Elon Musk’s Twitter Quest Turns Tesla’s Edge Into a Risk

Many Tesla Inc. investors watched in dismay as Elon Musk plunged into a battle over buying Twitter that pulled his attention away from the electric-car maker. Now that the deal is done, some are fretting Twitter is an even bigger drag on Tesla than before.

Tesla’s stock has plummeted 46% this year, compared with a 28% drop for the Nasdaq 100 Index. However, unlike the megacap technology companies that have seen similar or bigger routs, such as Meta Platforms Inc., earnings estimates for Tesla are actually higher than they were a year ago.

Many Tesla bulls see Musk’s singular management style as the company’s biggest edge over the century-old automakers across the globe. Yet he’s been deeply involved in overhauling the social-media company, to the point that he said this week that he had too much on his plate and was working “morning to night, seven days a week.”

“The question some investors are asking is, how many balls can he keep in the air while he’s juggling all of these responsibilities?” said Brian Mulberry of Zacks Investment Management. “The concern is that there are only so many hours in the day for Musk to manage all of these projects, and we’re starting to see a deterioration in the stock price because of that.” 

Tesla didn’t reply to a request for comment on Musk’s workload. However, Musk, during a trial related to his Tesla pay package in Delaware on Wednesday, said he is now spending almost all his time reorganizing Twitter. He expects the “fundamental organizational restructuring” will be completed by the end of next week.  

Apart from Tesla and Twitter, his other ventures include Space Exploration Technologies Corp., or SpaceX, the tunnel construction company Boring Co. and neurotechnology firm Neuralink Corp. 

While Tesla investors are most worried about Musk’s focus deviating from the EV maker, there are other risks as well. For example, after taking over Twitter, Musk asked engineers from Tesla to review Twitter workers’ code. 

Zacks’ Mulberry said that though Musk is expected to dedicate a lot of time to his newest acquisition for the initial month or so, “if he continues to use staff from other companies like Tesla, or SpaceX, to keep helping Twitter, then obviously there’s going to be a degradation of productivity to those other companies.” Zacks owns Tesla stock through its All-Cap Core fund. 

These latest doubts have also deflated hopes that once the Twitter deal closed, and Musk was done with his related sale of Tesla shares, the cloud over the automaker’s stock would lift. For one, it’s hard to say with any certainty that Musk won’t soon sell more shares, given that his latest offloading of about $4 billion in Tesla came despite assurances from the CEO that he was done selling. 

“Elon Musk has never dispelled the notion that he is the man, the person behind Tesla,” said Mark Stoeckle, Adams Funds’ chief executive officer. “And because of that the market cannot give the current other managers at SpaceX, Tesla, or Boring Co. enough credit to run those without Musk.” Adams owns about 143,000 Tesla shares.

Even without the Twitter chaos, Tesla has plenty to tackle. The threat of a recession sent US stocks tumbling this year, with valuations of growth companies such as Tesla taking the hardest hit. At the same time, analysts have warned that demand for its electric cars may soften as consumers are squeezed between high prices and slowing growth. 

Still, investors have a lot to look forward to once the Twitter overhang is gone and the market stabilizes. As the global leader in EVs, Tesla is set to benefit from the auto industry’s shift to battery-powered cars from gas-fueled ones. In the US, President Joe Biden’s Inflation Reduction Act is also expected to give a jolt to EVs, helping Tesla. 

Meanwhile, Wall Street analysts’ average price target for Tesla suggests a 52% return over the next 12 months.  

“I believe the Twitter noise will die out by month end as Musk gets a handle on Twitter’s issues,” said Gary Black, managing partner at The Future Fund, which advises the Future Fund Active ETF. At that point, he expects Tesla’s stock to be driven by the rising adoption of EVs and the launch of the company’s Cybertruck pickup, among other factors.