Tesla’s share price took a nosedive today, dropping as much as 10%, following the electric vehicle maker’s release of its third quarter earnings results and a chaotic conference call with CEO Elon Musk. The stock sell-off wiped out over $50 billion in Tesla’s market valuation, highlighting investors’ concerns with Musk’s conduct and uncertainty about demand for Tesla’s vehicles.
The steep decline in Tesla’s stock price occurred despite the company announcing better-than-expected Q3 financial results on Wednesday. Revenue rose 56% year-over-year to $21.5 billion while earnings per share hit $1.05, surpassing average analyst estimates.
However, shares remained relatively flat after the earnings release yesterday as investors focused on Musk’s announcement about an upcoming Cybertruck delivery event in December. The stock selloff accelerated rapidly today though, with Tesla shares hitting session lows of $207.50 shortly after the earnings call with analysts ended.
Muted Musk, Cryptic Answers Contribute to Tesla Stock Drop
There were a few likely factors that triggered today’s plunge in Tesla’s share price following the Wednesday conference call. Musk himself admitted the electric carmaker may be “recession-resistant but not recession-proof,” tempering demand expectations amid rising interest rates and inflationary pressures.
Tesla also poured some cold water on plans for its proposed Gigafactory in Mexico, saying it was focusing its efforts on ramping up existing factories for now. But beyond these warnings, analysts pointed to the overall tone and evasiveness of Musk’s commentary as major reasons for Tesla’s post-earnings shellacking.
The earnings call got off to a rocky start as Musk was accidentally muted for the first few minutes of his opening remarks. Tesla’s IR team eventually unmuted him but without informing the CEO, leading to an awkward silence before Musk continued his speech not realizing the prior mishap.
More concerning to investors, Musk dodged or gave cryptic answers to critical questions about Tesla’s business outlook. When asked about Tesla’s legal liability for its Full Self-Driving software, Musk skirted the issue and instead complained about people already suing the company before claiming Tesla had achieved “baby AGI (artificial general intelligence).”
Musk also devoted nearly half the call to blaming macroeconomic factors like high interest rates for dampening demand, rather than addressing operational challenges within Tesla’s control. This perceived passiveness and lack of accountability likely unsettled investors banking on proactive leadership from Musk.
Analysts and Investors Express Disappointment Over Erratic Conference Call
Based on immediate reactions, the lackluster Elon Musk earnings call appears to be the primary catalyst for Tesla’s stock crash rather any material change in the company’s Q3 results or guidance.
Long-time Tesla analyst Fred Lambert called the conference call “disastrous” in his post-earnings take, airing concerns about groupthink andyes men surrounding Musk. Top comments on Tesla forums like r/TeslaInvestorsClub similarly slammed the confusing call.
One top Reddit comment with over 20 upvotes called for a “more conventional CEO,” blasting Musk for constant manufacturing changes and lack of new models beyond the core S, 3, X and Y lineup.
Other investors criticized Musk for deflecting responsibility and blaming external factors like the Federal Reserve’s interest rate hikes. The CEO’s seeming dismissal of critical business challenges worried shareholders about future execution.
Tesla Faces Growing Pains, Economic Headwinds inscaling Production
Tesla is navigating a critical inflection point, transitioning from a niche EV maker to mass market automotive giant. While the company is leading the electric vehicle revolution, its breakneck growth and Musk’s unpredictable leadership style may be showing cracks.
Ramping up production has led to quality control issues troubling customers used to Tesla’s premium positioning. Uncertainty around the Cybertruck, Roadster and other future models adds to concerns about execution.
Meanwhile, rising interest rates and inflation are squeezing consumer budgets for big ticket discretionary purchases like cars. Competition in EVs is also heating up, with models from Ford, Hyundai and others gaining ground.
Outlook Hazy Despite Tesla’s Dominance in EVs
With Tesla stock down nearly 50% from peak levels, investors are entering a “show me” mode regarding the company’s business trajectory. Tesla still leads the EV segment it helped create, especially in the U.S., but near term uncertainty abounds.
Musk and his executive team face a pivotal test reassuring shareholders through transparent communication, realistic guidance and a renewed focus on operations, cost control and demand drivers.
Tesla’s upcoming Cybertruck rollout could be a catalyst restoring confidence if it goes smoothly. But executing on Musk’s bold vision still remains a steep climb, especially with economic headwinds. For Tesla stock to rebound sustainably, the company must consistently meet targets and communicate clearly with stakeholders.
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