Tesla has captured a lot of headlines this year with Elon Musk ensconced as head of DOGE, and charged with reducing excessive government expenditure and improving efficiency. This has not been a great outcome for Tesla shares, with the stock down more than 50% from the record highs at one stage. Sentiment has been further soured by rapidly falling EV sales. Elon Musk and many analysts continue to see the silver lining coming from autonomous driving and the key battery division.
Retail investors bought $7.3 billion in Tesla stock over the past two weeks according to JP Morgan with “buying behaviour signalling that retail investors are in ‘buy the dip’ mode.” But while retail investors are buying, Tesla insiders have sold huge amounts of stock. JPM said that “while this is not the longest consecutive streak of retail buying in Tesla, it is the highest magnitude among all past ‘buying streaks’ in over a decade.”
However, while retail investors are buying Tesla, insiders at the company are selling.
Since November, company insiders including board directors, the CFO, and Elon Musk’s brother have collectively sold a combined $335.2 million of Tesla shares. The stock sales occurred mostly at prices between $300 and $400 per share, according to filings made with the SEC. James Murdoch, a director on Tesla’s board, made the most recent insider sale disposing of $12.9 million worth at about $240 per share.
At a recent meeting, Elon Musk urged Tesla employees to hold onto their stock despite the recent volatility, which has been sparked in part by declining EV sales and also a boycott of the Tesla brand.
“If you read the news, it feels like Armageddon. I can’t walk past the TV without seeing a Tesla on fire. What’s going on? Autonomous driving will unlock Tesla’s true value on Wall Street. So what I am saying is, ‘Hang on to your stock’”.
Elon Musk might be right about autonomous driving, but the commissioning and rollout of a fully developed model could still be some time away. Meanwhile, the CEO is distracted from his role being pulled in different directions by DOGE and other companies such as Space X.
Overhead resistance on Tesla at $300 and above is likely to prove heavy. Given the considerable amount of technical damage, Tesla could well have further to go on the downside before the bottom is in. I suspect the rebound rally will soon run out of momentum, with rapidly declining EV sales and cash flow still set to dominate sentiment. I am a fan of Elon Musk’s success in the business world, but I would be standing aside and waiting for the dust to settle before buying Tesla (we don’t own the stock in our portfolios).
In China, Tesla EV rival BYD has gone from strength to strength. China’s consumers have switched to BYD which is more competitive on price and arguably now leading the technology race. Tesla sales have tanked in Europe and elsewhere as consumers protest the CEO wading into politics. Meanwhile, shipments from Tesla’s giant Shanghai factory, which opened in 2019, have declined for five consecutive months. As one fund manager said, “aside from witnessing the greatest brand destruction of our times thanks to Elon Musk, Tesla is also losing the innovation race.”
Tesla is struggling to keep up with Chinese rival BYD and a wave of other local EV makers. BYD announced a new ultra-fast charging technology, claiming it could provide enough power for 400 kilometres of driving range in just five minutes. BYD’s one-megawatt chargers are twice as powerful as Tesla’s fastest superchargers. Unlike Tesla, BYD stock recently hit a record high on the Hong Kong stock exchange (we own BYD in the Fat Prophets Global Contrarian Fund).
BYD has broken out of a long-established trading range to make a new record high. Near term, risks a pullback and potential retest of the HK$330 breakout level. I would be adding to positions on weakness (not advice). BYD has the potential to become the Toyota (the global auto leader) of the EV market.
Carpe Diem
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