Tesla and Musk face activist pressure in 2023 aimed at share buybacks

  • According to Wedbush, Tesla will likely come under increasing pressure from activist investors in 2023.
  • Wedbush said Tesla could come under pressure to launch a share buyback program if the stock price falls.
  • Tesla shares have cleared $560 billion in market value this year, down more than 50%.

Tesla and Elon Musk may face more pressure from activist investors in 2023, according to a note from Wedbush analyst Dan Ives.

Tesla is a ripe target for activists, because while the underlying business continues to grow significantly, its share price will have halved by 2022. $560 billion.

Another reason why Tesla is likely to come under pressure from activists is because CEO Elon Musk isn’t fully focused on running the electric vehicle business. Instead, Musk divides his time between being the CEO of several high-profile companies, including SpaceX, Tesla, and now Twitter.

According to Ives, activist investors could pressure Tesla to launch a stock buyback program, improve profit margins or take “strategic moves.”

“We also believe that activism in the broader technology sector will increase as names such as Salesforce and Tesla, two examples, will face increasing pressure around margins, buybacks and strategic moves,” said Ives.

A share buyback program for Tesla has been increasingly discussed among investors in recent months after Musk teased the idea of ​​a share buyback on Tesla’s third-quarter earnings call.

“We want to go through the proper process to do a buyback, but it’s certainly possible for us to do a buyback in the range of $5 billion to $10 billion,” Musk said on the call.

According to YCharts data, Tesla is trading at its lowest valuation multiple since it first became profitable in 2020. The stock has a P/E ratio of 52x and an expected P/E multiple of approximately 32x. While that’s still double the S&P 500’s expected P/E multiple of about 17x, it’s well below Tesla’s high earnings multiple of 1,401x in early 2021.

Whether now is a good time for Tesla to buy back its own shares as competition in the EV sector heats up remains to be seen, as some argue that Tesla is still in growth mode and needs to reinvest its profits to maintain its lead. strengthening in the sector. instead of buying shares.

Therefore, any activist pressure on Tesla in 2023 will likely focus on low-hanging fruit first, such as refocusing Musk on his Tesla responsibilities and launching initiatives that would help improve profit margins.

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