Tesla and Musk to Face Activist Pressure Targeting Share Buybacks in 2023

  • According to Wedbush, Tesla will face increasing pressure from activist investors in 2023.
  • Wedbush said Tesla may face pressure to launch a stock buyback program as share prices fall.
  • Tesla stock has wiped out $560 billion in market capitalization this year and is down more than 50%.

Tesla and Elon Musk could face increasing pressure from activist investors in 2023, according to a note from Wedbush analyst Dan Ives on Monday.

Tesla is a mature target for activists, as its stock price has halved in 2022 even as its core business continues to grow significantly. Tesla’s stock fell another 6% on Monday, bringing its year-to-date market cap loss of $560 billion.

Another reason Tesla is facing activist pressure is that CEO Elon Musk isn’t entirely focused on running the electric vehicle company. Instead, Musk splits his time between being the CEO of several different 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 make “strategic moves.”

“We also believe activism will start to rise in the broader tech sector as names like Salesforce and Tesla, two examples, will face increasing pressure around margins, buybacks and strategic moves,” Ives said.

There has been more and more talk among investors about a stock buyback program for Tesla in recent months after Musk mocked the idea of ​​stock buybacks on Tesla’s third-quarter earnings call.

“We want to work on the right process to make a buyback, but it’s certainly possible for us to make a $5 to $10 billion buyback,” Musk said.

According to data from YCharts, Tesla is trading with the lowest valuation multiplier since it first became profitable in 2020. The price-earnings multiple of the stock is 52x and the forward P/E multiple is about 32x. While that doubles the S&P 500’s forward-looking P/E of about 17x, it’s well below Tesla’s high gains of 1,401x in early 2021.

As competition in the electric vehicle industry heats up, it’s not yet clear whether this is a good time for Tesla to buy back its stake. instead of buying back shares

As such, any activist pressure on Tesla in 2023 will likely focus on low-hanging fruits such as refocusing Musk on Tesla responsibilities and launching initiatives to help improve profit margins.

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