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Tesla's earnings report was worse than expected, but Elon Musk has a plan

Dan DeFrancesco   

Tesla's earnings report was worse than expected, but Elon Musk has a plan
  • This post originally appeared in the Insider Today newsletter.

Hi! Costco shoppers who scooped up the store's gold bars are learning that being an amateur commodities trader is actually really hard!

In today's big story, we're looking at Tesla's earnings report and what comes next for the EV maker.

What's on deck:

But first, the man with the plan.

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The big story

Tesla's turnaround plan

Bad news: Tesla's earnings report was worse than expected.

Good news: Elon Musk has a plan.

Tesla's disappointing earnings illustrated how bad a year it's having. The EV maker missed profit and revenue estimates, but those weren't the only ugly numbers.

Tesla's free cash flow was negative $2.5 billion in the quarter, a shocking 674% year-over-year drop. (The company did point out it spent $1 billion on AI infrastructure investments this quarter.)

Those figures aren't what you want to see from a public company. And even though Tesla tried to pin the blame on hybrids, such a bad earnings miss isn't usually something Wall Street overlooks.

Except… that's exactly what investors did.

Details on its robotaxis plan and news of expediting the release of an affordable model were all Wall Street needed to get back in on Tesla. Shares popped nearly 11% in premarket trading, a big win for a company down more than 40% on the year.

Tesla's ambitions around robotaxis and an affordable model tap into key trends.

Speeding up the launch of cheaper Tesla models — whenever that may be; details on a timeline were relatively scant — addresses a consumer that has shifted away from wanting big, expensive EVs.

Discussion of robotaxis, meanwhile, allows Tesla to ride the stock market's AI wave that has sent other companies' stock prices skyrocketing over the past year.

Perhaps that's why Musk spent so much of the earnings call discussing autonomy and the progress made with Tesla's Full Self-Driving software.

But having a plan is one thing. Executing it is something else entirely. Musk, for all his accomplishments, hasn't always held firm to future milestones he's targeted.

To that point, Business Insider's Linette Lopez suggested an even bigger initiative Tesla consider: Musk stepping down.

The CEO, she argues, is ultimately responsible for Tesla squandering its lead in the EV market and not better insulating itself from threats when things were going well.

Considering Musk's close ties with some of Tesla's board members, such a drastic move is a long shot. A more realistic request might be Musk pulling back on other responsibilities, but that also seems unlikely. Musk told analysts on the earnings call that Tesla is the majority of his work.

Ultimately, Musk's fate could be decided by investors. Tesla is seeking shareholder approval for Musk's $55 billion pay package, which a Delaware judge has already struck down.

If investors vote against the package at Tesla's annual meeting in June, who knows where Musk — and his AI ambitions — will end up.

3 things in markets

  1. The March sell-off in stocks could be the start of something bigger. JPMorgan's Marko Kolanovic highlighted a "problematic backdrop" in equities that investors seem to be ignoring. Stubborn inflation and geopolitical concerns aren't going anywhere and "put additional pressure on investors to de-risk," Kolanovic wrote.

  2. Cathie Wood's investors are heading for the exits. Outflows for Wood's ARK funds are ramping up after a three-year decline. This year alone the suite of ARK ETFs has net outflows of $2.2 billion, triple what it endured last year.

  3. Stocks for a strong economy. Goldman Sachs highlighted 30 names that they think will outperform the market because they're investing heavily in future growth opportunities like artificial intelligence. Meta, Intel, and Micron Technology were among the stocks the bank flagged.

3 things in tech

  1. Microsoft is blocking employee access to Perplexity AI. Perplexity AI is one of the largest customers of Microsoft's Azure OpenAI service. Other AI tools, like Google's Gemini chatbot, are also blocked on Microsoft's employee devices.

  2. Threads has overtaken X in one key metric. New data shows Meta's Threads is consistently surpassing Elon Musk's X in daily users in the United States. While X still has more monthly users, Threads could be on its way to becoming bigger than its competitor.

  3. Scoop: Navan's IPO. The a16z-backed travel and expense platform, which was valued at $9.2 billion back in October 2022, is targeting an April 2025 public listing, a person with direct knowledge of the matter told BI.

3 things in business

  1. America is drowning in plastic. In 2018, China stopped taking the United States' plastic imports. The US is now scrambling to find alternatives for the 40 million tons of plastic it produces each year.

  2. How Amazon won over skeptical advertisers. Since launching three months ago, Prime Video's ads have made a positive impression on advertisers, luring them in with generous price incentives and sponsorships.

  3. The Senate passed a bill that could ban TikTok. Joe Biden has signaled that he'll sign the legislation, which would effectively ban TikTok from the US app store. The final vote was 79 senators in favor, and just 18 opposed.

In other news

What's happening today

  • Today's earnings: Boeing, Meta, IBM, and other companies are reporting.

  • The US Supreme Court will hear the Idaho abortion ban case.

The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, in London. George Glover, reporter, in London.

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