Elon Musk dances at the opening of Tesla’s Berlin-Brandenburg Gigafactory in Germany in March.
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Tesla was kicked off Wedbush’s “Best Ideas” list on Thursday following last month’s purchase of Twitter by Tesla CEO Elon Musk.
The “Twitter circus show” brought forth by Musk is starting to impact the EV maker’s “pristine” brand
Wedbush said its bullish long-term on Tesla but the near-term view is challenged.
Tesla was kicked off Wedbush’s list of best stock ideas, with the investment firm saying the “circus show” led by CEO Elon Musk at his newly acquired property—Twitter—is starting to hurt the electric vehicle maker.
“In what has been a dark comedy show with Twitter, Musk has essentially tarnished the Tesla story/stock and is starting to potentially impact the Tesla brand with this ongoing Twitter train wreck disaster,” analysts Dan Ives and John Katsingris wrote in a note published Thursday.
Tesla stock has lost about 15% since Musk completed his $44 billion purchase of the social media app on October 27 following his attempts to back out of the deal.
“From selling Tesla stock again and again, to the PR nightmare that Twitter has become, cutting 50% of employees and then needing to bring some back, Musk’s attention focus from Tesla to Twitter, and ultimately the fear that this Twitter lightening rod of controversy on a daily (almost hourly) basis starts to negatively change the Tesla brand globally,” said Wedbush.
Musk after closing the Twitter acquisition has sold 19.5 million shares of Tesla worth around $3.95 billion, according to regulatory filings made public on Tuesday.
Wedbush kept its outperform rating on Tesla but cut its price target to $250 from $300, “reflecting a lower multiple associated with the Musk overhang that gets worse by the day.”
Some advertisers have suspended advertising on Twitter over concerns about its new leadership. Musk’s quick changes at Twitter include an $8-a-month subscription through which users can pay to have a blue check badge next to their account name and on their profile. Billionaire Mark Cuban told Musk he’s been he has spent “too much time” muting newly verified accounts.
“This is a pivotal few months ahead as the Twitter circus show is slowly starting to impact the pristine EV brand of Tesla and this could impact demand down the road in this EV arms race where brand/perception are of the utmost importance,” said Wedbush.
Tesla stock is now “deep in the investor penalty box until deliveries hit in early January and we get a better sense of the 2023 delivery/production trajectory,” said Wedbush.
Shares of the EV maker have dropped about 50% in 2022, underperforming the tech-rich Nasdaq Composite‘s loss of 34%. Tech stocks have had a rough year largely as the Federal Reserve drives up borrowing costs in its fight against inflation. Tesla stock in premarket trade Thursday turned higher, rising 5% to more than $177, as part of a broader market bounce following a better-than-expected October inflation reading.
Wedbush said its longer-term bullish view of Tesla generally remains unchanged.
The “EV demand and production story are still in the early days of playing out as part of a massive transformation to the auto world.”