Tesla stock cut back below a key technical level early Thursday, following a four-day, almost 18% rally. The pullback also followed comments on Wednesday made on X, formerly Twitter, by Chief Executive Elon Musk in support of an antisemitic post.
Several TSLA bulls joined the chorus criticizing the Tesla chief's language. Meanwhile, IBM decided Thursday to pull advertisements from X following reports ads appeared next to posts supporting Adolf Hitler and the Nazi Party. Apple also chose to pause ads on the social media platform, Axios reported Friday.
For investors the question is, did the controversy cause and/or amplify the pullback? Or was the move a technical response to normal profit-taking by investors?
Late Wednesday, Elon Musk endorsed a post from "The Artist Formerly Known as Eric," an X user with 4,800 followers. The post echoed long-standing antisemitic tropes, saying that Jewish people stoke hatred of white people and support allowing "hordes of minorities" into the U.S.
"You have said the actual truth," Musk responded on X. The Tesla chief executive added that the Anti-Defamation League (ADL), a Jewish advocacy group, "unjustly attacks the majority of the West" and that he is "deeply offended by ADL's messaging and any other groups who push de facto anti-white racism or anti-Asian racism or racism of any kind."
On Thursday, following the comments and as controversy over Musk's comments brewed, Tesla stock opened 1.5% lower on average volume. Shares ended Thursday down 3.8% to 233.59 on a 13% rise in volume. That left the stock back below the stock's 50-day moving average, giving back the key level of support overtaken a day earlier.
Tesla stock dipped nearly 2% early before advancing 0.4% to 234.47 in above average volume Friday during market action.
TSLA Bulls Call Out Musk
Musk's comments were denounced by many as antisemitic, including by the White House and some long-term, high-profile Tesla bulls. The concern for TSLA stock investors is that Musk weakens the Tesla brand, which is intertwined with his own image.
"It is unacceptable to repeat the hideous lie behind the most fatal act of Antisemitism in American history at any time, let alone one month after the deadliest day for the Jewish people since the Holocaust," White House spokesperson Andrew Bates said in a statement Friday.
"We condemn this abhorrent promotion of Antisemitic and racist hate in the strongest terms, which runs against our core values as Americans," Bates added.
Meanwhile, Ross Gerber, a longtime TSLA supporter who heads Gerber Kawasaki Wealth and Investment Management, told CNBC Thursday evening that he had "never had this with any company I've ever invested in ever in my life where the CEO of the company himself does so many detrimental things that is it destroying the brand."
"As a shareholder, it's absolutely outrageous, his behavior and the damage he's caused to the brand," he said. Gerber added that he is not selling his Tesla stock.
Gary Black, the managing partner of the Future Fund, posted on X Thursday that Musk "has to stop the antisemitic remarks" before he damages the Tesla brand.
"Two of my Jewish clients reached out to me this morning to express their outrage over his Twitter comments," Black wrote.
Tesla, Elon Musk And Social Media
After Musk took over Twitter on Oct. 28, 2022 purchasing the social media platform for $44 billion, some longtime Tesla stock bulls worried Musk's focus on the social media platform, along with negative attention, would weigh down Tesla stock.
Musk appeared to lessen those fears when he hired Linda Yaccarino, NBCUniversal's advertising chief, as the new CEO for X Corp. The Tesla chief added Yaccarino will focus on business operations while he will work on product design and new technology.
At the time, Wedbush analyst Dan Ives wrote the news ends some of the "distraction risk around the Tesla story."
On Nov. 9, HSBC initiated coverage of Tesla stock with a reduce rating and 146 price target. Analyst Michael Tyndall wrote that Tesla vehicles may well be the main driver of revenue and profits currently, but the future for Tesla is about robots, autonomous vehicles, energy storage and supercomputers.
"We see considerable potential in Tesla's prospects and ideas, but we think the timeline is likely to be longer than the market and valuation is reflecting," Tyndall wrote.
The analyst added that Chief Executive Elon Musk presents a "considerable singleman risk."
On Thursday, IBM suspended advertising on X, following a report by the Financial Times that the social site ran ads next to pro-Nazi posts. A Media Matters study also found ads from Apple, Oracle and many others next to antisemitic content.
Musk commented late Thursday on X that "Media Matters is an evil organization."
Tesla Stock
But did the controversy trigger negative trading in Tesla stock?
The four-day run begun Nov. 10 drove shares back above resistance at their 50-day moving average for the first time in several weeks. (The stock is building the right side of a double-bottom base giving it a 278.98 buy point, according to MarketSmith analysis.) Tesla shares pulled back less than 4%, on volume that was 12% above average.
Tesla's prior chart action shows a three-day rally back above its 50-day line in May, 2022, also prefaced a pullback below support in the following session. That drop was an 8% pullback in trading volume that was 18% above average.
A seven-day rally in August also hoisted shares past resistance and above support. Shares quickly reversed, shedding 6.6% on a 22% increase in volume. On May 5, 2022, Elon Musk announced he would be CEO of Twitter and also reported plans to bring in outside investors. Both were negatives for investors.
Aug. 5 was the date of a fairly mundane shareholder meeting. There was also a minor news item noted that California's Department of Motor Vehicles filed a complaint alleging Tesla had misled consumers as to the effectiveness of its Autopilot and Full Self-Driving features — not a news item likely to have placed much, if any, downward pressure on the stock.
Thursday's reversal appears to have held character with previous pullbacks. However, TSLA's move may have gotten a mild nudge from the antisemitic Musk controversy. But Tesla shares pared losses in early action Friday, as the stock tested, then rebounded from support at its 21-day exponential moving average.
TSLA has advanced more than 16% in November, with preliminary Cybertruck deliveries beginning Nov. 30. Morgan Stanley analyst Adam Jonas wrote on Nov. 6 investors should look for a number of factors that would signal the Tesla stock slide is halting.
Jonas wrote Tesla must stop missing consensus EPS estimates while successfully launching new vehicles, including, but not limited to, the Cybertruck. The Morgan Stanley analyst added Tesla must demonstrate its business model is moving toward licensing and software and other products that have "relevance beyond the auto market."
Since the beginning of 2023, Tesla stock has advanced about 90%, broadly outperforming the broader S&P 500 index.
Tesla stock ranks sixth in the 35-stock IBD automaker industry group. The S&P 500 component has a 91 Composite Rating out of a best-possible 99. Tesla stock also has a 91 Relative Strength Rating and an 88 EPS Rating.
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