Elon Musk: Tesla Could Be Worth More Than Apple + Saudi Aramco. Stock Market: Not So Fast.

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On the Tesla conference call today, the #1 headline grabber was that Tesla CEO Elon Musk now thinks Tesla [NASDAQ:TSLA] could one day become more valuable than Apple and Saudi Aramco currently are combined. That would entail a massive increase in Tesla’s market cap, as the chart below shows.

On this afternoon's $TSLA earnings call, @elonmusk said he believes Tesla can exceed the market capitalizations of Apple and Saudi Aramco combined…

… without assuming any value from autonomous humanoid robots. pic.twitter.com/UHekxHRpx4

— James Stephenson (@ICannot_Enough) October 19, 2022

Elon Musk said later in the call that this calculation completely excluded Optimus (the potential for Tesla to make money on AI-boosted robots). That comment was followed by a long silence, seemingly something intended by Elon for dramatic effect.

Twitter was full of Tesla followers dropping that highlight, clicking Tweet, and waiting for the responses, myself included.

Elon started out on that train of thought by referencing the time he said that Tesla could become worth more than Apple’s market cap at the time, which he noted today Tesla had done.

While Elon hyped up Tesla’s potential future stock price, the after-hours result was a short spike upward followed by a stronger and much longer crash downward. In other words, if stock traders believed at all in that long-term vision of a valuation higher than Apple & Saudi Aramco combined, they certainly didn’t see it coming anytime soon and decided it was time to dump some stock. This story might get a bit complicated, though. …

There was a broad consensus after the call that Elon was “selling,” trying to pump up the Tesla stock price. This was highlighted not by perennial critics but by major TSLA bulls. The conclusion many have come to is that Elon needs to sell more Tesla stock in case he needs more cash to buy Twitter.

Elon pumped $TSLA harder than a guy who needs to buy an overpriced social media app

— Whole Mars Catalog (@WholeMarsBlog) October 20, 2022

$TSLA conf call:
– Zach guided to “just under 50%”deliv growth for FY’22 – implies 4Q delivs ~450K+
– Elon: 4Q delivs “epic”
– Elon said $5B-$10B buyback likely in 2023
– Auto GM% probably weak due to ramp of Berlin/Austin
– M-$30K vols will be bigger than all models combined

— Gary Black (@garyblack00) October 20, 2022

4/ Elon clearly selling on call:
– 4Q will be epic
– Said TSLA market cap would be more than AAPL and Saudi Aramco combined (>$4T)
– $5B-$10B buyback next year
– FY’24 forecast of 50K Semis implies $10B of increm revs @ $200K
– New compact would outsell all other models combined

— Gary Black (@garyblack00) October 20, 2022

Is that what was going on? Was Elon pumping TSLA knowing that he intended to sell more stock soon? Well, whether for that reason or others, the market has decided that the conference call brought more pessimism than optimism and the time to sell is now. [Disclosure: I own Tesla stock, but I have no intention to buy or sell stock anytime soon.]

There are a variety of factors that could have led shareholders to drop the stock after hours. Guiding “just under” 50% growth year over year may be a bit lower than some expected, since guidance was previously 50% growth. Talk of a stock buyback in 2023 might have cooled off hopes that Tesla’s large piggy bank could be used to grow even faster, or integrate more into other arenas.

He talks about a cheaper car yet we still have no CT price.
Talked about Optimus yet demo underwhelmed most.
We are years away from $500 shares.
I can wait.
Until then, just watching the shares fall hard until Elon stops selling.
Other CEOs don't do this type of thing.

— MychaelP (@MP_InTheMoney) October 20, 2022

We don't even have the CT yet, Gary.
And CT had an initial price of $39k.
Buyers are waiting and waiting and waiting.
I'm still holding shares but being down over 50% for a company with huge numbers is quite odd.
Did your fund buy shares while talking it up?

— MychaelP (@MP_InTheMoney) October 20, 2022

A return to discussions around a cheaper Tesla may have fueled concerns about consumer demand problems. Elon Musk said on the conference call that he had heard/seen many concerns about Tesla consumer demand in the past month and emphasized that demand was very strong and they were going to sell all the vehicles they could produce as far into the future as they can see. He said they weren’t at all worried about demand. However, some analysts pulled out some comments he made about the Chinese and European markets that they read as signs of demand issues nonetheless. Did many analysts and stock traders think that reading between the lines, they saw consumer demand issues? Or were they just looking for issues because of preconceived notions? Was Tesla’s talk of a cheaper car in response to demand issues? Or was it just always part of the plan but something Elon avoids talking about except in the case of potential Tesla robotaxi service?

Did I hallucinate the earnings call I just heard or did they? https://t.co/XML8TBmnFR pic.twitter.com/dqL6c4DNSx

— Nafnlaus 🇮🇸🇺🇦 (@enn_nafnlaus) October 19, 2022

Regarding the demand issue, one person summarized the surprising take (that you can see a screenshot of above) as, “Elon talks too much. He mentioned that there’s a recession in China and Europe. They’re riffing on that. It’s just FUD as usual.” Elon’s specific responses in those portions of the call that he is referring to were:

• “China is experiencing [inaudible] of a recession of sorts — from a property market mostly — and Europe has a recession of sorts driven by energy. The US — North America — is in pretty good health. Although the Fed is raising interest rates more than they should, but I think they’ll eventually realize that and bring them down again. You know, demand is a little harder than it would otherwise be, but as I said earlier, we’re extremely confident of a great Q4, and we anticipate continuing to grow our vehicle production, sales, and deliveries by on average 50% a year — as far into the future as we can see.”
• But then, after a moment of pause, he tagged on, “One caveat I should say: growing production by 50% every year — we’re trying to smooth out deliveries and not have this crazy delivery wave at the end of every quarter. And, in fact, we were just fundamentally running out of — there weren’t enough boats, there weren’t enough trains, there weren’t enough car carriers to actually support the wave. Tesla got too big. Whether we like it or not, we actually have to smooth out the delivery of cars [at the end of each quarter] because there just aren’t enough transportation objects to move them around.”
• “To the best of our knowledge, we believe that Tesla will continue to grow deliveries and revenue, production, at a 50% or greater compound annual growth rate.”
• “I think we happen to be in a very good spot. I wouldn’t say it’s recession proof, but it’s recession resilient. […] Yeah, we try to model out, let’s say 2023 is a brutal recession year — even then we generate meaningful cash.”

so that’s what happened to the $25k car pic.twitter.com/G87o7EE23l

— Whole Mars Catalog (@WholeMarsBlog) October 20, 2022

Clearly, Elon noted many things during the quarterly Tesla conference call that put Tesla in good light — from the statement that Tesla is still aiming for 50% year over year growth in production, that it sees no demand issues/concerns, that it is developing a lower-cost car that will outsell the Model 3 and Model Y (and be used for robotaxis), that Elon thinks Tesla will eventually be worth as much as Apple and Saudi Aramco currently are combined if Tesla executes well, and more — but the stock market has so far responded negatively to the quarterly updates. I’ve gone through potential reasons why above, but feel free to chime in with your own thoughts below.

Had same thought but also wouldn’t bet against @elonmusk pic.twitter.com/ogxCZbMSGr

— 🐶 𝔼𝕒𝕣𝕝 of FrunkPuppy 🐶 (@28delayslater) October 20, 2022