Analysts Aren't Impressed With Elon Musk's Earnings Call Behavior
What’s a good way of pissing off the very analysts you’re hoping to impress — or at least placate? Brush them off in the midst of an earnings call. Resorting to angsty teen language works well, too.
That’s what happened Wednesday during a call between Tesla CEO Elon Musk, Wall Street analysts, media, and one YouTuber. While the YouTuber — Gali Russell, shareholder and young host of a channel called HyperChange TV (who gained access to the call via a tweet) — ended up as Musk’s preferred interviewer, the analysts who asked questions described by Musk as “dry” and “boring” no doubt left the interaction in a state of shock.
The most pressing issue analysts wished to discuss with Musk was his company’s continued cash burn. Over $1 billion flowed from Tesla coffers over the first quarter of 2018, exceeding analysts’ predictions. Bloomberg reports that the automaker had $2.6 billion on hand at the end of March. That’s down from the end of last year.
Tesla, which hasn’t posted a positive free cash flow since the third quarter of 2016, burned through more than a billion dollars in three of the past four quarters. Musk claims his company will not need to raise funds this year.
The earnings call quickly took on an antagonistic tone, with Musk refusing to answer questions pertaining to the automaker’s financial situation, the Model 3’s future profitability, and whether reservation holders for that vehicle are dropping out.
Toni Sacconaghi of Sanford C. Bernstein asked Musk whether he expected to reach a 25 percent gross margin target set for the Model 3. Tesla CFO Deepak Ahuja had said that a number of things, including tariffs, could impact the model’s profitability.
“Yeah, but we’re talking about a 3 percent to 5 percent difference, and that’s something that we’ll solve like within three months to six months later,” Musk replied. “So don’t make a federal case out of it.”
Sacconaghi pressed on, inquiring about the company’s (lowered) 2018 capital expenditure projection. Where will the company stand in terms of capital requirements?
“Excuse me. Next. Next,” Musk told the call operator. “Boring, bonehead questions are not cool. Next?”
Joe Spak of RBC Capital Markets asked Musk just how many reservation holders were configuring their vehicle online after being invited to do so. Lengthy delivery delays could easily cause some would-be buyers to back out of the purchase, though there’s still over 450,000 reservation holders on file. Regardless, a valid question.
Musk wasn’t in a mood to answer. “We’re going to YouTube,” Musk replied, referring to the HyperChange TV host. “Sorry,” Musk said, “these questions are so dry. They’re killing me.”
Ben Kallo, a Robert W. Baird & Co. analyst who offered Musk a little sympathy before asking his question, wanted to know more about the Model 3’s production progress. The model’s ramp-up hasn’t gone according to plan. Surely, investors would like to hear some positive updates?
“I think that if people are concerned about volatility, they should definitely not buy our stock,” Musk answered. “I’m not here to convince you to buy our stock. Do not buy it if volatility is scary. There you go.”
CNBC‘s Phil LeBeau called Musk’s remarks “bizarre,” “strange,” and “odd” — a sentiment shared by other industry watchers. After missing previous Model 3 production targets, you’d think Musk would do everything in his power to satisfy nervous investors and skeptical analysts ahead of the company’s next target.
While Musk claimed during the call that his company will hit its production target of 5,000 Model 3s per week by the end of the second quarter (an effort helped by a May shutdown), as well as turn a profit later this year, pissing off analysts seems like a risky strategy for relieving stress.
Tesla’s stock dipped more than 8 percent following the call. Currently, the company’s share price is down 6.5 percent from the end of trading Thursday.
More by Steph Willems
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This reminds me of the documentary I saw on Enron, where the company was flying high, but trouble was on the horizon, and CEO Kenneth Lay called one of the analysts an "a**hole" on the conference call. We all know how that story turned out. I'm a big fan of Tesla's cars, but wouldn't touch the stock with a 10-ft pole.
Now, whether or not you agree with what Musk did, you have to keep in mind that Musk has been the butt of a lot of bad sentiment by analysts for over 15 years at Tesla. He's been under a lot of stress and to be quite blunt I wouldn't be surprised if he isn't on the verge of a breakdown simply because the Model 3 assembly ramp hasn't gone as well as he had hoped. Every time he seems to make a step forward, something happens to drive him backwards and sometimes those events seem too well timed to be coincidental. Worse, everybody has been harping on him about financials, distracting him when he's trying to get a product running. Hell, I'd be bloomin' short with them too! Any of us would if our minds are locked on real, physical problems and someone tries to divert the talk to something that... to be quite honest, may not matter IF he can get that line running at full speed. Tesla has the potential, still, to blow the EV market wide open with the first, reasonably affordable, long-range EV with high-end performance capabilities. But if Musk ends up blowing his top... we could see the whole EV movement collapse and I, for one, am strongly opposed to that outcome.