Wall Street’s Message: Rein In ‘TechnoKing’ Musk’s Reign

This time, the Tesla TSLA stock (TSLA) drop looks more permanent. Amid the widespread fanfare of new and established electric vehicle manufacturers introducing their new offerings, Tesla’s “TechnoKing” Elon Musk is flailing about, even as he continues to lose top executives. (CNN article, “Tesla desperately needs a No. 2 for Elon Musk” explores Wall Street’s concerns.)

It’s time to extract the connotation of magic from “Tesla” and “Elon Musk”

Investors reward companies that offer exciting and rational growth stories. The explanation of a company’s growth potential can produce stock price gains well before earnings arrive.

Such was the case for Tesla, with its electric vehicle leadership and novel innovation. However, there are now three problems for Tesla.

The first problem is that It’s been eleven years

The dream has become reality. Tesla is now fully operational. At this point, Tesla should be showing substantial, rising growth in revenues and earnings. However, earnings are paltry, made skimpy by executive stock-based compensation costs. Moreover, the company should be a cash machine that fuels further growth, instead of relying on periodic $5 B stock sales to shore up its cash account.

The second problem is the invasion of competitors

New products, new designs, improved performance, better service, trusted names and even new companies with exciting new stories. An early leader – even Tesla – is not allotted a spot atop a growth industry. It must fight wisely to retain its status, and that means having ample resources, a focused strategy and depth of superior management.

The third problem comes from Tesla’s lack of management depth, superior or otherwise

It is worrying Wall Street. That concern is obvious in the stock’s 33% decline even as the stock market rose 10%. Worse, the fulfillment of that management need is running in reverse. There is a recurring executive exodus. Moreover, Elon Musk, self-appointed “TechnoKing” of Tesla, clearly views himself as superior on all fronts. This situation is a classic example of a brilliant innovator attempting to be a (the) savvy business chieftain. The only solution to this problem is for the Tesla board to install a management team that can focus on the company’s needs. Without this change, expect the Tesla story to wither, the business to stagnate and investors to join the executive departures. Remaining employees and investors then become hangers-on, waiting and hoping for the exciting days to return – but they don’t.


The bottom line: Don’t count on a Tesla new high run-up

Down 1/3 to $600 from its $900 high, TSLA needs to climb 50% to regain its lost ground. But the competitive world is more alive now, and it is less friendly for Tesla. That environment has Wall Street worried, as does Elon Musk’s flailing about.

So, don’t expect that 50% climb to be quick or easy. When (if) it comes, there will be ample selling by professionals and individuals wanting to “lighten their positions” or just get out.

Worse is the risk of a further collapse. The stock’s fundamental pricing remains high and the stock picture is negative, as shown below. Add in the shareholders hanging on because of the past magic, and there is the potential for another selloff.

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