Tesla
shares were falling Monday. Elon Musk and a report from The Wall Street Journal were the main reasons. Earnings from an auto supplier were another reason.
The Musk news first. The Journal reported Saturday that Musk took drugs with some
Tesla
board members, citing people who have witnessed the drug use and others with knowledge of it. The Journal also wrote a story detailing alleged drug use by Musk in January.
Tesla didn’t respond to a request for comment about the weekend report. Musk hadn’t responded to requests for comment in the original report.
Tesla shares were down 6.5% to $175.69 on Monday, while the
S&P 500
and
Nasdaq Composite
were off about 0.8% and 0.9%, respectively.
Coming into Monday trading, Tesla shares have fallen about 24% year to date. The reporting on Musk is a small factor in the stock drop. Investors are mainly worried about weaker-than-expected growth for Tesla. The company shipped 1.8 million electric vehicles in 2023, up almost 40% from 2022. In the company’s fourth-quarter earnings report, Tesla said, “In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023.”
Wall Street is modeling 2.1 million units sold in 2024, up about 17%. A few months ago that projection was for almost 2.4 million units.
All of the Musk-related news is just one more thing for investors to worry about. The “building narrative [is] ultimately noise for the stock,” said Wedbush analyst Dan Ives. He doesn’t sound too concerned about governance at Tesla.
“The Street knows Musk is not home Saturday night reading a novel drinking milk and eating cookies. If the U.S. Government is fine and backs Musk so will Tesla shareholders.”
Ives is referring to the government’s contracts with Musk’s space company SpaceX. Musk pointed out in a recent tweet that he is subject to random drug testing as a government contractor.
“The risk really is his job at SpaceX with this type of report,” said Baird analyst Ben Kallo, adding that attacks on Tesla’s governance, of course, will raise some concern for Tesla shareholders.
Kallo rates Tesla stock a Buy and he has a $300 price target on the shares. Ives rates Tesla stock at Buy with a $315 price target. About 41% of analysts who cover Tesla stock have Buy ratings, and an average price target is about $216, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
Even if Ives is correct, there is a lot of Musk-related “noise” for investors to digest. The weekend report of drug use with directors comes days after a Delaware court voided Musk’s 2018 pay package, which awarded him options for some 300 million Tesla shares that vested based on hitting performance milestones. Musk, in response to the ruling, said he is considering moving the legal incorporation of Tesla from Delaware to Texas.
Looking ahead, the Tesla board will have to redo the 2018 pay package—or draft an entirely new compensation plan. That will keep Musk’s worth, and importance to Tesla, top of mind for investors.
Other EV stocks, along with Tesla are down in Monday trading. Shares of
Lucid Group
were down 4.7%,
NIO
stock dropped 3%, and shares of Chinese EV giant
BYD
were down 0.9%.
General Motors
shares fell 2.7%.
Musk’s EV leadership could impact the entire industry, but other EV stocks likely were down because of earnings reported from
ON Semiconductor.
ON supplies chips to the auto industry, and in general EVs use more chips than traditional cars. The company’s October earnings report set off a slew of selling in the EV space after it guided fourth-quarter sales to about $2 billion when Wall Street was looking for $2.2 billion.
Fourth-quarter sales reported Monday were in line with guidance. Looking ahead, the company guided first-quarter revenue to about $1.85 billion. Wall Street was looking for $1.92 billion. It looks as if sales at ON will be down year over year for the fourth consecutive quarter.
Falling sales mean less ordering from the auto makers, which means the auto makers don’t see robust demand early in the year. It’s another sign of weaker-than-hoped-for demand for the EV space to start 2024.
ON stock, however, was up 8.1% on Monday. Shares had dropped more than 20% after the company’s earnings report in October.
Write to Rupert Steiner at [email protected]
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