Home Stock Market Commentary A Rough Week for Musk: Earnings Miss, Explosions, & Blue Checks Revolt

A Rough Week for Musk: Earnings Miss, Explosions, & Blue Checks Revolt

A Rough Week for Musk: Earnings Miss, Explosions, & Blue Checks Revolt

The enigmatic entrepreneur, Elon Musk, went through a tough, tumultuous week:

  • Tesla, the electric vehicle giant, missed earnings by a wide margin.
  • Revolutionary rocket company SpaceX had a crash and burn during a test launch.
  • Twitter marked a controversial decision to remove legacy verification checkmarks, leading to plenty of consternation amongst the previously verified population.

Already facing unprecedented (for him) public backlash, the former public darling Elon faces more scrutiny than ever as investors, analysts, and the media-at-large question his financial strategies and executive decisions – and the implications for his company stakeholders.

Tesla Swings and Misses

Tesla’s Q1 earnings report came as a shock to investors, despite tightening economic conditions, as the company fell slightly short of projections but issued a dour outlook.

Reporting a slight revenue miss, the headline story was Tesla’s gross margin reduction to 19.3%. Tesla’s adjusted net income was $2.9B, a hair lower than Wall Street’s $3B projection. In response to the report, Tesla’s stock price dropped 7.70% in afterhours trading.

Source: Morningstar

Much of the investor fear is likely attributable to Tesla’s announced price cuts for its electric vehicles, citing a volume-based strategy to push product out of the door at the expense of per-unit profitability.

Some analysts argue that lower prices are negative for Tesla, while others believe the company will experience short-term pain for long-term gain, citing demand in China as a critical catalyst. In any case, Tesla’s near-term future seems uncertain as the market continues to digest the company’s earnings and margins.

SpaceX’s Starship: A Step Backwards or a Sign of Progress?

Meanwhile, SpaceX’s unmanned Starship test launch on April 20th, 2023, ended in an explosion before the rocket’s stage (booster from body) separation. Despite the setback, the company deems the test a success, as the lessons learned will contribute to improving the Starship system’s reliability.

SpaceX aims to make life multi-planetary and plans to establish bases on the Moon and Mars. The Starship spacecraft has been selected by NASA for the Artemis III mission to transport astronauts to the Moon in late 2025.

SpaceX Starship in Flight (Source)

Although the explosion marks a significant step in SpaceX’s pursuit of a reusable rocket system, it is a financial setback for the company. The entire program is estimated to cost between $3B and $10B; although the test’s failure provides valuable data, it’s certainly a hit to an already-pricy project’s balance sheet. 

Twitter Axes the Checks

Adding to Musk’s turbulent week, Twitter rolled out removals of blue checkmarks from legacy, formerly verified accounts refusing the monthly maintenance fee required. This move has resulted in many high-profile users losing their verification status, causing concerns about the platform’s ability to provide accurate information from authentic sources.

A parody account, Melner nevertheless echoes broad sentiment amongst the former blue check class

Musk’s strategy to boost Twitter’s revenue by pushing more people to pay for a premium subscription has been met with skepticism. As fewer than 5% of legacy verified accounts joining Twitter Blue. Although much of the rhetoric espousing a mass migration from Twitter proved toothless, authentication concerns might drive away ad revenue at a time when its most needed.

A Rough Week for Musk

Business is never easy, especially when you’re juggling as many operations as Musk, but this week is particularly volatile. Tesla’s earnings miss and shrinking profit margins shook investor confidence, while SpaceX’s explosion raises concerns about the viability of its ambitious projects. Proving bad things come in threes, Twitter’s verification controversy casts further doubt on Musk’s ability to monetize the platform effectively.

What, Me Worry? – Musk’s late night April 20th Tweet after a tough week

As Tesla faces tightening margins and increased competition from other electric vehicle manufacturers, the company needs to prove it can continue to innovate while maintaining profitability. Tesla’s Cybertruck production, set to begin later this year at Giga Austin, will be a crucial test of the company’s ability to deliver on its promises and meet market expectations.

In the realm of space exploration, SpaceX must demonstrate that it can learn from its failures and iterate upon its designs to develop a reliable, reusable rocket system. Success in this endeavor would not only revolutionize space travel but also solidify SpaceX’s position as a leader in the industry, paving the way for further innovation and investment.

Lastly, Musk’s approach to monetizing Twitter through premium subscriptions and the removal of legacy verification checkmarks will require a delicate balance. To maintain the platform’s reputation as a source of accurate information and retain its user base, Musk must carefully consider the implications of his decisions on user experience and overall platform credibility.

As Musk navigates these financial headwinds, it remains to be seen how his leadership will steer these companies through adversity. As these stories unfold, the world will be watching to see how Musk’s leadership shapes the future of technology, commerce, and global connectivity.