Tesla (TSLA 11.00%) held its annual shareholder meeting Tuesday, which gave investors a rare chance to hear from its infamously reticent CEO, Elon Musk. (Yeah, right.) But despite the great platform, which he used to promise, among other things, a Tesla with a 400-mile range next year and self-driving features in 2020 that don't require human intervention, the stock is generally wobbling sideways.
In this segment of the MarketFoolery podcast, host Chris Hill and senior analyst Seth Jayson consider the hazy future for the electric-car innovator, its uniquely problematic autonomy plans, Musk's penchant for theatrical exaggeration, and more.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
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This video was recorded on June 12, 2019.
Chris Hill: Tesla had its annual shareholder meeting on Tuesday. Shares were up briefly this morning in part because Elon Musk made comments at the meeting --
Seth Jayson: Did he say anything positive? I can hardly imagine!
Hill: Let's be clear, any CEO who's not saying positive things at their shareholder meeting is doing a bad job of being the CEO. I don't knock him for that. He said, among other things, it won't be long before we have a 400-mile range car. Talked about, in 2020, Tesla drivers will be able to use self-driving features without intervention. It seems like, you just look at the stock chart today, there was some initial enthusiasm. The stock was up briefly. It's now down a couple percentage points.
Jayson: The problem is, if you say things that don't turn out to be true often enough, sometimes people stop believing you. It was more than two years ago that Elon Musk promised us that you'd be able to sleep in your Tesla while it drove across the country, and everyone believed it then. That never happened. And then he kind of dials things back. And then a couple months ago, he dialed things up. He said, for sure there will be a million Tesla robo-taxis on the road; you'd be stupid to buy any other car. Which is just laughable. I mean, Consumer Reports a couple of weeks later rated Autopilot as dangerous, and more difficult to drive with than just driving yourself, because it was so erratic. And now we have, a couple months after that, Autonomy Day, which to me seemed like a smokescreen designed entirely to try to shift the sentiment of the company away from financials and toward, "We're going to become an Uber competitor!" Now he's sort of walking things back and saying self-driving without user intervention, but also at the same time supervised robo-taxi -- which, by the way, Waymo is doing that right now, and it exists in other forms.
He just makes these promises that don't line up with the reality of what other self-driving car leaders are saying and what they're doing. This is a really difficult task. It's not just a matter of getting a couple hundred thousand or a couple million more miles. There's real diminishing returns for machine learning for doing this. They have not cracked this nut yet. Tesla's doing it with more limited hardware than other companies. There's nobody else trying to do it their way. Tesla true believers would say, "Well, that just shows what a genius Musk is." I tend to think that if he's the only one doing it this way, and all these other really smart people are saying, "You probably can't do it that way," that he's probably the one who has it wrong.
Very interesting shareholder meeting. There were some other comments that stood out to me. Tesla shareholders are obsessed with the idea of being victims. They love this idea that they're victims of a media conspiracy, which is hilarious because they are the beneficiaries of so much media incredulity for years. I mean, nobody looked at Musk and said, "Can you really do all those things?" until recently. Now, of course, they don't like it. One of the remarks was something about, "It's crazy, the media talks about you as if you're about to go bankrupt!" And he says, "Of course we're not. That's just insane." Except, not too long ago, everyone thought they were running out of cash, and Musk claimed they weren't, and then after they had a quarter where they got some free cash flow, he came out and said, "Yeah, we were only a couple weeks away from running out of cash." They want to have it both ways. It's really nutty.
I wouldn't take a real position in it either way. On the one hand, you have a CEO who's very comfortable saying things that are not true. You have a lot of other executives leaving the company, probably related to that. On the other hand, you have this rabid shareholder fanbase that makes the stock completely detached from fundamentals. It's all about this crazy personality. Not for me.
Hill: You just reminded me of the Alex Gibney documentary that was on HBO. For those who haven't seen it, it's a fabulous bit of documentary filmmaking, about Theranos and Elizabeth Holmes. One of the things that was noteworthy to me in that was the opening of the documentary. There was a decent bit of information about Thomas Edison, tracing the line of the Silicon Valley "fake it 'til you make it" mentality back to Thomas Edison; saying Edison did a fair amount of that. That's a tried and true practice that didn't start with Elizabeth Holmes, it didn't start with Elon Musk. That kind of thing goes on.
All that being said, they report earnings, second quarter report is scheduled to come at the end of July. It really seems like, on the times when Tesla has come out with a legitimately encouraging slash/earnings report, a lot of that other stuff just disappears. By the way, I'm like you -- I don't own shares, I would never in a million years short this stock. I'm on the sidelines, just watching all of this play out. And I just think to myself, no one ever got in trouble for walking up to a bat and hitting a home run. If they come out at the end of July and have some blowout quarter, that helps. But, of course, they actually have to do it.
Jayson: Yeah. The miracle quarter, and it wasn't really spoken about at the time, the cash flow quarter, was an artifact of really massaging working capital and calling in some favors. You wonder, can they actually keep doing that? They raised money following the miracle quarter because they needed it, which suggests that they couldn't keep doing that. It's not easy to build cars. It's not easy to build cars when you're also telling everyone you're going to build self-driving electric trucks and all this other stuff. Maybe they pull it off. I really hope the industry goes, but they have a lot more competition coming from all the other manufacturers, and those manufacturers are not stupid.