Tesla has supplied bearish investors with plenty of reasons to stay in their cave this year: Elon Musk’s long-awaited “robotaxi day” was a flop; the EV pioneer’s first two quarterly earnings reports have raised concerns about falling profits and margins; and Musk himself has been evasive when it comes to his vision for the company’s future.
This lack of clarity about Tesla’s short-term strategy is weighing on its share price. Heading into Wednesday’s Q3 earnings release, the stock is down 13% this year. The S&P 500, meanwhile, is up 23%.
Tesla, long the buzziest of Wall Street darlings, has even lost its place among the tech giants in the so-called Magnificent Seven, replaced by semiconductor manufacturer Broadcom. The latter’s shares have risen roughly 300% over the past three years, while Tesla’s are down nearly 27% in that span.
Don’t expect Tesla management to change its approach anytime soon, though, according to Morningstar senior equity strategist Seth Goldstein.
“If they have a couple bad quarters, they don’t really care if the stock sells off,” Goldstein, who also chairs Morningstar’s electric vehicle committee, told Coins2Day last month.
After the earnings miss in Q2, a senior tech analyst told Coins2Day that Musk came off as uneven and defensive on the call with analysts and investors. Goldstein said he wouldn’t go that far, especially because he didn’t witness anything he hadn’t before. Even when Tesla was one of the Street’s best performers, he said, he witnessed management laugh off and give condescending answers to skeptical analysts.
Tesla does its earnings calls differently than most major companies. Instead of jumping into an analyst Q&A after management’s opening statements, Tesla first selects questions submitted by retail investors that are “upvoted” by other shareholders on a Reddit-style platform.
Judging by some of the most popular questions on the site, however, many retail investors have the same concerns as analysts like Goldstein. The top two questions focus on whether Tesla is still on track to start production on a more affordable vehicle by the end of 2025, something Goldstein views as the company’s most likely growth driver in the near term.
Musk and Tesla keep focus on the future
Tesla shareholders, however, are likely used to the ups and downs by now. The company provides less short-term guidance than most high-profile companies, Goldstein said, which contributes to the stock’s volatility.
Despite cooling EV demand this year, Goldstein expects EV sales to account for 30% of the auto market by 2030, up from 3% in 2020. He said Tesla will remain focused on fulfilling its long-term goals, whether that’s developing its “full self-driving” software (which currently requires close driver supervision); launching a robotaxi (Musk said it will be ready for 2027); or continuing to build its rapidly growing energy generation and storage business.
“If they can execute all those, then the stock price will take care of itself, right?” He said. “It doesn’t matter what consensus says. It matters what they do, and if they are able to deliver their long-term goals, then the market will reward them accordingly.”
Tesla’s management thinks in years, he said, not quarters. If shareholders are not on board, however, they might want to get off the boat.