Tesla Inc (Tesla Stock Quote, Chart NASDAQ:TSLA) has problems both big and bigger, according to Norman Levine, managing director at Portfolio Management Corp, who points to CEO Elon Musk’s questionable leadership and a rise in the car company’s competition as reasons to avoid the stock.
Ahead of its next earnings report due in early November, Tesla is reportedly making a push to up its sales numbers by getting owners to bring friends on board and by calling on volunteers to help speed things up at local delivery centres. Said to be driven by Musk’s prediction last quarter that his company would be both profitable and cash-flow positive by the second half of 2018, the push even has the CEO tweeting that a shortage of car carrier trailers is factoring into the mix.
But much has happened to the automaker and its mercurial CEO since that Q2 report on August 1, one which failed to meet analysts’ expectations for earnings but came in slightly above consensus on revenue. Overall, it was enough to boost investor confidence in the company, whose share price rose sharply over the following week — only to just as dramatically fall in response to Musk’s own antics, not the least of which was a surprise tweet indicating that he intended to take Tesla private. As a result, TSLA is currently trading right where it started off the year at the US$312.00 mark.
That volatility seems par for the course with Musk running the show, says Levine.
“The CEO is quite erratic and I like to have confidence in a CEO,” says Levine to BNN Bloomberg . “What happens with a lot of entrepreneurs is that they build up companies and then stay at the helm too long. They’re good at getting a company to a certain level but they need professional management after that, and that’s not happening here. [Tesla] is at that stage where they need it and he’s viewed now more as a liability than an asset.”
“The other problem is that up until very recently, Tesla has had the luxury electric vehicle market to its own. Now, you’ve got the major auto manufacturers — Mercedes announced that their electric vehicles are coming out in the next couple of years — and it’s the first time that the consumer who wants a luxury electric vehicle has had a real choice. That’s going to work against Tesla,” he says.
“[Tesla’s Model 3] is getting great reviews but they’re still turning out a relatively small number of them, and once they start getting real competition, I’m wondering what kind of upside there’s going to be,” he says.