Billionaire Elon Musk tweeted on Friday that he has hired Linda Yaccarino as the new CEO of Twitter (now known as X Corp.) and will move to the roles of executive chair and chief technology officer in approximately six weeks.
It's a huge development for Tesla (TSLA -3.55%) shareholders, who have seen Musk straddle leadership roles in Twitter, Tesla, and SpaceX simultaneously since buying the social media platform late last year.
The timing couldn't be much better, with Tesla pursuing several incremental projects that could change the long-term trajectory of the stock. Here are three potential impacts of Musk's decision and what it means for Tesla investors.
1. A more focused Musk at a critical time
Tesla hasn't required Musk's full attention in recent months; the business is profitable and is producing its Model 3 and Model Y at steadily increasing volumes that still trounce what competing brands can deliver. But Tesla is getting ready to evolve and bring several big projects to market that could add incremental growth to the company moving forward.
Cybertruck
For starters, Tesla's entry into the passenger truck segment begins with a Cybertruck delivery event -- potentially in the third quarter of this year. Ford's F-150 series is the top-selling vehicle in the U.S., and the company has already brought an electric model to market. Cybertruck opens a large market segment to Tesla, which has been in development since the truck's unveiling in 2019.
Tesla Semi
The company began initial deliveries for Tesla Semi in December and recently delivered a new fleet to PepsiCo. The units cost approximately $250,000, and there are more than 4 million semi-trucks on the road in America alone. Tesla is among a handful of competitors rushing electric models to market, but Tesla Semi's estimated 500-mile range makes it a standout against a field that averages 150-250 miles on a charge. Investors should monitor how quickly Tesla can ramp up production and whether Semi's range helps it take market share in this new industry for the company.
Full self-driving (FSD)
Tesla has made waves with aggressive price cuts, which showed up in the company's profit margins in the first quarter. Musk emphasized that this is strategic because full self-driving will recapture margins down the road. FSD has been in development for years and hasn't been perfected yet. However, the technology keeps improving. Musk has implied that FSD could be the company's single-most important venture.
2. Tesla's brand becomes less polarizing
Musk's involvement in Twitter, a social media platform, has made him an increasingly public figure. He is the most followed person on the platform, with nearly 140 million followers. His social media spotlight directly interacts with current and potential customers.
Musk's celebrity has helped grow Tesla without traditional ads and commercials, and he will probably remain active on Twitter. Musk noted his intention to focus on software and product design as Yaccarino gets up to speed. Investors should look and hope for a Musk that invites less controversy moving forward than in recent months.
There's a saying that a reputation takes years to build but only minutes to destroy. Musk's eccentric and sometimes polarizing nature could arguably sour some consumers on Tesla's brand. His willingness to speak his mind is admirable, but it could potentially steer business away from Tesla if consumers negatively associate him with the Tesla brand.
3. A potential boost in market sentiment
If you go by price action, it seems Wall Street hasn't liked Musk's Twitter involvement. Tesla shares are down roughly 50% since Musk began buying shares in Twitter in early 2022. Fortunately, Tesla continues growing earnings, making the stock's price-to-earnings ratio much more attractive at 50 times earnings versus 200 back then.
Investors looking at Tesla today see a business with several incremental projects looming that could each add notable growth to an already thriving company. Even better, you're paying less for a piece of Tesla's earnings than before.
These situations sometimes need a catalyst to change the stock's trajectory, and Musk stepping down from Twitter's pole position could be it. Now investors need a more-focused Musk to roll out Cybertruck later this year, and Tesla could be a big winner during the next bull market.
