We were not the only ones who were left speechless by Thursday’s Tesla Tanturm: Elon Musk’s bizarre, childish, perhaps intoxicated meltdown during yesterday’s Tesla conference call, in which he interrupted analysts from Bernstein and RBC, cutting them off in the middle of the question for being “boneheaded, boring and dry” (when all they wanted was information on the company’s capex plans and Model 3 demand). This morning, the entire sellside appears to have joined in, to wit:
- TESLA INVESTORS SAY ODD EARNINGS CALL ’SHOOK CONFIDENCE’: RBC
- TESLA LIKELY TO FALL TODAY AFTER ‘TRULY BIZARRE’ CALL: JPMORGAN
- TESLA REITERATED SELL AT GOLDMAN ON LIKELY MISSED TARGETS
But the best reaction of all came from Morgan Stanley’s traditional Tesla fanboy, Adam Jonas: not even he could ignore the fast-motion carwreck (with or without an autopilot) that Musk unveiled 37 minutes into the call.
His rather shocked note on “The Importance of “Boring Questions” out this morning at 1:29am GMT…
… is below. Enjoy:
Tesla’s 1Q18 analyst conference call was arguably the most unusual call I have experienced in 20 years on the sell- side. Many investors we spoke with post the call agree.
The first half of the Q&A was dominated by analyst questions about manufacturing, automation, cost, efficiency, and capital… a few other questions covered recent management departures and reservation momentum. We asked about the scope of collaboration between Tesla and SpaceX on data, to which Mr. Musk said “there are many areas for us to collaborate… haven’t really thought about it.” A surprising answer from someone who launched a Tesla Roadster into outer space on a SpaceX rocket.
The call made an odd turn ~37 minutes in when Elon criticized an analyst for asking a ‘boring’ question about capital requirements and then interrupted the following question (about Model 3 order configuration), saying “We’re going to go to YouTube. Sorry. These questions are so dry. They’re killing me.” He proceeded to take a 23 minute series of questions from a blogger. While the consequences are unquantifiable, we believe Tesla’s CEO made a mistake in refusing to answer some of the analyst questions about the Model 3 ramp. Additionally, we found the posture out of character with the normally inviting, enlightening tone of prior conference calls over many years. While they may be ‘dry’ in nature, we argue such questions are extremely important for a highly levered and cash hungry company with 2025 bonds trading at 89. As we have highlighted in our previous research, even the short-term cadence of Model 3 production can significantly impact cash levels, liquidity, and financial credit worthiness. This is due to the interplay of fixed cost absorption and negative working capital. In our view, more than any other factor, the path of the Model 3 can determine whether the stock could test our $561 bull case or fall below our $175 bear case.
To be clear. Tonight’s conference call didn’t go very well. Feedback we have received from investors during and following the call support this view. Irrespective of the Tesla CEO’s annoyance with the genre of questions he was receiving from the analyst community, we note that an important part of Tesla’s success has been its relationship with the capital markets in funding its ambitious plans. The analysts on the call represent the providers of capital that Tesla has throughout its history depended upon.
Well, when Tesla’s access to capital markets is finally cut off in a few quarters, there is always the Teslacoin ICO…