The 6 craziest things Elon Musk said on Tesla’s earnings call

Published 11:58 am Thursday, January 25, 2024

By Ian Krietzberg

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Shares of Tesla (TSLA) – Get Free Report plummeted more than 12% Thursday, in the wake of a weaker-than-expected earnings report followed by an earnings call that failed to settle the nerves of anxious investors. The fall has erased close to $100 billion in value for the company, now trading at around $182 per share with a market cap of $579 billion.

The electric vehicle giant reported earnings Wednesday of 71 cents and revenue of $25.17 billion. Both metrics missed Street forecasts despite Tesla delivering around 1.81 million vehicles in 2023.

But the biggest issue for Tesla remains price cuts and a falling gross margin, two concerns that have been plaguing investors now for several consecutive quarters.

If investors thought they would get reassurance from CEO Elon Musk on Wednesday night’s earnings call, they were sorely mistaken.

“We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure and fluctuating demand,” Wedbush analyst Dan Ives, a long-time Tesla bull, wrote in a note, adding that the call was yet another “train wreck” for Tesla.

Ives reduced his price target to $315 from $350 in response to the call.

Ives wasn’t the only bull to cut his price target; Gary Black, managing partner of the Future Fund, reduced his price target to $290 from $300 following the report.

On a call that left analysts and investors displeased, to say the least, here are the six most incendiary comments Musk made, about everything from Optimus to a next-gen vehicle, and Wall Street’s harsh reaction.

The next-gen vehicle

Musk has been talking about a $25,000 next-generation Tesla for months. It’s a product that has many investors excited, as such a vehicle would enable stronger competition with cheaper gas-powered cars while simultaneously addressing the affordability problem that Musk remains so concerned with.

A Reuters report earlier in the day Wednesday indicated that Tesla has asked suppliers for quotes to develop a next-generation compact crossover EV codenamed “Redwood.”

Sources said that Tesla was aiming for production to begin in 2025.

Musk, confirming the story, said on the call that Tesla’s “current schedule says that we will start production towards the end of 2025,” though he added that he is “often optimistic regarding time.”

“That will be a challenging production ramp. We’ll be sleeping on the line,” Musk said. “I am confident that once it is going, it will be head and shoulders above any manufacturing technology that exists anywhere in the world.”

While not a hard announcement, Deepwater’s Gene Munster said the move effectively introduced the first sub-$30,000 Tesla, which isn’t a good move for the brand.

“Bottom line: Tesla’s likely going to announce a new vehicle later this year and that will slow sales,” he said, adding that it will make “a difficult 2024 meaningfully more challenging.”

Musk’s 25% voting share

Earlier in January, Musk, who currently holds a 13% stake in Tesla, said that he was uncomfortable growing Tesla into a leader in the artificial intelligence and robotics space without a 25% ownership stake.

This comes a little more than a year after Musk sold more than $20 billion worth of Tesla stock to finance his purchase of Twitter in 2022.

Asked about the comment on the call, Musk doubled down, saying: “I don’t want to control it, but if I have so little influence over the company at that stage I could be voted out by some random shareholder advisory firm. I want to have enough to be influential. I want to be an effective steward of very powerful technology.”

He added that he sees a path to turning Tesla into an “AI and robotics juggernaut.”

Morgan Stanley’s Adam Jonas wrote in a note following the call that, while he understands the spirit of Musk’s concerns, he is also “sympathetic to the view of many investors that the issue of voting control adds risk to the narrative.”

He called this issue more fodder for the bears than the bulls.

Musk, margins and interest rates

Asked for guidance about margins, which have been plaguing Tesla for months, Musk said: “We don’t know.”

“If interest rates come down quickly, I think margins will be good and if they don’t come down quickly they won’t be that good,” he said. “We have lots of people who want to buy our car, but simply can’t afford it.”

Shares of Tesla tumbled more than 9% following each of the previous three earnings calls. In the wake of the fourth-quarter call, the stock is down 12.4%.

VCG/Getty Images

Both Ives and Black said in response that Musk, for the second quarter in a row, did not shut the door on the potential for more price cuts.

Ives had said in the lead-up to the earnings report that “the line in the sand around margins must be drawn” by Tesla management.

“Our near-term confidence in the story is shaken, but we remain firm on a long-term bull thesis around Tesla and the broader AI story set to take hold,” Ives said. “This is a pivotal period for Musk to get Tesla through that will help shape (or haunt) its EV future.”

Licensing FSD

On its July earnings call, Musk claimed that Tesla was “already in early discussion with a major OEM about” licensing the company’s full-self driving (FSD) technology.

Six months later, such a license has not materialized, and Musk’s confidence about it has seemingly vanished.

“I think lots of car companies should be asking for FSD licenses, but I think they don’t believe it’s real, quite yet,” he said. “That will become obvious probably this year.”

Tesla and robotics: Optimus

After spending the past year teasing continuous upgrades to Tesla’s Optimus project, Musk said that the company has a chance of shipping “some number of Optimus units next year.”

Calling it a “revolutionary” product, Musk said that Optimus “has the potential to far exceed the value of everything else at Tesla combined.”

A society integrated with Optimus robots, according to Musk, could create a limitless economy.

“This is a brand new product, a lot of uncertainty,” he said. “It’s impossible to make a precise prediction. Potential to be the most valuable product of any kind, ever.”

While Munster agreed that Musk is “onto something with Optimus,” he added that, based on Musk’s track record, Optimus likely won’t start shipping until 2030 at the earliest.

Dojo is a ‘longshot’

Asked about Tesla’s supercomputer, Dojo, Musk called the device a “longshot.”

“It’s a longshot worth taking because the payoff potential is very high, but it’s not a sure thing at all. It’s a high-risk, high-payoff program,” Musk said. “Dojo is working and it is doing training jobs; we are scaling it up and we have plans for Dojo 1.5, Dojo 2 and Dojo 3. It’s got potential but can’t emphasize enough: high risk, high payoff.”

Tesla’s AI and robotics efforts are a key component of Jonas’ thesis on the company. He said in September that Dojo could add around $500 billion to Tesla’s market cap by accelerating its push into Robotaxis, among other things.

“Other than some relatively superficial comments around Optimus and FSD Beta testing, there were no real Al rabbits pulled out of Tesla’s hat here,” Jonas said.

He maintained his $345 price target, saying that the long-term Tesla story remains intact, although “negative developments in the global EV market very much matter to Tesla and should reasonably have a negative near-term impact on the price of the stock.”

Jonas, echoing sentiments from a number of other analysts, noted the lack of details regarding demand or conviction in the company’s profit outlook for the year.

“I struggle to think of another company who provided such scant level of details on the forward year outlook,” he said.

Musk, meanwhile, returned to his usual standard, saying that if Tesla executes well, it could become the most valuable company in the world.

“The long-term story is intact for Tesla and we truly believe EV adoption to a much broader mass market is around the corner with AI/FSD the future, HOWEVER the near-term Category 4 hurricane around price cuts and lack of granularity, guidance, and communication from Musk and Tesla is a bitter pill to swallow for the bulls,” Ives said.

Contact Ian with tips via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.