitter.
Throughout his quest to take over Twitter, Elon Musk has offloaded TSLA shares multiple times this year. In April, He sold about $8.5 billion worth of Tesla shares, and then another $6.9 billion shares in August.
Morgan Stanley’s Tesla Take
Morgan Stanley has a $150 bear case for Tesla. However, the investment bank believes Tesla’s recent price drop is a “window of opportunity opening for prospective Tesla investors.” Morgan Stanley thinks Tesla sentiment and decelerating EV demand might challenge its bear case before the end of 2022.
Tesla recently cut its prices in China. Morgan Stanley predicts that the company would also slash car prices in Germany as Giga Berlin reaches 5,000 vehicle production per week. It also expects Tesla to cut prices in the United States in the first half of 2023. The price cuts may be an opportunity for prospective Tesla customers.
Twitter and Tesla
In a recent note to investors, Morgan Stanley (MS) analyst Adam Jonas wrote that investors are concerned about the effects “consumer sentiment” might have on Tesla’s business in the near term. Jonas wrote that consumer sentiments could materialize in several areas, namely:
- Consumer sentiment/demand.
- Commercial partnerships.
- Government relationships and support.
- Investor sentiment and capital markets participation
“Controversy creates uncertainty…In our opinion, one of the main drivers of Tesla shares to ‘tera-cap’ status in recent years was the ability for investors to confidently model the economic outlook for the company’s core EV and energy storage businesses supported by a favorable economic backdrop. In recent weeks, this confidence has been tested, and we believe will continue to be tested through year-end,” wrote Jonas.
Twitter Controversy
Twitter has become a controversial topic in recent weeks. Some Tesla investors have reservations about how Musk plans to monetize the platform and use it as a space for free speech.
Consumer and Investor Sentiment
MS believes some customers and investors might want to distance themselves from any Twitter controversy. Elon Musk’s involvement in Twitter has led some to question their ties to Tesla, although the two companies are entirely separate.
Morgan Stanley believes that Tesla still needs support from investors to surpass its current market cap. As of writing, Tesla’s market cap stands at $602.97 billion.
Commercial Partnerships
Tesla prides itself as a self-reliant, vertically integrated company. But it still relies on commercial partnerships with companies that might want to distance themselves from controversy.
Although, usually, association with Tesla has proven beneficial to other companies. For instance, mining companies who have struck deals with Tesla often also strike deals with other automakers.
Government Support
Elon Musk’s recent activity on Twitter and changes to the platform have also created some tension between the Tesla CEO and some political leaders in the United States.
Last week, U.S. President Joe Biden commented that Musk’s relationships with other nations needed observation. Musk’s ties to other countries are heavily related to Tesla’s operations, considering the company has gigafactories in China and Germany.
Musk’s ties to other nations and his political opinions on Twitter have contributed to the controversy surrounding Musk, the platform, and, in extension, Tesla.
Disclosure: I am long TSLA.
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Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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