Tesla’s stock has just dropped almost 50% to $193/share year-to-date.
Much of the drop comes from Musk’s purchase of Twitter…seen as a bad move. And now Musk wants to put Twitter behind a paywall.
Technical analyst John Roque of 22V Research says that Tesla’s $100/share is possible if things don’t start improving for the auto maker. If it reaches the $100 mark, Tesla’s market value will have fallen from a high of $1.2-trillion in January 2022 to $300-million. At its current price of $200/share, it is worth $600-billion. So even if it doesn’t drop to $100, it has lost $600-billion in less than a year.
For reference, Ford’s stock price only dropped 6% — so the problem is not in the auto market.
Musk meanwhile says Tesla could be worth $4.5 trillion, more than Apple and Saudi Arabia’s oil giant Aramco put together.
This time the markets aren’t buying it. His personal fortune has dipped by $72-billion — nearly twice the market value of BMW.
I have nothing against Elon Musk and hope he succeeds, but let’s get real. Very few of his operations make business sense. If it weren’t for the fantasies of the stock market, he would still be a South African rich guy with pockets full of emeralds. Not a bad gig, but not the razzle-dazzle the markets are agog over.
Here’s how unhinged the investment mind-set is: Consider the business logic of the Tesla operation. The stock market puts Tesla’s value at $700-billion (down from $900-billion a month ago). This means that investors need a return of $70-billion a year for the next ten years. At a current profit margin of 15% — not sustainable, BTW, now that the other companies are in the EV game — Tesla requires sales of $480-billion. To get that, Tesla has to sell 10 million cars a year. The entire global passenger vehicle market sold under 75 million units in 2021. The largest firm, Toyota, has about a 10% market share (7.5-million vehicles). Tesla needs to sell more cars than Toyota to be worth the stock market value. BTW, currently it produces less than 1-million cars/year.
What were investors thinking, that they could get a return ten times higher than reality could deliver?