Tesla watchers worry that Elon Musk is too distracted

Tesla Inc.'s Chinese operations are struggling to pump out cars because of coronavirus shutdowns, and its new plants in Austin, Texas, and Berlin face long production ramp-ups. The automaker is also under fresh regulatory scrutiny over its driver-assistance software, and its stock price has fallen far further than equities markets overall.

CEO Elon Musk, meanwhile, has been posting his thoughts about a variety of topics on Twitter while pushing to take control of the social media platform.

Among his tweets last week, he observed that "politics is a sadness generator," that "assault rifles should at minimum require a special permit" and that "Italy will have no people" if falling birthrates continue there.

While Musk has long used Twitter to talk about his multiple companies, the prospect of him becoming Twitter's interim CEO and injecting himself into thorny political and social issues has analysts worried about his auto company's financial performance.

Musk has his share of distractions. He denied a report this month that he sexually harassed a flight attendant on a private jet in 2016. And Tesla faces investigations by NHTSA into its Autopilot software.

Tesla also is coping with the same challenges that the rest of the auto industry is facing: rising inflation, higher interest rates and manufacturing issues related to the pandemic and supply chain shortages.

Tesla doesn't have a press office, but Musk commented on Twitter last week that despite all the current economic headwinds, "I also think that Tesla has the potential to be the most valuable company ever."

As of the market close Thursday, May 26, Tesla shares were down just more than 40 percent so far this year to $710.66. That compares to the overall Nasdaq composite falling 26 percent in the same time period. Analysts said that Tesla has been pressured by the weekslong closure of its massive Shanghai factory, but also mounting automotive concerns at home.

"It is hard to isolate factors behind the recent correction, from Nasdaq to Twitter financial commitments and China lockdowns, but we are clearly witnessing an uncomfortable pileup of negative news," financial firm Jefferies wrote in a research note last week that also cited Musk's "polarizing political opinions."

To be sure, other automotive stocks, such as Ford Motor Co., have fallen a similar amount as Tesla year to date. But Tesla's slide comes as analysts forecast strong vehicle sales growth and profits this year, while legacy automakers have struggled with falling production on parts shortages. Tesla's record stock close was on Nov. 4 last year at $1,229.91.

Jefferies downgraded Tesla's price target to $1,050 from $1,250. It reduced its full-year production estimate by 85,000 vehicles to 1.4 million — but noted that's still a 52 percent annual growth for the automaker.

Despite concerns over how Tesla is being run in the short term, Jefferies sees the EV maker outpacing legacy automakers in operating performance and profits.

Tesla's sales, which have been rising steadily for two years despite the pandemic and semiconductor shortage, are expected to take a hit in the second quarter as a result of the China lockdown. But production should accelerate in the second half of the year as the Shanghai plant recovers.

Twitter user Troy Teslike, who provides a Tesla production forecast itemized by factory, puts the automaker's second-quarter global ouput at 254,000 vehicles — down from about 310,000 in the first quarter. The second-quarter numbers include a 74,000 drop from Shanghai and new contributions from Berlin at 6,825 and Austin at 1,274. The two new plants opened in March.

In a Twitter post last week, Teslike predicted full-year production at more than 1.4 million, meeting Musk's goal of at least 50 percent growth for 2022. Teslike put Berlin's yearly output at just over 55,000 and Austin's at 51,274.

Also last week, Daiwa Capital reduced its Tesla price target to $800 per share from $1,150, mostly on lost production in China. It forecast a 70,000-vehicle decline in the second quarter and a 35,000-vehicle loss in the third quarter.

"Additionally, we have modeled a slower ramp-up in Tesla's Austin and Berlin plants, driving an 80,000-unit decline in deliveries for the year," Daiwa said. The firm put full-year production at 1.2 million vehicles, down from a previous estimate of 1.4 million.

Also contributing to its downgrade of Tesla, Daiwa said, was "any negative impact from Elon Musk's proposed takeover of Twitter, either on management of Tesla or on TSLA stock from a potential divestment."

Some analysts have speculated that in order to afford the $44 billion Twitter deal, Musk may need to sell additional Tesla stock, unless he can lower the price.