This is a difficult start for Megacap Tech stocks. As of the market closures on April 24, each member of the "Magnificent Seven" has produced negative returns so far this year.
None of the darling list of artificial intelligence (AI) is worse than electric vehicle (EV) manufacturers Tesla (NASDAQ: TSLA). When I wrote this, Tesla's stock price fell 36% this year.
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One of the biggest factors driving Tesla’s stock sell-off is the damage to the company’s brand. Let’s explore why investors have been focusing on recent brands and more importantly, assessing why these fears may be exaggerated.
Brand interests are one of the most valuable assets a company may have. Few businesses in the world can immediately recognize their products. apple,,,,, Coca Cola,,,,, McDonald'sand Nike It is a rare company when it comes to building brand moats.
I'm not sure I'll put Tesla on top of the most recognized brand in the automotive industry. But, in the EV subsector of the wider industry, I think it holds the throne (or close to it).
For most companies, reaching global scale and brand recognition will take billions of dollars to sell and market. While Tesla does invest in advertising to some extent, the company has another thing, and no other automotive business can claim: outspoken CEO Elon Musk.
As I wrote a year ago, Musk is more or less a major marketing tool for his company. Thanks to social media, he has a huge influence all over the world, and can sell his company’s latest and greatest companies through buttons. The problem is that his influence can be both an asset and a responsibility. Let's explore what I mean.
In the final stages of the 2024 presidential election, he became a key financial supporter of Republican nominee Donald Trump. After winning on November 5, 2024, Trump eventually appointed Musk to lead a new plan called the Department of Government Efficiency (DOGE).
The Governor’s main goal is to identify areas of wasted spending in the federal budget to reduce the U.S. deficit. At a high level, many people may not see the problem with this goal.
But, like what Musk often does, he has already conducted large publicity campaigns. Almost every day, it posts on social media what contracts cancel, why they were canceled and the value of these transactions.
These actions have caused a sensation among some political activists and have led to a ripple of protests in many Tesla dealerships. As Musk said recently on his first quarter call:He naturally fought back from it was those who received wasted money and unfortunate The dollar will try to attack me and the Doge team and anything related to me. ”
The fission created by Musk's political ties has caused some investors to worry that consumers might buy alternative electric cars and pass them through Tesla for fear of being mislabeled as supporters of Musk or any number of polarized politicians.
As a result, the company's growth prospects are indeed questioned.
Given that Trump will spend another three and a half years in the Oval Office, bearish investors may think Tesla’s best days are in the rearview mirror, and the company will be able to recover soon. Fortunately, during the first-quarter earnings call, management dropped a breadcrumb that made me (long-term Tesla investor) more optimistic.
During the phone call, an executive said the company witnessed "In Q1, the number of test drives worldwide hit a record number. So interest is still high. Now, we Continue to see good interest. ” Musk followed this comment, saying: "In terms of no macro issues, we can't see a decrease in demand."
The three words I personally feel relieved are "the interest is still high."
On the phone, Musk hints at the fact that he will cut back on Doge's time. I think this will be a near-term benefit, but at a higher level, this move may not even be necessary. Given that management guarantees that demand levels remain strong, I am cautiously optimistic about the company's long-term growth.
The fact that you ask Tesla to have many AI-powered products and services at the top of a powerful electric car level should scale in the coming years, the stock still seems to be a solid opportunity for those who can handle some volatility and uncertainty here and there.
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Adam Spatacco has positions at Apple and Tesla. Motley fool has a place and recommends Apple, Nike and Tesla. Motley Fool has a disclosure policy.
Worry about Tesla's brand issues? These 3 words of the company's first-quarter earnings call should give your fears a rest. Originally published by Motley Fool