Tesla Stock Drops While Other Automakers’ Stocks Rise Following Tesla Investor Day — What Happened?
What went wrong? Tesla held a big Investor Day event, yet at the end of it, Tesla’s stock tanked and the stocks of competing automakers rose. I’m going to provide a few different perspectives here to try to make sense of it all.
First of all, I’ve covered Tesla for more than a decade, and one of the clear patterns in that time has been that “buy the rumor, sell the news” is very strong with this stock. Conference call after conference call, special event after special event, Tesla stock [NASDAQ:TSLA] would drop after the big show. Whether that’s all gaming the system or there’s something substantive to it, I don’t know, but it’s been a clear pattern. In that case, does it matter what was presented? Would the stock tank no matter what? Well, perhaps it is just a mental affliction I have, but I do think what was in the presentation mattered. If Tesla had said, we’re going to start producing a $25,000 “Model C” (or pick your favorite name for the model) on April 1, I imagine the stock would have spiked.
And that does bring up one possible explanation. Almost all of the hype or interest I saw about Tesla Investor Day 2023 leading up to it concerned that lower-cost model everyone seems to be on the edge of their seats waiting for. One can say that would be a “Tesla Model C” event, not a “Tesla Investor Day” event. That is indeed how Tesla has historically done it, but I think there was expectation because there was the idea that Tesla was being a bit stealth about it (if Tesla announced it was having an event for a cheaper model, that could hurt current demand for the Model 3 and Model Y). Also, Tesla’s 3rd master plan was supposed to be all about scaling up, and what’s critical to scaling everything up? A hugely mass-market model or two, a lower-cost Tesla that more people can afford. Now, I’m not going to lie — I always thought the event was about the supply chain, and that Tesla wouldn’t announce a new model at this kind of event. However, I also saw that it was obviously what was expected.
If not more about a potential low-cost Tesla, I think many investors/traders were expecting some kind of big breakthrough announcement, something both shocking and tangible/believable. It appears there was no such news, and thus Wall Street’s response. But that also doesn’t capture the full response. …
Not only was Tesla stock down 5.85% yesterday — stocks of some competitors were up a lot. XPeng stock [NYSE:XPEV] was up 5.3%, NIO stock [NYSE:NIO] was up 2.9%. Even Ford stock [NYSE:F] and GM stock [NYSE:GM] were up — 1.9% and 2.3%, respectively. BYD stock was also up (2.1%). Surely, that’s not all a coincidence.
The best explanation I can think up is that, without more evidence that Tesla is doing something bigger in the affordable EV space or with some breakthrough technology, investors think that competitors have a better opening or better footing in the market than they thought might be the case the day leading into Investor Day.
Hold on, many people have said. Tesla did actually reference a lower-cost model — actually a lower-cost platform that multiple models would use! That’s better than what was expected, no? Also, Tesla announced some major modifications to its manufacturing processes in able to enable this lower-cost platform. And the company mentioned that the lower-cost models would be produced at various factories around the world, starting at the newly announced Mexico gigafactory. Shouldn’t Tesla get props for all of this?
The best explanation I can come up with for why these announcements had no apparent effect is that they were already fully expected, and in the worst case, they were further back in the plans than anticipated. A more affordable Tesla has been long mentioned and discussed. A gigafactory in Mexico was long expected and solidly rumored. For the stock to go up, the news has to surpass the expectations. Perhaps this has just always been a Tesla problem — so much excitement leading into the event that the market is disappointed with whatever is presented. Perhaps the hype around the event from key people made investors think it was going to be more than it was. Perhaps in the long presentation, people got lost or fell asleep and didn’t find the extra value in what Tesla is doing that Elon Musk expected them to find. Maybe, for short-term effect at least, the presentation should have been shorter, more focused, and more simply highlighting a few key highlights for the investment world? But hey, maybe no one at Tesla (Elon Musk included) cares about the short-term effect and is happy that the company laid out its plans and processes more completely for Tesla fans and followers who got something from the presentation.
At the end of the day, Tesla’s market cap is far above that of its automotive competitors, indicating that the investment community sees a large gap between Tesla and others on future revenue potential and profit potential. However, one presumes that the intention of Investor Day 2023 was to impress the investment world and boost the stock price, yet the result appears to be that the investment community is less impressed than they expected to be and they even moved over to Tesla’s competitors more in response. Who is surprised? What else might have caused this undesired outcome?
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