Tesla investors attempt to see past Elon Musk’s many distractions

Elon Musk wants to buy Twitter. This is good news for Twitter shareholders who have been suffering for years, but Tesla investors believe he still has time for them. They also need some help.

Musk has many admirers on Wall Street and behind his wheel. Some are tired of the fact that the world’s wealthiest person is unable to focus on the company that gave him the majority of his wealth.

After Wednesday’s close, Tesla (TSLA), reports its earnings. Concerns about Tesla’s (TSLA), recently reported lower production and delivery numbers for the third quarter, have led to shares falling more than 35%.

Wall Street expects Wall Street to continue seeing strong sales growth and earnings growth. Consensus forecasts call for more than a 60% increase in revenue and profit. Analysts have been reducing these estimates over the last few weeks.

This is partly because Tesla is facing increasing competition from Ford (F), GM (GM), Volkswagen (VLKAF), and other electric vehicle startups such as Rivian or Lucid in the United States.

China is also facing major challenges, with Tesla competing against local EV rivals like Nio (NIO), Xpeng, and Li Auto. BYD is also a Chinese auto company that Warren Buffett’s Berkshire Hathaway (BRKB) backed.

Fair enough, the whole auto industry is in trouble this year because of growing concerns about a global recession and rising energy prices.

All major US, European, and Japanese carmaker stocks are down around 20% to 45% this fiscal year. The shares of pure-play EV companies in both the US and China have plunged between 60% and 80% by 2022.

Too many distractions

Gary Black, managing partner of the Future Fund, and a Tesla shareholder has been tweeting over the past few weeks about how concerns about Twitter are a headache to Tesla investors.

Black tweeted that there were several issues for Tesla because of Twitter. Two of the most significant? Two of the biggest?

Tesla does not have a chief operating officer. Musk must be hands-on with Tesla while being distracted by SpaceX, The Boring Company, and Neuralink, as well as Twitter (TWTR).

Tesla could be hurt by a slower global economy and possible recession, as evidenced by the low production numbers and deliveries.

Morgan Stanley analyst Adam Jonas asked, “Are you sure that the problem is only supply?” in a recent report.

Jonas said that it was unreasonable to assume that the company could continue raising prices without causing demand to suffer, particularly if the economy slows.

As Tesla faces increased competition in the US, demand could be affected.

Analysts at S&P Global Ratings stated that Tesla must expand its product range to compete with established global automakers and start-ups.

S&P analysts believe Musk will be able to pull it off. The S&P analysts recently upgraded their Tesla credit rating. They acknowledged that it would not be easy. There is very little room for error. S&P projects that North American electric vehicle models will surpass 100 by 2026. This is more than four times the current level.

Analysts stated that “over the next 3-5 years, a few of these could become formidable rivals for Tesla.”

Streaming meltdown

Netflix investors are well-versed in the risks that can occur when a market you once dominated becomes mainstream. The streaming giant’s shares have plummeted more than 60% by 2022, making them one of the worst performers on the S&P 500.

Investors will be keeping an eye on Netflix (NFLX), as they wait to see if the company can stem the bleeding that has resulted in the loss of subscribers in the first two quarters.

Netflix’s problems prompted it to announce plans last Thursday for an advertising-supported subscription plan that is cheaper. The ad-based version, also known as old-fashioned TV, will be launched by Netflix in November. This bold move may not be successful.

Jeffrey Wlodarczak from Pivotal Research Group, who holds a “sell” rating for the stock, stated that “we see the move by the global streaming incumbent player to offer an ad-supported tier as defensive and not offensive and fraught… a risk that continues to underappreciated.”

Many consumers are cutting back on the amount they will spend on streaming services due to recession worries. This is bad news for Netflix in particular.

Eric Sheridan, a Goldman Sachs analyst, stated in a report that he is “concerned” that more subscribers could “spin down” into the lowest-priced plans of users in any possible consumer recession in the next 6-12 months. In other words, users will ditch the more costly plans in favor of less profitable, lower-priced subscriptions.

Netflix is not the only streaming service that is in trouble. The shares of Disney (DIS) are down almost 40% this year. There is also an ad-based Disney (DIS+) version.

Netflix and Disney+ are not the only options. There is also Disney-controlled Hulu and Amazon Prime Video (AMZN), Apple (AAPL), TV+, Peacock, and Paramount+ as well as Disney-controlled Hulu and Disney+.

Investors worry about the impact of economic slowdown jitters on the media sector. They fear that consumers may not be willing to pay more for their monthly subscriptions and that corporate advertising budgets might also decrease.

Peacock shares owned by Comcast (CMCSA), Paramount, and Warner Bros. Discovery are down 40% to 50% in this year’s fiscal year.

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