The Rabid Capitalist

Professor Glenn A. Okun

Last week, Tesla delivered quarterly operating and financial results that disappointed previously diminished expectations.  Elon Musk’s bold pronouncements regarding Tesla’s future products dominated the earnings call.  The Rabid Capitalist perceived this event as an attempt at the magician’s tactic of misdirection, hoping to distract investors’ attention from actual performance.

The teleconference was a litany of operational and financial disappointments.  Tesla’s revenue fell by ten percent compared with the first quarter of 2023.  It was the first decline since the pandemic.  Price discounts failed to rejuvenate car sales.  Quarterly profit collapsed to $1.13 billion, declining in excess of fifty percent relative to the previous year.

Unsurprisingly, the future was the focus of the event.  New products and technologies were vaguely discussed.  Hard questions regarding the progress, timing and financial potential of those innovations were largely dismissed as subjects for a future call.

This has been the history of Tesla: celebrate good results and distract attention from the bad.  The latter effort has always required misdirection by new product and technology announcements.

The Rabid Capitalist cannot avoid noticing that the frequency of these futuristic proclamations has increased and the effect on the stock price has declined.

Investor confidence has waned.  Despite a short-term bounce in the stock, the market has reacted negatively to Tesla’s “fake it until you make it” approach.   

The technological constraints and demand challenges of electric vehicles (see https://therabidcapitalist.com/2024/03/03/tesla-touts-itself-faster-than-the-roadster-can-go-from-zero-to-sixty-miles-per-hour-2/, https://therabidcapitalist.com/2024/02/26/the-tide-goes-out-on-electric-vehicles/ and  https://therabidcapitalist.com/2024/03/30/teslas-advertising-signifies-that-it-is-an-auto-maker-not-a-tech-company/) prevent short-term favorable results for Tesla.  The stock should be viewed as a long-term bet on commercially valuable innovation. 

The Rabid Capitalist expects that Tesla will face a rocky road of investor skepticism due to the sheer number of unfulfilled futuristic promises made by the company.  It is not an attractive investment at this time.

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