Cailianshe, December 13 (Editor Bian Chun) According to a report released by investment bank Wedbush analyst Dan Ives on Monday, 2023 Tesla and Musk may face increasing pressure from radical investors.
Although the company's basic business continues to grow significantly, Tesla stock price has fallen by more than half so far in 2022. Tesla's stock price plummeted 6% on Monday, causing its market value to evaporate by $560 billion this year. The stock price plunge has made Tesla a target of pressure from radical investors.
Another reason Tesla may face pressure from aggressive investors is that its CEO Musk is not fully focused on running the electric car company. In addition to Tesla, Musk also has several well-known companies including SpaceX and Twitter, which has taken away his time and energy.
Radical investors, also known as rights protection investors, usually refer to some hedge funds and institutional investors. In order to defend their own rights, they will ask the company to make changes and even interfere in corporate decisions, such as increasing dividend payments, repurchasing stocks, reducing costs, adjusting management, and sometimes even spin-off and reorganizing companies.
Radical investors may pressure Tesla to start a buyback
According to Ives, radical investors may put pressure on Tesla to start a stock buyback program, increase profit margins, or take "strategic measures."
"We also believe that rights protection actions in the entire technology industry will begin to increase, and companies such as Salesforce and Tesla will face increasing pressure on profit margins, buybacks and strategic measures," Ives said.
In October this year, Musk talked about the possibility of stock buybacks on Tesla's third-quarter report conference call, saying that it could buy back 5 billion to 10 billion US dollars in stock. Since then, investors have talked more and more about Tesla's stock buyback program.
According to data from financial services company YCharts, Tesla's current price-to-earnings ratio is at its lowest level since its first profit in 2020. The stock has a 52-fold price-to-earnings ratio and a forward price-to-earnings ratio of about 32-fold. Although this is still twice the forward P/E ratio of the S&P 500 index (about 17 times), it is far lower than Tesla's ultra-high P/E ratio of 1,401 times at the beginning of 2021.
It is worth noting that is a good time for Tesla to buy back shares as competition in the electric vehicle industry intensifies, and it remains to be seen whether it is now a good time for Tesla to buy back shares. Some believe Tesla is still in growth mode and should reinvest its profits to consolidate its industry leadership rather than buy back shares.
Because of this, any pressure exerted by radical investors on Tesla in 2023 may first focus on easy-to-achieve goals, such as getting Musk back to focus on his responsibilities at Tesla and launching initiatives that will help boost the company's profit margins.
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