Tesla Inc. TSLA shares extended their slide on Wednesday to a fresh two-year low, pressured by CEO Elon Musk’s decision to sell a small portion of his stake in the electric vehicle maker.
What Happened: Tesla shares are trading at a one-year forward price/earnings multiple of 42 times, the lowest since at least 2019, said Gary Black, managing partner at Future Fund. On a trailing 12-month basis, Tesla’s P/E is currently at 54.88.
See Also: 'Boy Who Cried Wolf:' Tesla Bull Says Elon Musk Losing Credibility As He Keeps Selling Shares Despite Promising 'He Is Done'
Ever since peaking at $414.50 in early November, the shares have been going through a lean patch. The lackadaisical phase has come despite the company holding up fairly well, both on the supply and demand side, amid the uncertain economic climate.
Musk’s questionable move to buy Twitter and the resultant apprehensions about his divided attention to Tesla are talked of as the primary reason for the stock debacle.
Black’s Recommendation: To lift the sagging stock, Black recommends that Tesla initiate a $10 billion stock buyback.
At $178, $TSLA now trading at the lowest 1yr forward P/E (42x) since at least 2019. A $10B buyback would be hugely accretive here and change the awful sentiment since the $TWTR deal. @MartinViecha @elonmusk pic.twitter.com/01BsL4GWAB— Gary Black (@garyblack00) November 10, 2022
Black had earlier sent an open letter to Tesla’s board, urging it to initiate a $10 billion buyback. In the letter, the Tesla bull laid down his case for the buyback and delved into the advantages of a buyback over dividends.
He also noted that a buyback will provide the company with a unique opportunity to accumulate the stock at well below his estimate of $550/share intrinsic value.
Price Action: Tesla closed Wednesday’s session down 7.71% at $177.59, according to Benzinga Pro.
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