Analysts Aren't Impressed With Elon Musk's Earnings Call Behavior

Steph Willems
by Steph Willems
analysts arent impressed with elon musks 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.

[Sources: Reuters, Bloomberg] [Image: Elon Musk/ Twitter]

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  • Healthy skeptic Healthy skeptic on May 03, 2018

    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.

    • See 5 previous
    • BklynPete BklynPete on May 04, 2018

      @jkross22 I'm sure he's no sweetheart but Tesla shouldn't attract snowflakes either. Still, ever looked at the departure rate of his key people? It's not pretty. https://www.bloombergquint.com/business/2018/03/13/tesla-treasurer-and-vp-of-finance-is-said-to-leave-the-company https://www.bloomberg.com/news/articles/2017-03-03/at-tesla-departures-mount-as-carmaker-stretched-to-the-limit

  • Vulpine Vulpine on May 03, 2018

    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.

  • Readallover I always found it hilarious that my parents`friends who paid up for the luxury and exclusivity of a M-B were shocked and disappointed when they went to Europe and found their car was significantly cheaper AND widely used as cabs over there.
  • Laszlo I own a 1969 falcon futura 4 door hardtop, original inline 6 and c4 transmission and it still runs to this day.
  • BklynPete So let's get this straight: Ford hyped up the Bronco for 3 years, yet couldn't launch it to match the crazy initial demand. They released it with numerous QC issues, made hay for its greedy dealers, and burned customers in the process. After all that, they lose money on warranties. The vehicles turn out to be a worse ownership experience than the Jeep Wrangler, which hasn't been a paragon of reliability for 50 years. The same was true of the Aviator, Explorer, several F-150 variants, and other recent product launches. The Maverick is the only thing they got right. Yet this company that's been at it for 120 years. Just Brilliant. Jim Farley's non-PR speak: "You don't get to call me an idiot. I get to call myself an idiot first."Farley truly seems hapless, like the characters his late cousin played. Bill Ford is a nice guy but more than a bit slow on the uptake too. They have not had anything resembling a quality CEO since Alan Mulally turned the keys over to Mark Fields - the mulleted glamor boy who got canned after 3 years when the PowerShi(f)t transaxles exploded. He more recently helped run Hertz into the ground with bad QC and a faulty database that had them arresting customers. Ford is starting to resemble Chrysler in the mid-Seventies Sales Bank era. Well, at least VW has cash and envies Ford's distribution reach and potential profitability.
  • Mike Beranek This guy called and wants his business model back.
  • SCE to AUX The solid state battery is vaporware.As for software-limited pack capacity: Batteries are obviously the most expensive component of an EV, so on the rare occasion that pack capacity is dramatically limited (as in your 6-year-old example), it's because economies of scale briefly made sense at the time.Mfrs are not in the habit of overbuilding pack capacity just for fun, and then charging the customer less.Since then, pack capacities have been slightly increased via software because the mfr decides they can sacrifice a little bit of the normal safety/wear margin in the interest of range. We're talking single-digit percentages, not the 60/75 kWh jump in your example.Every pack has maybe 10% margin built into it, so eating into that today (via range increases) means it's not available to make up for battery degradation tomorrow. My 4-year-old EV still has its original range(s) and 100% SOH, but that's surely because it is slowly consuming the margin built into the pack.@Matt Posky: Not everything is a conspiracy to get your credit card account, and the lengthy editorial about this has nothing to do with solid state batteries.
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