Seth Goldstein, equity strategist at Morningstar Research Services, joined Cheddar News to discuss what to take away from Elon Musk's recent sale of Tesla stock.

What to Take Away From Elon Musk's Sale of Tesla Stock

well Tesla Ceo, Elon musk selling another $3.6 billion worth of tv makers stock possibly to help things over at twitter, which we do know is facing a host of issues, so musk has now sold more than $23 billion worth of Tesla stock this year, just months after promising that he would stop doing so in order to prop up twitter. Meanwhile, ark invest Cathy wood, buying the post sale dip, scooping up nearly $12 million worth of Tesla stock and joining me now is Seth Goldstein equity strategist at Morningstar Research Services. Thanks for coming on the show. What can we take away from musk's latest Tesla share sale? Well, I think it's clear that twitter may need some more financing, especially in in light of you know, rising interest rates, I think twitter got this sort of bridge loan financing so much to close the deal, but now they're looking to secure permanent financing sources which has involved must selling shares last month this month and you know, until we get some sort of signal from us or from twitter that, that the permanent financing is in place and that the company is able to fund it, its future expenditures, this will likely be an overhang on Tesla stock that we could see future share sales from us to support twitter, Okay, I think that's a good point. I mean thankfully Cathy Wood has kind of been the Tesla boost if you will right when Elon musk has decided to sell shares, we know that Cathy wood has come in and scooped up shares in the past. So giving it, I guess a little bit of a prop there from falling even further. That is that what is your projection for Tesla stock going forward? And do you have any calls on twitter? Of course, twitter is now a private company, but whether or not twitter can actually be successful in this new wave? Well, we did think twitter was undervalued before the acquisition. So we did think that twitter was, was, you know, viable growth company. Um, but looking at Tesla, we view the fact that undervalued right now, you know, when you look at the actual underlying business, Tesla is hitting all subjective, you know, the Tesla just tweeted out a couple hours ago that the gigafactory in texas was ramping up sales and hitting the 3000 of car a week production milestone. And you know, we've seen similar progress reports of Berlin. So the two new giga factories are ramping up, We're seeing progress on going out the insurance business and more states, we're seeing progress on the full self driving subscription software. So for business standpoint, we think everything for Tesla is looking good. However, as long as there's still this sort of twitter overhang on the stock, you know, we, we think that some investors may be cautious and want to stay out of the name. Okay, so I like this tweet that I want to show here the irony, of course, putting this out on twitter Seth of all places, one of Tesla's biggest individual investors I see here turning to twitter on Wednesday yesterday, take a look ST Tesla needs and deserves to have a full time ceo our Tesla investors, you think starting to feel like musk is spending too much time on twitter. Right? So the share sale is one thing, but we also have to talk here about musk's basically diversification. He's got what, 56 different companies out there yet. He is still the Ceo of Tesla. Yeah, yeah, that's a great point. And you know, I do think part of the twitter overhang is not just to share sales. It's also twitter needing to find a permanent ceo, which would allow much to return more time to Tesla. Now when we look at Tesla, you know, must have stepped the strategy and at this point it's more about execution. So I do think the existing leadership team in the various division is focused on that and that's why we're seeing progress being made. However, as a signal to the markets of who's running Tesla, I do think it's important that eventually at some point next year there's a permanent ceo named for twitter. Yeah, who would be a good ceo for twitter. I don't know if you have anyone in mind set, I mean I'm not sure how musk honestly would pick a ceo of twitter but that of course would I think be a major turning point in the story. Yeah. You know, I would expect someone who has, uh, ex industry experience. So, you know, I'm sure there's a deep roster of people that would be suitable candidates. But you know, I think it really, it really just comes down to um, must need to name someone and at that point, you know, for for Tesla stock that starts to relieve the overhang. Okay, well, as we mentioned, Tesla shares down a lot this year. I know you said the stock undervalued well outperforming the broader markets death. But as we look ahead to next year, a potential recession on the horizon, consumers pulling back on spending a bit and certainly the retail sales data did show that was the case for auto sales in this latest report that we got this morning. What is the outlook for Tesla as a business in 2023 amid lower growth? So while there, while we do expect an economic slowdown for the broader economy, the silver lining for Tesla is that the majority of the markets, their song to is luxury autos and luxury goods tend to perform better during economic slowdown than the wider consumer goods economy. And so for Tesla, we still think they're going to see strong demand growth and they're going to be benefited by the inflation reduction act, bringing back subsidies that Tesla has not had for quite a few years now. So I do think that demand will still remain strong, will prove resilient and lead to a strong double digit growth year for Tesla in 20 23rd Street. All right, Seth Goldstein, equity strategist and Morningstar Research Services said. Thank you.