Tesla’s stock price plummeted, Musk’s wealth shrank by 146 billion a day, and he angrily denounced bears as “drunkards”
The “earnings season” of US technology stocks kicked off on the 19th local time. Tesla “takes the lead” in announcing its financial report for the second quarter of this year. As profits and cash flow are not as expected, Tesla’s stock price has plummeted all the way. As of the close of the 20th, it has fallen by nearly 10%, and the decline continues to expand after the market.
Perhaps dragged down by Tesla’s “open door”, the stock prices of technology giants such as Netflix, Microsoft, Amazon, Oracle, and Meta fell across the board, causing the Nasdaq index to close down by more than 2%, and there was a rare situation where chip stocks underperformed the market.
Tesla’s “crash” caused the world’s richest man Musk to lose US$20.3 billion (approximately RMB 146.16 billion) in assets overnight, and other technology tycoons including Zuckerberg and Bezos also lost US$20.8 billion in wealth.
Musk, on the other hand, “gets more frustrated and courageous”, calling on investors who believe in him to buy Tesla shares at low prices while the market is panicking. He also compared those who are bearish on Tesla to “drunk men” and called on supporters to ignore their “nonsense.”
Musk data map
Profit margins are lower than expected, leading to panic in the market
Musk urges investors to buy Tesla stock on dips
According to Tesla’s financial report, Tesla achieved operating income of US$24.93 billion in the second quarter of this year, exceeding analyst expectations. But at the same time, the gross profit margin has dropped sharply, only 18.2%, and the free cash flow is only 1.005 billion US dollars, which is far less than the 2.18 billion US dollars expected by analysts.
Tesla explained in its financial report that the main reason for the lower profit margin is that its “mixed pricing” strategy has led to a decline in average selling prices, while the large cost of battery design and development has also greatly dragged down profit margins.
Tesla CEO Musk said on an investor conference call that sacrificing profit margins in exchange for more market share “makes sense.” If the economic environment deteriorates in the future, Tesla still has room to continue to cut prices and squeeze out the market share of rivals. Musk also said he has “very high confidence” in Tesla’s long-term value. He believes that the value of the company is expected to reach five times or even ten times its current size. He also suggested holding Tesla for a long time like Buffett, as a value investment. If there is a panic in the market, take the opportunity to buy a lot of Tesla shares.
Musk even compared investors who are bearish on Tesla to “drunk people.” “Imagine you’re sitting in your own home surrounded by a group of delirious drunks yelling to buy your house every day. The price they offer goes up and down every day. But you know that the house is still the same house, and the value of the house hasn’t been lowered just because of these drunks yelling.”
▲Orlando, Florida, USA, Tesla logo according to Visual China
At the same time as Musk’s comments, the market reacted to Tesla’s financial announcement, and its stock price plummeted. Tesla fell 9.7% all day on the 20th to close at $262.90, the biggest drop in three months. This also reduced Musk’s personal net worth by $20.3 billion in one day to $234.4 billion. Musk has made his wealth primarily through his holdings in Tesla, space exploration company SPACE X and Twitter. Prior to this, his road to wealth this year was smooth sailing. Year-to-date, his wealth has increased by about 118 billion U.S. dollars, and Tesla’s stock price has risen by 136% over the same period.
Market analysts generally believe that Tesla’s soaring stock price this year actually has some elements of “overdrafting the future” in it. In the past, Tesla was a cutting-edge force, and its products had higher prices and were accepted by the public. In the first quarter of this year, the Tesla Model Y has become the best-selling car in the world. Tesla is slowly entering the “home of ordinary people”, and the price and profit margins will not be as high as in the past.
Technology stocks collapse across the board
Has the U.S. technology industry entered a bubble?
Musk isn’t the only American tech billionaire whose wallets have shrunk.
As the Nasdaq 100 index, which is dominated by technology stocks, fell 2.3%, the total net worth of Amazon founder Bezos, Oracle founder Larry Ellison, former Microsoft CEO Steve Ballmer, Meta founder Zuckerberg, and Google co-founders Larry Page and Sergey Brin also fell by $20.8 billion.
The share price of Netflix, which announced its financial report with Tesla, fell 8.4% on the 20th, which surprised market participants.
▲Netflix has produced a large number of popular dramas
The financial report shows that Netflix’s revenue in the second quarter of this year was US$8.19 billion, a year-on-year increase of 2.7%, which was lower than the growth rate of 3.7% in the previous quarter, and its revenue scale was also lower than analysts’ expectations of US$8.3 billion. Netflix’s operating profit in the second quarter of this year was US$1.83 billion, with a year-on-year growth rate of 22.3%, which was basically the same as the guidance given in the previous quarter, and the growth rate was higher than the 21% growth rate in the previous quarter. Netflix expects revenue growth to accelerate in the second half of this year, benefiting from an increase in the proportion of paying subscribers.
Goldman Sachs, a well-known financial institution, reminded investors that there is a bubble in U.S. technology stocks at present, and investors need to be careful about risks. Goldman Sachs strategist Hannah Scheetz wrote after assessing 28 industry bubbles in the past 40 years, “The U.S. technology sector is now in a bubble, but we believe that this bubble will remain in place for a period of time, averaging nearly two years.”