Elon Musk is putting an old saying about notoriety to the test.
There is no such thing as bad publicity, the saying goes.
But Musk’s increasingly strident posts on Twitter are beginning to have an impact at Tesla, where he also serves as chief executive.
Tesla’s favorability ranking has declined by 53.5% over the past year, hurt by Musk’s tweets after he acquired Twitter and took the social media company private.
Just 13.4% of American adults view the EV maker favorably as of January 2023, according to data from Morning Consult, a brand intelligence firm. A year ago, 28.4% of American adults had a positive view of the company, whose shares have fallen 61.2% over the past year.
The decline was led by Democrats who tend to be fans of electric vehicles, including buying Teslas. Just 3% of these adults had a favorable opinion of Tesla, a rapid decline from 10.3% since December 2022.
Many investors worried that Musk would focus solely on Twitter after its $44 billion acquisition in October. The billionaire’s tweets also became more conservative. His decision to allow previously banned accounts to return to the microblogging site to tweet racist or anti-Semitic comments also alienated both users and advertisers.
Tesla bull Gary Black said the Tesla brand hasn’t “taken a hit” despite those concerns.
When Teslas’ favorability fell, Musk stopped tweeting conservative views, he said.
“Elon is a smart guy and he’s learned to stop tweeting more conservative views,” Black said. “You don’t want his brand affected by his more right-leaning views, especially if his client’s franchise is over-indexed to climate-friendly Democrats. That annoys them.”
The Morning Consult outage is only temporary, he said in a tweet.
“The fall in $TSLA The favorability scores should come as no surprise, given Elon’s acquisition of Twitter in October, and Elon’s tendency to express right-wing political views, which has likely angered many in the Democratic base who have traditionally over- indexed Teslas,” Black tweeted on Jan. 18. .
The drop in favorability should reverse, he said.
“I expect TSLA favorability ratings to stabilize or improve from here. In 2023 @Elon Musk has significantly reduced tweets about his political views on TWTR,” Black tweeted.
Tesla missed its 2022 delivery target and Musk slashed prices on its two flagship models: the entry-level Model 3 sedan and the Model Y SUV, which make up 95% of its 2022 deliveries.
The price reduction ranges between 7% and 20% and there are two models eligible to benefit from the new US federal tax credit of 7,500 dollars.
Tesla price cuts boost stock price
Massive price cuts averaging $10,000 per vehicle “help,” he said. “This is driving $TSLA shares, despite a 16% cut in FY23 estimates over the past month.”
Tesla shares have risen 5.39% over the past five days after a 14.07% drop over the past month.
Black, managing partner of the Future Fund, is confident that massive price cuts of up to 20% for some models will not affect the EV maker’s long-term status and valuation.
He said Musk’s cuts “seem to have a positive impact on sales” as the billionaire tries to pick up growth as sales numbers fall.
The number of weekly Tesla vehicle registrations in China rose to 12,654 for the week of Jan. 9-15 from 2,110 the week before, Black said.
Registrations are a metric that analysts use to track the number of cars being delivered and registered from buyers.
“Tesla is still the cool car and clearly the number one car with a 60% EV market share in the US and less than 20% globally,” he said. “It continues to be the most desired car for electric vehicle buyers.”
The price cuts were necessary even though they will hurt profit margins in the short term, Black said.
Tesla consists of 9.2% of Black’s Future Fund Active ETF FFND as of January 17. The electric vehicle maker had a terrible fourth quarter due to “noise” from Twitter and the impact of lower output from its factory in China, he said.
Future Fund ETF, which launched in August 2021, bought more Tesla shares last week at $105 a share, but Black did not disclose the number of shares.
“They had to do something to get volume growth,” he said. “It’s hard to say if they were too much. They needed to do it.”
New lower Tesla prices launched
Retail prices now start at $43,990 for the rear-drive Model 3 and $53,990 for the Model 3 Performance, according to the company website.
All Model Y configurations will now be eligible for the tax credit, which was not the case before the price cut.
To qualify for the federal tax credit, cars, sedans, and trucks must have a retail price of no more than $55,000. SUVs, on the other hand, with a retail price of up to $80,000 are eligible for the credit.
“There will be a significant impact to TSLA’s near-term gross margin, and the math depends on how long these new price levels last,” Chris McNally, an analyst at Evercore ISI, warned in a research note.
However, by lowering its prices, Tesla solves a problem pointed out by Toni Sacconaghi, an analyst at Bernstein, in a January 2 note.
“We think Tesla will need to lower its growth targets (and run its factories below capacity) or maintain and potentially increase recent price cuts globally, putting pressure on margins,” he said. “We see demand issues persist until Tesla can make a lower-priced offer in volume, which may be as early as 2025.”
During a Twitter space in December, Musk said the logic behind the new pricing strategy: Margin compression during a recession allows volume to continue to grow. Tesla can make up the shortfall by selling software and services like Full Self-Driving, its advanced driver assistance system.
In early 2022, some buyers waited nine months for a Tesla, but those “days are long gone,” Morgan Stanley analyst Adam Jonas said on January 13. He has a price target of $250.
