The founder and CEO of Tesla (TSLA -1.10%) (among other remarkable companies) may have a talent for seeing possible futures of technology and disrupting his way toward them. But rather like Moses, Elon Musk is taking longer than you or he would expect to get to the financial promised land. Case in point: Three months ago, he said the company would be profitable every quarter going forward, and last week, it delivered a surprisingly steep first-quarter loss.
In this segment from MarketFoolery, host Chris Hill and Motley Fool Director of Small-Cap Research Bill Mann talk a bit about what went wrong this time, how the market reacted, and what they think of Tesla's business broadly.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on April 25, 2019.
Chris Hill: Let me share with you a headline from Business Insider from late January: "Elon Musk Says Tesla Will Be Profitable For 'All Quarters Going Forward.'"
Bill Mann: [laughs] Going forward!
Hill: Cut to the last 24 hours, when Tesla posted a loss for the first quarter.
Mann: Not even a loss, this was a dumpster fire of a quarter. I don't understand how it is that Tesla shares aren't down 20%. They literally missed on every metric that you would look at and say this is something that you would like to see a good company do. Their revenues were shy of expectations by about $400 million, which is a lot. I go back to something I learned from The Motley Fool Investment Guide back in the day. There are a couple of tip-offs that tell me the struggles at Tesla. Their total revenue dropped $2.6 billion from a year ago, and their accounts payable only dropped by $155 million, so there's some real stress within Tesla. I'm really surprised that the shares are holding up as well as they are.
Hill: Yeah, the stock is only down about 3% or 4% today. Look, I don't own shares, I'm not short this company. I'm agnostic. I'm not a hater.
Mann: I'm not either!
Hill: But I do look at this, and I just think to myself, how bad things have to be for the stock to actually drop 15%, 20%?
Mann: I've long described Tesla as a mutant company. First of all, let's remember that Tesla founded a new model in how you even sell cars, how they're built, everything else. So for any company to have generated $4.4 billion in revenue in a quarter as a new car company, to me, it is amazing. I think that we sometimes get caught up in the expectations game. But the sheer fact of what Tesla has done and what Elon Musk has done is amazing. But, they are pulling some threads. Their platforms, the Model S and the Model X, they had sharply lower sales. There's a refresh, and I don't know where the capital is going to come from to do it.