Tesla’s share price, having doubled after the virus-induced market slump, fell by more than 10% following the latest outburst from CEO Elon Musk (pictured). He tweeted that the electric-car maker’s stock price “is too high”, says Richard Waters in the Financial Times. This is ironic given that Musk has been engaged in a “running battle” with short-sellers who have complained “that the shares are artificially inflated”.
Musk’s decision to talk down his own company’s share price is clearly a “kick in the teeth” for investors, says Liam Denning on Bloomberg. However, he is right to stress that Tesla’s stock price is “an emotional, not financial, construct”. After all, the pandemic has piled more stress onto Tesla’s “already less-than-utility-like model”. Despite analysts’ euphoria at the “peanut-sized profits” Tesla announced in its latest earnings report last week, there are serious concerns about what the continuing suspension of activity at Tesla’s main factory in California will mean for future cash flow.
Still, the profit and the recent comeback in the stock price show that Tesla is doing better than its traditional competitors, says Antony Currie on Breakingviews. While the firm’s valuation of 75 times earnings is clearly “unjustified on pretty much any sane metric”, its soaring share price gives it “potential access to far more capital”. And with shares in Tesla’s competitors cratering, it might be a good idea for Musk at least to consider “snapping up” a bigger producer for a “song” and “accelerating his goal of advancing the mass production and adoption of electric vehicles”.
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