Apple reported quarterly earnings yesterday. Tesla and Facebook went today. Tomorrow it’s Amazon. Add in a bunch more that I don’t follow as closely and it sure is a busy week.
Truthfully, I really enjoy listening to earnings calls from companies that I follow because it gives me a chance to hear directly from management about both past performance and future outlook. It is also interesting to note the differences between how different companies go about these calls – everything from minor details like what kind of music they play before the call starts to the type of energy the speakers project to the level of detail they are willing to share with analysts and investors.
For example, Apple runs their call as you’d imagine they would, which is to say very business-like. Only CEO Tim Cook and CFO Luca Maestri speak and they don’t divulge many extra details unless they are “defending” the company and/or the stock as was the case this time after their first missed guidance in about 17 years. I imagine their call taking place in a boardroom with bottled water lining a table against the wall.
The Tesla call is a mess. Elon Musk does the majority of the talking but clearly hates these calls and thinks the questions analysts ask are boring and short-sighted. Every now and then he will toss it to the CFO or someone else he has invited into the room for that particular call. They are usually surprised they get to speak and then not as surprised when Elon cuts them off to say something else he thought of. I imagine this call taking place in a Tesla vehicle driving down the highway on speakerphone on the way to a fast food joint.
Amazon CEO and Richest Man On The Planet Jeff Bezos doesn’t even participate in the Amazon calls. Legend has it that he is out helping deliver Amazon packages to customers on those days. I just made that up but I really do wonder what he is doing at those times.
Bezos actually was a guest at a conference a few years ago where he mentioned that it amused him when analysts would congratulate Amazon for a good quarter. He explained that they are actually congratulating them for good execution 2 years prior since nothing that was done in the past 90 days truly affected that quarter’s results. Work today will be reflected in quarterly financials 6-8 quarters from today.
This probably explains not only why Bezos doesn’t participate in calls but also why many CEOs seem to dislike the quarterly focus that Wall Street maintains. Most large companies, and specifically tech companies, are working on projects that take years to go from initial concept to the research & development stage, to manufacturing (in the case of hardware) or programming (software). If a particular project takes only a week or two longer than expected, its launch (and the revenue it generates) can move from one quarter to the next, impacting quarterly earnings.
This means nothing to long term investors but Wall Street will punish the stock price for such “missed expectations” in the moment. For me, despite considering myself a long term investor who invests primarily in long term behavioral shifts, these quarterly calls serve as an opportunity to hear management control the narrative (as opposed to the stories the media promotes during the interim) and give me a chance to make sure the company is still on the path that I have in mind, or if not, to make changes to my investments.