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A stock pop and a stock flop
Apr 25, 2024
Episode 1147

A stock pop and a stock flop

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Our takeaways from Tesla's and Meta's earnings calls.

It was a big week for tech earnings calls. Guest host Nova Safo unpacks how they went down for Tesla and Meta and why the stock market reacted so differently to what their CEOs had to say. Plus, what Boeing’s troubles say about the state of U.S. manufacturing. And, would you try an AI-generated gin cocktail?

Here’s everything we talked about today:

Join us tomorrow for Economics on Tap! The YouTube livestream starts at 3:30 p.m. Pacific time, 6:30 p.m. Eastern. We’ll have news, drinks and play a round of Half Full/Half Empty.

Make Me Smart April 25, 2024 Transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

Kimberly Adams 

Hello everyone, I’m Kimberly Adams. Welcome back to Make Me Smart, where we make today make sense.

Nova Safo 

And I’m Nova Sofo filling in for Kai Ryssdal. Thanks everybody for joining us on this Thursday, April 25.

Kimberly Adams 

Today, we are going to listen back to some big news stories of the week. We’ve got some audio clips lined up. Don’t worry. None of the Supreme Court today, which everybody else is listening to, but some other stuff. Let’s go ahead and get into it.

Elon Musk

“These new vehicles, including more affordable models will use aspects of the next generation platform, as well as aspects of our current platforms, and will be able to produce on the same eight factoring lines as our current vehicle lineup.”

Nova Safo 

Okay. So that’s Elon Musk. Tesla CEO on his company’s earnings call this week. Listen. The company’s earnings were terrible. Their sales are down. Their revenues are down. I think it’s down the most in several years for a quarter. And there were serious questions about the company’s future because there were these reports that it’s abandoning the idea of making a specific, low-cost model. A new model of Tesla, and I think is going to be called the Model 2. And instead, is focusing on Robotaxis. Musk had come out and said that’s a lie. Well, it sort of wasn’t. So, in the earnings call, here’s how they massage things. From what he’s said. What’s funny is depending on who heard the earnings call, people heard different things from this call. It was almost as if people wanted to hear what they wanted to hear. But at the end of the day, it was a masterclass in taking bad news and massaging it in a way that appeared to appease investors. The stock went up after their terrible earnings report because Musk suggested that what they’re going to be doing, maybe not making an individual car anytime soon that is there that is specifically a low-cost car. But he and other executives said on the call, we’re going to take what we’ve learned as we’ve been trying to make that car and figure out how to make it and apply that to all of our current lineup. So, they said we’re going to be spending less capital. Music to Wall Street’s ears to develop lower cost models across the lineup. And we think we can deliver those sooner than we would have a Model 2, I believe it was. You know, if it was a standalone model. That was enough. Wall Street. At least some investors are happy to pile back into Tesla. So, really a masterclass on massaging the massaging bad news.

Kimberly Adams 

Letting it say what you want to say. And then, you had a comparison you wanted to make to that clip. Yeah?

Nova Safo 

The “don’t do it this way” earnings call. Here’s Mark Zuckerberg, Meta CEO.

Mark Zuckerberg

“Building a leading AI will also be a larger undertaking than the other experiences we’ve added to our apps, and this is likely going to take several years. On the upside, once our new AI services reach scale, we have a strong track record of monetizing them effectively.”

Nova Safo 

So, Zuckerberg went on. So, what he’s talking about there is we’re about to spend a ton of money to continue to develop artificial intelligence tools and figure out how to implement it into our various products. And he went on to say, they’re not expecting it to yield financial results for a while, at least a couple of years. So, one thing investors don’t want to hear is, by the way, this is on an earnings call where they reported doubling their profits from this same quarter a year earlier. And yet, they had stellar earnings and their stock plummeted after this earnings call because Zuckerberg basically told investors hey, believe us, we promise eventually we’re going to make money on this thing. But first, we’re going to pile in a lot of cash into it. They did not like hearing that.

Kimberly Adams 

So, what do you think is the takeaway in terms of corporate communication, given the weird way that these two earnings calls played out?

Nova Safo 

Well, I think the first takeaway is how important communication itself is. Investors aren’t just listening, aren’t just looking at the bottom line, really. I mean, because as we all know, and if you’re a regular Marketplace listener you know. The stock market is about the future, not about the past.

Kimberly Adams

And definitely not the economy.

Nova Safo

And it’s definitely not the current economy. But what Zuckerberg was suggesting was the near term future was more uncertain than investors were willing to stomach, at least at the current valuations of his stock, of his share price of Meta. So, I think the takeaway is, you know, that how you say things and what you focus on in those calls are just absolutely essential. And it really was a stark difference between the performance of those two companies and their share price and how investors took the various news coming from those two companies.

Kimberly Adams 

It’s interesting I was reading or hearing from someone saying that even though Tesla’s earnings were so bad, it sort of puts them on par with other car companies. That in terms of it’s just not as meteoric as it has been in the past.

Nova Safo 

That seems like it’s been terrible. Look, the electric vehicles market is down. But Tesla has some existential, you know, threats. And Musk has said it himself. BYD, and potentially other Chinese electric vehicle makers are undercutting them on price in China and in other parts of the world. That’s a serious threat, so it’s not necessarily just a matter of their performing like other companies.

Kimberly Adams 

Yeah. Okay, moving on. This next clip is from an interview I did on Marketplace yesterday with Jerry Useem, who’s a contributor to The Atlantic. And I asked him about, well, he wrote a really interesting piece on Boeing, and how this company that was so well respected, and just sort of the pinnacle of good engineering, and innovation, and all these things, has now gotten to this place where you have these terrible crashes. And then, you know, with hundreds of people dying in their planes, and then you have doors flying off in midair, and all these other things and kind of leadership at Boeing often not knowing even where these problems are starting. And I asked him what Boeing’s troubles tell us about the state of American manufacturing as a whole. And here’s what he said.

Jerry Useem

“It’s a very visible case for what I think has been a fairly pervasive phenomenon. I mean, as recently as the early 2000s, Intel was seen as the absolute last word in manufacturing prowess, and its CEO, frankly, admitted that like it lost its edge on the shop floor.”

Kimberly Adams 

And that was yet another example of this idea that when, over time, companies like Boeing and like Intel brought in leaders who weren’t engineers. They were experts in the finance side of things. And he says that’s led companies to make decisions that don’t prioritize overall quality or and, you know, sort of good manufacturing practices, often just sort of outsourcing or offloading their own manufacturing lines to outside contractors and being more like assembly plants and things like that. And it’s led to a decline in quality and in Boeing’s case, potentially safety.

Nova Safo 

That’s fascinating. And it really ties into what we were just talking about with stock prices because Wall Street wants relatively quick results quarter by quarter. And these companies have been over time manufacturing giants, bringing in finance folks, people who are better at keeping the stock price up or sending it higher versus necessarily investing in the future, or investing as much as some folks think is necessary for the future of their particular business.

Kimberly Adams 

Or to stop doors from falling off a planes.

Nova Safo 

Falling off planes in the air. Yeah.

Kimberly Adams 

Yeah. All right, one last one from Susana in Cathedral City, California recommended this clip, which by the way, you all can recommend clips too. Just like Susanna. Let’s hear it.

Lily Jamali 

“I’d figured I’d give this a shot too by asking chant GPT to specifically make a ‘Marketplace Tech’ gin cocktail, and what we got was the Tech Tonic — a mix of gin, elderflower liqueur, fresh lime juice and tonic water.”

Kimberly Adams 

That was from a recent episode of, as you may have heard, Marketplace Tech. Host Lily Jamali was inspired by yet another previous episode of Tech, which used AI to come up with this Marketplace-themed cocktail. And this time around, they asked for a gin-based cocktail specifically, and the episode gets into how scientists are using a nuclear magnetic resonance spectroscopy to analyze this. They’re using this very complicated technical thing to analyze the flavor profile of gin. And it could have implications for what can actually be considered gin in the future. And I’ll bet when they look under the microscope at the gin, you know what I bet they see?

Nova Safo 

The devil?

Kimberly Adams

The devil.

Nova Safo

Because that is what you say that.

Kimberly Adams

That is what gin is. And I’m sure that’s why Susana wanted me to hear this. I still think it’s the devil.

Nova Safo 

It’s the devil. Now, why? Why is gin the devil?

Kimberly Adams

Oh, I’m not telling that story on radio.

Nova Safo

No?

Kimberly Adams 

And on that note, that is it for today. Tomorrow, you can join Meghan McCarthy Carino and I for Economics on Tap, where I will not be having gin. We will have news drinks and we’ll play a game. You can join us on the YouTube livestream starting at 3:30 Pacific, 6:30 Eastern. Make Me Smart is produced by Courtney Bergsieker, and audio engineering is by Charlton Thorp. Ellen Rolfes writes our newsletter. Thalia Menchaca is our intern.

Nova Safo 

Marissa Cabrera is our senior producer. Bridget Bodnar is the director of podcasts, and Francesca levy is the executive director of Digital.

Kimberly Adams

Do you like gin, Nova?

Nova Safo

I’ve had it maybe once or twice. I think it’s too strong for me.

Kimberly Adams 

Yeah, it’s too strong for most of us.

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