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Elon Musk
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News that
Tesla
maybe a Chinese problem stirred the stock a bit on Friday.
After all, China is very important to any electric vehicle manufacturer, and Tesla is the most valuable EV maker of all. Now CEO Elon Musk has addressed the problem. And he doesn’t seem too concerned.
On Friday, The Wall Street Journal reported that the Chinese government may stop driving Tesla vehicles (ticker: TSLA) over national security concerns. The timing coincided with talks between the US and China in Alaska that ended in a dispute over human rights and democracy.
Tesla shares fell early in Friday trading, but ended the day at around 0.3% as the
Nasdaq Composite
0.8% and the
S&P 500
fell a bit.
Reuters reported on Saturday that Musk told Chinese listeners that his company has a very strong incentive to be very careful with any information that may be collected by the company or through sensors and cameras on its cars.
“If Tesla were to use cars to spy in China or anywhere, we will be shut down,” Musk said, according to Reuters.
For the stock, the problem with the Chinese government appears to be a minor one, but investors should come along as China is critical to the company’s success. China is the largest market for new cars and new electric vehicles. Wedbush analyst Dan Ives calls China the hub of future growth for the company. He rates Tesla stock as a Hold and has a target price of $ 950 for stock.
“At a time of some tensions between the US and China, Musk & Co. is in a unique position – along with
Apple
– to be caught in the crossfire, ‘Ives wrote in a report Friday. He added that while he didn’t expect the situation to get out of hand, he was keeping a close eye on developments.
Tesla stocks have fallen in recent weeks, but not because of geopolitical tensions.
Higher interest rates have hurt Tesla stock. High interest rates hurt high-growth stocks like Tesla more than others. For starters, higher interest rates make it more expensive to finance growth. Second, fast-growing companies generate most of their cash flow well into the future. Higher interest rates make the promise of future cash a little less attractive in relative terms than a higher yield on bonds today.
Tesla shares are down about 7% so far, behind comparable returns from the S&P 500 and
Dow Jones Industrial Average.
Shares are down about 27% from their 52-week high in January. The yield on the 10-year Treasury bill has recently risen past 1.7%, up around 0.5% in recent weeks.
Write to Al Root at [email protected]