Musk lands a belly flop as Tesla bulls label his Investor Day a 'waste of time'

Roughly 40 minutes into the nearly four-hour-long presentation, the carmaker’s chief designer confessed there would be no unveiling of the new highly anticipated entry model so critical to its 2030 growth target.

The moment of disappointment would set the tone for the entire Wednesday evening.

“This was the meat that I was hoping for today,” posted Gene Munster, managing partner at Deepwater Asset Management.

Shareholders captivated by Elon Musk, a CEO regularly compared to Steve Jobs, are used to high-energy Tesla events that have rivals scrambling to copy his visionary ideas.

Instead what they got was a boring snoozefest bereft of any “wow” moments as a series of executives plodded on with a lackluster retread over mostly old ground.

Not even Musk revealing the much-anticipated third installment of his Master Plan could save the day, with the stock expected to sell off on Thursday. 

Rather than details on product strategy or how Tesla can benefit from his other companies like Twitter and SpaceX, the CEO delivered a sermon on how all of earth’s 8 billion inhabitants could subsist on wind and solar energy generated using just 0.2% of the planet’s landmass. 

What investors wanted to hear was news about the revolutionary new car Musk is planning, as his existing range, with the exception of the Model Y, is getting very long in the tooth.

Another absolute disaster for $tsla investor day. You’d think I’d learn my lesson after each year. I’m a glutton for punishment I guess. Mark my post, next year I won’t hold one share going into event.

— squawksquare (@squawksquare) March 2, 2023

A small affordable hatchback that could take on BYD’s Dolphin in emerging markets like China would propel Tesla into the stratosphere by no less than halving the carmaker’s current manufacturing cost per unit. 

Through this step change in affordability, Musk believes that by the end of the decade Tesla can reach the impossibly high figure of 20 million vehicles sold annually.

This would be more than the two largest carmakers, Toyota and Volkswagen, combined: Currently he has the capacity to build just a tenth of that figure. 

Musk told investors demand is infinite, but he didn’t convince them

Yet Musk has already had to cut prices to stimulate demand.

Weekly China insurance numbers suggest Tesla is struggling to find enough buyers to hit his aspirational figure of 2 million global sales this year without the help of President Biden’s generous Inflation Reduction Act tax credits. 

Consequently investors wanted the Tesla CEO to show proof there is a realistic path to his 2030 goal—especially as Musk has no intention of ever matching the breadth and depth of his industry rivals’ product ranges. 

For example, Volkswagen Group last year needed 10 brands offering cars and trucks in all manner of sizes and body styles covering every conceivable market niche in order to hit 8.3 million unit sales. 

By comparison, Musk wants to adopt the Apple iPhone approach, selling no more than 10 models in staggeringly high volumes.

Once he adds the Cybertruck sometime later this year, he will already have six in his portfolio with a daunting path of 18 million more annual sales to climb.

For investors questioning Tesla’s near $650 billion market cap, the math simply doesn’t add up unless the new entry model lives up to its high expectations.

Musk dismissed concerns on Wednesday, arguing the key was all about cutting costs to lower the threshold of affordability so customers who have always dreamed of owning a Tesla can finally buy one.

“Demand for our vehicles in terms of desire to own them may as well be infinite,” Musk claimed. “It’s indistinguishable from infinite at this point.” 

In fact the only concrete news to emerge yesterday was the selection of Mexico’s Nuevo León state as the site of the manufacturing plant for the next-gen vehicle.

This nugget, which came after the scripted portion of the event actually ended, had however already been flagged in recent weeks by the media and confirmed the day before by President Andrés Manuel López Obrador.

Not even Wednesday’s figure of $150 billion to $175 billion in estimated investment that Tesla requires to hit its 2030 goals proved to be straightforward guidance: Finance chief Zach Kirkhorn just called it an indicative figure and nothing analysts should introduce into their financial models. 

Anticipation proved a major catalyst in the stock’s 2023 rally

That rendered Investor Day the second straight disappointing Tesla presentation.

Panned as equally boring and long-winded, September’s AI Day, built around the unveiling of his Optimus humanoid robot, coincided with the start of the stock’s brutal fourth-quarter slide.

The difference was Wednesday’s event didn’t bother managing expectations by billing it from the outset as a recruiting platform to attract top engineering talent.

This was a proper capital markets day in which Wall Street’s sell-side analysts fly in for what is expected to be a detailed road map they can then sell to their clients—a road map already promised by Musk and not delivered last January.

$TSLA -5.8% AH to $191 following Investment Day. Long on aspiration, short on detail. Lot of discussion on production and engineering but didn’t address demand side how to get from 1.8M delivs this year to 20M deliv target by 2030 (% M-3, M-Y, SX, CT, $25K, Robotaxis). pic.twitter.com/2PNwlEKGTy

— Gary Black (@garyblack00) March 2, 2023

As the event wore on, the stock began to weaken before eventually tumbling after hours as investors rushed to be the first to place sell orders. Currently it’s expected to open about 7% lower.

Some measure of profit-taking is inevitable given the buildup in anticipation. Tesla shares doubled since the start of the year, with Investor Day touted as a major catalyst. 

But even longtime Tesla bulls had difficulty maintaining their confidence, to say nothing of the bears that felt the drab presentation vindicated their skepticism.

Kevin Paffrath, a money manager with nearly 2 million subscribers to his YouTube channel, vented his fury afterwards, calling the event a “pathetic” and “embarrassing” joke that would only benefit short-sellers.

“If you listen to any of the earnings calls of Tesla you would have already known 99.9% of this stuff. The details were all regurgitated,” he said. “Did we really learn anything here? No. This was a boring waste of time.”

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