For better or worse, this is the third time this week that I’m writing about Tesla (TSLA). It’s never my goal to be a TSLA commentator, let alone to pose as a company analyst, but considering that TSLA is perpetually the most active stock at our firm it is impossible to ignore. It commands a huge mindshare among our customers. Thus, when the stock plummets more than -11% — after already being down more than -15% in the short year-to-date thus far – I simply can’t ignore it.
We can quibble about the specifics, such as the slight EPS miss, the fact that 2023 revenues grew only 3% despite sharply higher vehicle sales, or that 2023 earnings were well below 2022’s, but the biggest problem is the bigger picture. TSLA has always been about the future. There was a vision that electric cars would command a leading place in the auto industry, and that eventually the company’s lead would result in exponential earnings growth. Beyond that, there have been hopes that the company could bring artificial intelligence to real world products like self-driving vehicles and robo-taxis. There has always been an element of futurism embedded in TSLA’s corporate DNA, even as we saw the exponential earnings growth come to fruition in 2020-2022.
That is why it is particularly distressing that the company, or Elon Musk, specifically, was either unable or unwilling to offer any specifics about TSLA’s near future. Sure, there were big-picture promises about new vehicle types and self-driving, but there was little (or nothing) to assuage investors who have become accustomed to top and bottom-line growth. Instead, the company failed to offer guidance about deliveries and potential margin pressures. Perhaps it was soberingly honest to hear Musk say that he lacked a crystal ball, but it was not when nervous shareholders wanted to hear. Furthermore, in an AI-obsessed market, it was unpleasant to get another reminder that the CEO is weirdly attempting to hold the firm’s artificial intelligence offerings hostage in exchange for a highly dilutive pay package.
TSLA has always “sold the sizzle”, and then it actually delivered the steak. The problem for the company is that investors now expect a big fat T-bone and are disappointed when they only hear a sizzling platter from across the way.
When a company sports a P/E of 70, one can argue that it is priced for perfection. Yesterday’s conference call didn’t radiate perfection, let alone confidence, and that is why we see TSLA shares getting walloped today.
Disclosure: Interactive Brokers
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