WEBVTT - Gerber Says Tesla Performs 'Amazingly Well'

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic on Bloomberg Radio. So let's get

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<v Speaker 1>right to with somebody who is a Testla owner and

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<v Speaker 1>investor well known to our audience. We're talking about Ross Garber.

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<v Speaker 1>Russ Gerber is president and CEO like Gerber Kawasaki Wealth

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<v Speaker 1>and Investment Management. He joins us on the phone from

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<v Speaker 1>Santa Monica, California. Ross, pick out one number and in

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<v Speaker 1>this earnings report and tell us why it's your favorite.

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<v Speaker 1>Earnings per share, earnings for share. They beat by a

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<v Speaker 1>big number in a very very very tough environment while

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<v Speaker 1>they're ramping two factories and boy, okay, that number two

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<v Speaker 1>dollars and twenty seven cents ross for the second quarter.

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<v Speaker 1>Estimates were for one dollar and eighty three cents, So

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<v Speaker 1>blowing it out of the park when it came to

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<v Speaker 1>that bottom line. Yeah, it's like so hard with supply

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<v Speaker 1>chain and all the issues with China, and here they

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<v Speaker 1>come out with a huge margin on their vehicles with

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<v Speaker 1>the ramp. I mean, it's just they executed amazingly well.

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<v Speaker 1>So how are they doing it when so many others

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<v Speaker 1>seem to be struggling. Well, there's a couple of things

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<v Speaker 1>that Tesla has as a huge advantage over other automakers,

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<v Speaker 1>And it first started when Ellon went out and cut

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<v Speaker 1>supply deals with like Lithian companies and battery cell companies.

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<v Speaker 1>He already had the vision of like, we want ten

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<v Speaker 1>year contracts, we want guaranteed supply. Like he went all

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<v Speaker 1>in and did like huge deals with these suppliers early on,

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<v Speaker 1>before electric vehicles were even an issue. So he's kind

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<v Speaker 1>of gets the priority because he makes the most cars,

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<v Speaker 1>and he committed the most early, and so he has

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<v Speaker 1>the best position. Plus they're completely vertically integrated, so they

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<v Speaker 1>really have an advantage over other players in the eavy space.

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<v Speaker 1>Why aren't we seeing shares jump more If the bottom

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<v Speaker 1>line beat was so good, if automotive automotive gross margin

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<v Speaker 1>came in so much higher than expected, shares in the

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<v Speaker 1>after hours are only up two point I don't really

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<v Speaker 1>look at after hours trading as any indication of too much,

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<v Speaker 1>but we haven't had the conference call yet, and so

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<v Speaker 1>that's usually where a lot of discussed that may change

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<v Speaker 1>the trading and after hours, you know, I think the

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<v Speaker 1>most important thing is the valuation of Tesla is very

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<v Speaker 1>high relative to the market, so they need to have

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<v Speaker 1>good earnings to support their stock price and such. So

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<v Speaker 1>either way, the stock is going to be up tomorrow,

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<v Speaker 1>and I think that's great news. What's the important valuation

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<v Speaker 1>metric to watch? I mean, I'm just going to basic

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<v Speaker 1>PE is almost eighty eight right now, forward looking PE

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<v Speaker 1>of about sixty three. What is the important metric to

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<v Speaker 1>look at when we're trying to value something like a Tesla,

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<v Speaker 1>which most would argue is still a mega growth company, right,

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<v Speaker 1>So we value all companies based off their P to

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<v Speaker 1>growth ratio, So that's really what's important is how fast

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<v Speaker 1>is the company growing relative to its p And that's

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<v Speaker 1>really where you can get stock price appreciation because you see,

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<v Speaker 1>this multiple will be forced in a way lower as

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<v Speaker 1>he goes up if he doesn't go up, so he

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<v Speaker 1>usually goes up when he goes up. So the nice

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<v Speaker 1>way to look at it is because Tesla is beating

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<v Speaker 1>earnings and growing so fast their growth rate as well

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<v Speaker 1>over of earnings, but their PE is less than a hundred,

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<v Speaker 1>so relative to other stocks on the stock market, it

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<v Speaker 1>is actually very cheap. So what's the question that you

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<v Speaker 1>would have for executives on the call today for Elon Musk.

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<v Speaker 1>If you were able to ask a question, what would

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<v Speaker 1>you ask him? Well, A, most importantly, I I really

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<v Speaker 1>want to know what's happening in Berlin and Austin as

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<v Speaker 1>far as the ramp where they are with with production

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<v Speaker 1>and what's going on with the forty eight cell ramp,

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<v Speaker 1>because that seems to be sort of a little, you know,

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<v Speaker 1>hiccup that they're dealing with right now. So I'm really

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<v Speaker 1>concerned about technology also for full self driving, and you know,

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<v Speaker 1>I've been using the software and it's getting better and better,

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<v Speaker 1>But what's their time frame for a wide house which

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<v Speaker 1>I think? How much better is it getting? Because you know,

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<v Speaker 1>there were some videos that made the rounds just a

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<v Speaker 1>couple of weeks ago with some really concerning I think

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<v Speaker 1>Galileo Russell posted it a few weeks ago, and he's

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<v Speaker 1>a big testa bowl we've had on our program before,

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<v Speaker 1>and it showed it the vehicle turning right down the

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<v Speaker 1>wrong way down a one way street. I'm sure you

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<v Speaker 1>saw that video. Ross, Um, how much better is it getting?

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<v Speaker 1>Because that's that's pretty bad. You know, I think that

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<v Speaker 1>I've seen like so many humans just today do stupid

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<v Speaker 1>things like that. You know, it's really like hard to

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<v Speaker 1>be a perfect car while you're you do live in

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<v Speaker 1>l A. So that you know, I'm a California so

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<v Speaker 1>I can say that. And then I and I changed

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<v Speaker 1>my car in l A. And it's super hard, you know,

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<v Speaker 1>it's super hard to survive in l A. So I

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<v Speaker 1>take the expectation that a computer will have a flawless

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<v Speaker 1>driving ability when it's not even it's still a beta beta.

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<v Speaker 1>And then you get on the road and you watch

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<v Speaker 1>humans like kill each other on the road daily. We're

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<v Speaker 1>setting two standards, you see what I'm saying. And so like,

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<v Speaker 1>full self driving is never going to be perfect. Well

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<v Speaker 1>that's something who's gonna get run up? That's what I

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<v Speaker 1>want to ask Ross. Is full self driving crucial to

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<v Speaker 1>the Tesla story? Or can it just being a great

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<v Speaker 1>EV car maker? And that's enough. Well, it's crucial to

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<v Speaker 1>the story if you think about it, that making an

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<v Speaker 1>e V isn't a challenge for Tesla anymore so Tesla

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<v Speaker 1>as a company, where would they evolve too if they

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<v Speaker 1>were just an EV maker? Because eventually everybody's gonna be

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<v Speaker 1>making evs and it will become a commodity. There's the

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<v Speaker 1>human robot that I'm kind of upset, but that's that's

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<v Speaker 1>all about AI though that's not really about like building

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<v Speaker 1>a robot isn't hard. It's about making a smart robot

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<v Speaker 1>that can do good stuff, you know, and so like.

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<v Speaker 1>So the future is the software, and I think you

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<v Speaker 1>should look at it very much like Apple. You know,

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<v Speaker 1>the Samsung phones are just as good as the Apple

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<v Speaker 1>phones or better. Okay, the Google poones are just as

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<v Speaker 1>good or better, but we all use iPhones because of

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<v Speaker 1>the software and the way the software interacts with our

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<v Speaker 1>life keeps us involved with Apple forever. And that's what

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<v Speaker 1>Tesla is building with software that the other companies don't have.

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<v Speaker 1>So when you're talking it about an e V being

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<v Speaker 1>a commodity and tenures, they will get it. But the

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<v Speaker 1>software is where the value is. All right, we gotta

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<v Speaker 1>run Ross always informative and fun to catch in with you.

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<v Speaker 1>Ross Gerber over at Gerber Kawasaki Wealth joining us from

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<v Speaker 1>Santa Monica. This is Bloomberg