Wedbush claims that Tesla will face activist investor pressure next year to buy back stock after its shares are cut by half in 2022.

Twitter staff received a memo from Elon Musk on Thursday, confirming that job cuts would be announced Friday.Carina Johansen/Getty Images
According to Wedbush, Tesla will likely face more pressure from activist investors in 2023.

According to Dan Ives, a Wedbush analyst, Tesla and Elon Musk may face greater pressure from activist investors by 2023.

Tesla is an attractive target for activists as it has seen its stock price drop by half in 2022, despite its substantial growth. Tesla stock fell another 6% Monday, bringing its annual market value loss of $560 billion to $560 billion.

Tesla will likely face activist pressure because Elon Musk, the CEO of Tesla, isn’t fully focused on running the electric car company. Musk instead splits his time being CEO of multiple high-profile companies, including SpaceX and Tesla, as well as Twitter.

According to Ives activist investors could press Tesla to start a stock buyback program or improve profit margins.

Ives stated that activism will increase in the wider tech sector, as companies like Salesforce and Tesla will be under increasing pressure to make strategic moves, buybacks and margins.

Investors have been talking about Tesla’s stock buyback program in recent months, after Musk suggested it on Tesla’s third quarter earnings call.

Musk stated that while we are still trying to find the best process for a buyback, it is possible to do one on the order $5 billion to $10 billion.

According to data from YCharts, Tesla’s valuation multiple is at its lowest since 2020 when it became profitable. The stock’s price-to-earnings multiplier is 52x, and its forward P/E multiple is 32x. It’s still more than twice the forward P/E multiplier of the S&P 500 of 17x but it’s far below Tesla’s high earnings multiple, 1,401x in early 2021.

It remains to be seen if Tesla should buy back its stock now that there is more competition in the EV industry. Some would argue Tesla is still growing and should reinvest its profits in order to strengthen its position in the sector.

This is why any activism on Tesla in 2023 will likely first focus on low-hanging fruits, such as Musk’s responsibilities at Tesla and initiatives that would improve profit margins.

Business Insider has the original article.
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By: mfox@businessinsider.com (Matthew Fox)
Title: Tesla will face stock buyback pressure from activist investors next year after shares get cut in half in 2022, Wedbush says
Sourced From: markets.businessinsider.com/news/stocks/tesla-stock-buyback-program-activist-investor-pressure-elon-musk-wedbush-2022-12
Published Date: Mon, 12 Dec 2022 20:49:26 +0000