Since the beginning of the year, Tesla’s share price has dropped significantly. Largely as a result of recent decisions made by its CEO, Elon Musk. However, the purchase of Twitter cannot account for such a decline in capitalization.
Tesla’s stock price today dropped to a new 52-week low of about $121 per share. Recall that Tesla’s stock peaked at around $400 at the beginning of the year. Which was not different from the highest point it had hit earlier in 2021.
As a result, during the past year, Tesla’s market capitalization has decreased by over 70%. Since Frenchman Bernard Arnault, CEO of LVMH, took over for Elon Musk this fall, he momentarily lost his title as the richest person in the world. What therefore accounts for this decline in the company’s value?
Investors in Tesla didn’t like Twitter’s purchase
Tesla’s market value has decreased ever since Elon Musk’s takeover of Twitter was announced. To pay for the acquisition of Twitter, Musk sold billions of dollars’ worth of Tesla stock. Tesla investors don’t particularly like Musk’s frequent publishing of exciting tweets since seizing control of the business.
There is every reason to think that his disorganized management approach and are having an effect on his other firms. Many Tesla employees claim that Elon Musk’s increasingly unpredictable leadership on Twitter is hurting the automaker’s sales figures.
Sales in 2022 may disappoint
Investors have been worried that Tesla’s sales and profits forecast has worsened for a few weeks now. At the conclusion of the year, it was clear that the automaker’s sales were declining.
But Elon Musk’s business made an effort to turn things around. Particularly by providing numerous discounts to customers who chose to have their vehicles delivered before the year was over. Tesla has also begun offloading its Model 3 and Model Y vehicles in Europe, which are currently in stock and ready to ship. By giving customers who take delivery of their new Tesla in December 10,000 miles of free charging in Superchargers, the business also made an effort to increase sales and deliveries.
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Just after the New Year, the manufacturer of electric vehicles is expected to announce its fourth quarter data. And Deutsche Bank analyst Emmanuel Rosner has already warned that they could be underwhelming.
Tesla in 2023?
In addition to the aforementioned factors, the state of the world economy is the primary cause of Tesla’s stock decline. Automakers are disproportionately hurt by the Fed’s rate increase because most of their customers finance or lease their vehicles. Therefore, since they typically track central bank rates, monthly payments will rise.
The price of cars increases along with the cost of borrowing. So automakers must lower prices to keep or win over new customers. Rate increases thus frequently tend to stifle demand and lower automakers’ earnings. Which can have an impact on the value of their stocks. People therefore choose to turn to safe assets like savings accounts and government bonds rather than investing in risky stocks.
The US economy may have a recession next year after several years of inflation, which would affect auto sales. Musk predicted that the economy would be in a “serious recession” in 2023 during a Twitter conference call on Thursday.
Homes and automobiles will be “disproportionately affected” by the circumstances, he added. Adding that there will be a “greater macroeconomic drama than people now anticipate” economic. In addition, he said he wouldn’t sell any additional Tesla shares for the following two years.
However, we will keep tracking the development of events. As Elon Musk will step down from being the CEO of Twitter. Putting more focus on his other brands. So keep tuned for more new in this regard.