Today the stock price for Tesla falls in respond to Elon Musk's bizarre behaviour in the company's Q1 earnings call. Here is a question that if the market should punish Tesla because of his bizarre behaviour. Then we need to answer our first question what the Tesla stock price is built on.
The
market value of Tesla is similar to the market value of General Motor
which generates much higher revenues and earnings as well as cash. It
indicates that the market value of Tesla is built on investors'
expectations of Tesla's future growth and profitability. To boost
investors' expectations, the company has to tell "good stories" about
itself. Unfortunately, Elon Musk this time failed this time to tell
"good stories" to the institutional investors who have been hugely
disappointed since the earnings call; from this point of view, Tesla
should have been punished by the market, especially those institutional
investors. During the earnings call, Elon Musk answered ten questions
from a YouTube blogger, who represented a group of retailer investors.
This might have been caused by this group is fans of Elon Musk and Elon
Musk loved to answer people who love him. In addition, Elon Musk seemed
to want to change the culture of the earnings call and make the earnings
call more interesting to him. Maybe Elon Musk works long hours, he has
not been energetic during most of the earnings call (none I am aware
of). The last US presidential election showed that the traditional force
was defeated by the new force (such as Facebook), would this be true in
the financial market? I do not think so because the financial market,
especially the US financial market, is dominated by financial
institutions and retail investors are not as influential as
institutional investors.
Overall, Tesla should have been punished by the market and Elon Musk's behaviour
did affect the fundamental of the stock because it has lowered
investors' expectations that crucially contribute to the market value of
Tesla.
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