The financial press worked itself up into high dudgeon after Elon Musk was rudely dismissive to a couple of stock analysts during Tesla’s May 2 earnings conference call. The representatives of billion-dollar brokerage firms seemed particularly piqued that Elon ignored what he called their “boring, bonehead questions” to spend quality time with Galileo Russell, a young independent analyst. Headlines depicted a company in crisis, with a CEO on the verge of a mental breakdown. Pundits trotted out the clichés, accusing Musk of “biting the hand that feeds him,” and advising him to “grow up.”
A scorned Wall Street vented its fury the next morning–TSLA stock took a tumble as the financial pages exploded with indignation. Over the course of the next few days, however, cooler heads noticed that the news in the earnings report was actually pretty good: the company reported record earnings and a loss that was no larger than expected; margins on Models S and X are still strong, as is demand for Model 3. Musk also upped the ante on the Tesla Semi, saying he expects the production version to have a 600-mile range, an improvement over the 500 miles previously announced.
As a second wave of articles parsed the numbers, TSLA regained every cent of its post-rant losses. Musk made an apology of sorts, explaining why the questions in question were boneheaded (they had already been answered in the earnings report), but conceding that he was “foolish” not to have answered them on the call. He also reaffirmed his commitment to the company, buying an additional $10 million worth of stock, and predicting that the “short burn of the century” is coming soon.
Most analysts, including the two that Musk had dissed, reiterated positive or neutral ratings, and a couple issued very bullish forecasts indeed. Joseph Spak, one of the passed-over pundits, posted a conciliatory open letter, saying that Tesla remains a “compelling long-term opportunity.”
To Elon Musk’s followers, there was nothing surprising about his behavior on the call. Musk’s personal passion is not a liability–it’s what inspires investors to believe in his vision. While the news-driven investors were hitting the Sell button, the true believers were taking the opportunity to buy as much TSLA stock as they could.
The takeaway from this tempest in a teapot is that the events that make the biggest headlines often have the least long-term significance. While day traders and bloggers may make a quick buck from a CEO’s blowup, or a fiery car crash, long-term investors are far more interested in the demand for a company’s products, and the potential growth of its markets. The numbers that quantify these factors are to be found in the earnings report, and don’t necessarily need to be discussed in a conference call.
In fact, Judith Samuelson, writing in Quartz, wonders if the quarterly conference call needs to be retired, calling it “a tradition in which the highest-paid people on the planet patiently answer questions of analysts who are hyper-focused on ticks in the stock price.” The typical earnings calls is dominated by traders, and tends to reinforce the obsession with short-term results that plagues today’s business world (a 2017 McKinsey article explores this thesis in more detail). Elon Musk “couldn’t care less” about day traders, nor should he.
If quarterly conference calls must be, Samuelson suggests that CEOs devote their valuable time to discussing long-term strategy and trying to offer some insight into the mind-set of management, rather than repeating information that could be better imparted in a press release. And in fact, that’s just what Elon Musk was trying to do. To give one example, in response to a question about the company’s Superchargers, he explained his lack of faith in economic “moats.” The media being what it is, this sparked another round of headlines speculating that Musk was planning to start up a candy company.
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