“It was a click monster.”
I cringed, but she couldn’t see me since we communicated primarily through Twitter DMs. “She” was (and still is) an editor at a mainstream financial media outlet. She was describing the web traffic generated by a story idea I gave her in 2019. It wasn’t the first story idea she got from me, nor was it the first “click monster.”
I give my “click monsters” away because I don’t want them. As regular readers are apprised, I’m not a fan of journalistic click-chasing. In fact, I think it’s an oxymoron. Real journalists should only chase clicks to the extent they have something extremely important to say. Clicks shouldn’t be pursued for their own sake, which is to say for the sake of duping a credulous public out of its monetizable time.
Years ago, I read an interview with the editor-in-chief of a popular site that generates mountains of web traffic. He said the raison d’être of all web portals is traffic maximization. It was a manifestly false claim and a laughably transparent attempt to excuse his own cartoonishly sordid behavior. (He’d invariably claim that people like myself don’t understand the “business,” to which I’d not-so-gently suggest that if you have to resort to publishing vacuous tabloid fodder to pay your own bills and support the families of your employees, you’ve failed — not at being a tabloid baron, but at life in general.)
By contrast, I assiduously avoid so-called “click bait” because my goal isn’t to maximize web traffic. My goal is to maximize readers’ intelligence, which mirrors my own never-ending quest for enlightenment. Given that, I need an angle before I’ll indulge generic, mindless “click monsters” like, for example, an article reminding readers that it’s been a very, very bad year for shares of Tesla.
Tesla, as you may or may not be aware, is a company associated with Elon Musk. Musk is, among other things, a man associated with the same sort of “LOOK AT ME!” mentality, and thereby the same sort of generalized nonsense, characteristic of tabloid websites.
On Wednesday morning, in “Batman,” I wrote the article I wanted to write about Musk. This is the article I didn’t want to write, but felt compelled to nevertheless, because in a world where three quarters of the population in developed economies is more interested in eye candy than brain food, a chart depicting Tesla losing three quarters of its value is solid gold, just like those barbarous relics click-bait finance portals insist you should store in your tinfoil-lined basement alongside the canned food, drinking water and survival gear you’ll need for the Yellowstone eruption.
That’s a pretty rough ride, even by the high (or low) standards of a hyper-growth company during a year defined by rapid Fed hikes and dramatically higher real yields.
In fact, 2022 is on track to be the worst year ever for Tesla’s shares. December was especially cruel to Musk’s “precious child,” to channel KCNA.
Even if the stock manages to rebound a bit, it’s hard to come back from a 40% drop in less than four weeks.
In addition to consternation around Musk’s Twitter exploits, reports that the company intends to cut production at its Shanghai facility raised new questions about demand, as did news that Tesla is dangling discounts to US buyers.
Although the shares looked poised to rise on Wednesday, Tuesday’s outsized drop marked the 14th decline in 16 sessions.
“It feels like confidence is gone, and Tesla’s fairy tale suddenly ended,” one analyst said this week.
Not really. What it “feels like” is a perfect storm. Tesla, like virtually all other hyper-growth, long-duration equities in 2022, is laboring beneath the weight of the most aggressive Fed tightening campaign since Paul Volcker. Musk (and Cathie Wood) have all but begged Jerome Powell to stop.
At the same time, Musk’s share sales (and broken pseudo-promises to stop selling) have weighed on sentiment, particularly given the link to the Twitter saga.
Finally, it’s fair to assess that not every Tesla investor is enamored with Musk’s libertarian social media bombast, especially if his controversial political rhetoric is undercutting Twitter’s financial prospects and thereby raising the stakes for Musk of the acquisition.
As recently as October 20, Musk was still insisting on the idea that Tesla could be the most valuable company in the world. Of course, anything “could” be true, so I wouldn’t want to rule such a thing out. But I’d remiss not to note how increasingly far-fetched such an outcome now seems after December’s steep losses for the stock.
“I’m of the opinion that we can far exceed Apple’s current market cap,” Musk told analysts and investors on the company’s Q3 call. “In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined.”
At the time, Tesla’s market cap was around $650 billion. As of Wednesday, it was roughly $350 billion.
In fairness, Musk did say such a feat wouldn’t be easy. “It will require a lot of work, some very creative new products and always the luck,” he said.
I despise the man, but on the other side its hard to deny the novelty of Tesla products. I was the previous owner of a Powerwall. It automatically charged the battery to 100% when a storm was incoming ( to provide power in the event of an outage).
Do other car companies have over the air updates for their vehicles?
I’m not trying to be an apologist for the man, nor am I a fanboy, but I am buying this dip. I don’t think investors understand the power of software. (some) People are excited to work at Tesla, I doubt you would find the same for Chevy and Ford.
Pretty sure all the major car makers provide over the air communication with out cars. I get monthly readouts on my car’s systems and real time notifications if there is a problem that can create peril. There are at least seven or eight computers in my car and the company can shut it off remotely if requested by suitable authorization.
As to working for Tesla, I’ve read at least some tales of those who don’t really like working there. The reaction to Musk at Twitter was even worse, with thousands leaving and many having to be personally begged to return.
I’m not buying this dip but will consider buying at $40. The rising discounts on the cars (-$7500 is the latest) will lead to discounts in the stock very soon.
Between Twitter, interest rates and looming competition tesla is in for a rough ride. Going to be interesting to watch.
I often wondered how Tesla would do once BMW, Audi, Mercedes, General Motors and Ford got serious about producing electric cars. I think Musk will go broke at some point, as like, Trump, Putin etc he believes his own B.S!
At $350 billion it has about twice the market cap of Toyota. So even if you see Tesla becoming the most dominant automaker globally, it has another 50% to fall
Tesla’s stock is starting to look attractive in the same way that Meta’s does. Like Meta’s metaverse, Elon’s Twitter/libertarian fiasco is an anchor weighing Tesla down that likely won’t impact their long-term viability. Both companies are reaching the limits of their existing products, but those products still provide a firm foundation of cash flows and any Fed pivot would provide a major tailwind.
I’d still favor Meta because their founder isn’t actively antagonizing their customer base or regulators, but if Musk wises up, appoints a new Twitter CEO, and stops with the tweeting, Tesla could rally just as quickly as it dropped. As Musk noted, Tesla does have a lot of potential and people have short memories so Musk can still avoid permanent damage to the Tesla brand and maybe even get it back to a trillion dollar valuation in a few years.
I thought about the Meta comparison a lot yesterday, which means I thought about buying Tesla outside of an index fund. Ultimately, I decided against it. One problem for me is that Tesla’s cars are starting to look dated. They haven’t really changed the design, and relatively speaking, there aren’t many of them on the road (compared to… well, compared to all the other kinds of cars there are out there). You could argue that speaks to the market opportunity, but it’s problematic to me. Tesla isn’t a new company. Further, if the personality behind the personality cult is determined to irritate ~55% of the entire adult population in the developed world by way of deliberately contentious social media editorializing, I have to worry, as an investor, about how that may affect sales going forward, particularly as other luxury brands go electric. Typically, my threshold for buying stocks outside of an index fund is a 70% or more drop in a blue chip company (or a company that has, at one time, been a blue chip). For Tesla, I’m afraid that threshold is probably more like 85%. I need a huge cushion, but it’s getting close. Regardless of how much I don’t care for his rhetoric, I’d buy Tesla shares down another 15%.
TSLA still looks seriously overvalued to me, as in, another -50% to fair value based on consensus cash flows.
A Model 3 is a fine car, but I wouldn’t buy one for 2X its fair value.
Another risk to consider is that Musk may further divert his focus from Tesla, to SpaceX.
His stake in SpaceX is, on paper, worth more than his stake in TSLA ($66BN vs $47BN, roughly, after the most recent SpaceX round and Musk’s most recent Tesla sales). SpaceX feels like a Musk-suited business: fundamentally an engineering problem, with little competition, and lots of government revenue. That was what Tesla was, during its best growth period (excluding the artificial pandemic growth surge), but Tesla is rapidly becoming a different sort of business. Twitter is, of course, totally not a Musk-suited business.
Under this scenario, Musk could increasingly treat Tesla as his cash cow while turning his hype hose on Space X. Space X will block global warming! beam limitless power to Earth! mine untold riches from space! Have 5 billion internet customers! etc etc.