WEBVTT - Ross Gerber Talks Tesla Q1 Earnings

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<v Speaker 3>All right, Well, shares of Tesla are higher in the

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<v Speaker 3>after hours right now as investors continue to digest those

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<v Speaker 3>first quarter earnings numbers. Global vehicle inventory rose to twenty

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<v Speaker 3>eight days. It's a huge jump from the fifteen days

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<v Speaker 3>at the end of last quarter. Shares higher right now

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<v Speaker 3>by just about five percent. First quarter revenue coming in

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<v Speaker 3>at twenty one point three billion dollars that was below

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<v Speaker 3>estimates of twenty two point three billion dollars. That also

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<v Speaker 3>a missed when it comes to EPs adjusted EPs, I

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<v Speaker 3>should say that coming in at forty five cents versus

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<v Speaker 3>estimates of fifty two cents.

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<v Speaker 4>Shares a Tesla up about five and a half percent

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<v Speaker 4>in the aftermarket, but also Tesla to accelerate the launch

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<v Speaker 4>of more affordable models at getting a red sticky by

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<v Speaker 4>our team here at Bloomberg. All right, so let's get

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<v Speaker 4>to it with us Ross Gerber, president CEO at Gerber

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<v Speaker 4>Kawasaki Wealth and Investment Management, and also Bloomberg BusinessWeek columnist

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<v Speaker 4>Max Chafkin. Ross out there in Santa Monica, California. Max

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<v Speaker 4>here in our Bloomberg Interactive Broker studio getting ready for

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<v Speaker 4>another round of Tesla Bingo will getting do in just

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<v Speaker 4>a moment, Ross investors like it. What do you make

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<v Speaker 4>of this report looking backwards looking forwards?

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<v Speaker 5>Well, I think the good part of the report, because

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<v Speaker 5>this is really the only good part of the report,

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<v Speaker 5>is them saying that they're going to accelerate the production

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<v Speaker 5>of this next gen vehicle platform, and they were pretty

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<v Speaker 5>vague about what they're calling this or you know what

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<v Speaker 5>robo taxi is or is a model to coming, And

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<v Speaker 5>I think that'll be clarified on the conference call. So

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<v Speaker 5>you know, once again, we don't really watch after hours

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<v Speaker 5>trading because he really doesn't represent all the participants and so,

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<v Speaker 5>and we haven't seen the conference call yet, so we'll

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<v Speaker 5>see how this doc trades next several months. But there

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<v Speaker 5>really isn't any other good news in that report other

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<v Speaker 5>than them saying they're going to accelerate production, even though

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<v Speaker 5>they just fire all the people that are.

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<v Speaker 1>In charge of accelerating production.

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<v Speaker 3>Hey Russ, remind everybody take a step back here, because

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<v Speaker 3>Carol and I were looking at the terminal a little earlier.

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<v Speaker 3>You've you know, you are a longtime Tesla bull until

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<v Speaker 3>you weren't, and you were a longtime believer and have

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<v Speaker 3>been a long time believer in the company. You guys

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<v Speaker 3>still own a substantial number of shares over at kerber Kawasaki.

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<v Speaker 3>But what is your position right now in Tesla moving forward?

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<v Speaker 5>So my position is that Tesla is a wonderful company

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<v Speaker 5>that has enormous potential with the CEO who has become

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<v Speaker 5>so divisive that people won't buy the cars. And that's

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<v Speaker 5>why saying is just going to produce more cars doesn't

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<v Speaker 5>address the real issue is why they're not selling cars today,

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<v Speaker 5>and that's the issue that needs to be addressed that

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<v Speaker 5>isn't being addressed. So as a shareholder, we have to

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<v Speaker 5>assess what the future earnings potential of a company is

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<v Speaker 5>based off what their business model is. And when we

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<v Speaker 5>you know, we start investing in Tesla over ten years ago,

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<v Speaker 5>and we've had a great run up until the purchase

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<v Speaker 5>of Twitter, and so we've been lowering our position because

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<v Speaker 5>what we feel is that Elon's behavior has hurt the

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<v Speaker 5>brand in such a way that consumers actually don't want

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<v Speaker 5>to buy a Tesla. It's just the best car on

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<v Speaker 5>the road at the best price, so people buy the

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<v Speaker 5>car reluctantly at this point. So I think, you know,

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<v Speaker 5>we've got these problems to solve, and I'm not sure

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<v Speaker 5>if that will be addressed on the conference call today.

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<v Speaker 5>And that's you know, And I don't like being called

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<v Speaker 5>a Tesla bear, because I actually think they could turn

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<v Speaker 5>the company around pretty quickly if Elon changed his behavior

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<v Speaker 5>and stopped attacking everybody.

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<v Speaker 1>But I just don't think that's going to happen.

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<v Speaker 5>And so so I think the bigger issue that isn't

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<v Speaker 5>being addressed is doesn't matter how many cars Tesla makes

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<v Speaker 5>if nobody will buy them.

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<v Speaker 4>All Right, So Max chaff can come on in. You

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<v Speaker 4>guys do the Elon Inc. Podcast. You're constantly looking at

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<v Speaker 4>what he says, what he does. You're looking at his

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<v Speaker 4>kind of his assets, his portfolio, your initial thoughts on

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<v Speaker 4>kind of the headlines we got.

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<v Speaker 6>Yeah, just to kind of under Ross is saying something

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<v Speaker 6>like this, but like the note about the new products

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<v Speaker 6>is very vague. It doesn't say we're going to have

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<v Speaker 6>a model too, and it's going to come out on

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<v Speaker 6>this date, which is what investors, many investors have been

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<v Speaker 6>hoping for.

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<v Speaker 1>It says.

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<v Speaker 6>It sounds like it's saying, I'm reading it correctly, they're

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<v Speaker 6>going to try to essentially make the current models more affordable.

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<v Speaker 6>Now that obviously could allow them to sell more cars,

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<v Speaker 6>but it's a slightly different spin on things than what

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<v Speaker 6>many people have been inspecting. The other thing is, as

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<v Speaker 6>Ross is saying, you know, on a Tesla earning's day,

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<v Speaker 6>what Elon says, and more importantly, how he says it

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<v Speaker 6>is just as important as as what's in these numbers,

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<v Speaker 6>because he is going to hopefully anyway clarify some of

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<v Speaker 6>this but also hopefully get a sense of like where

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<v Speaker 6>things stand with robotaxi, where things stand with potential affordable cars,

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<v Speaker 6>and investors seemed to react to based on his optimism,

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<v Speaker 6>you know, a couple quarters ago, when he was in

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<v Speaker 6>this kind of dowur mood, we saw the stock go down.

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<v Speaker 6>So it's do we get an optimistic version of Elon

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<v Speaker 6>or the kind of very dour, pessimistic Elon.

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<v Speaker 4>Well, I wonder if you have a question for Ross Max.

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<v Speaker 6>Yeah, Ross, what is your reading on on this product?

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<v Speaker 1>On this paragraph about the product?

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<v Speaker 5>Well, I think you're dead right about the two things

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<v Speaker 5>you just said. Number One, they're of course vague because

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<v Speaker 5>of the legality of it. If they put this down

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<v Speaker 5>and they don't do it right. And since nobody seems

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<v Speaker 5>to know what Elon's going to do, and I'm sure

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<v Speaker 5>that everybody understands that nobody within Tesla knows what the

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<v Speaker 5>business plan is either, because they just don't at this point.

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<v Speaker 1>But I think secondly, a.

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<v Speaker 5>Lot of it will be how does Elon answer these

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<v Speaker 5>questions from investors during the conference call?

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<v Speaker 1>And what you said is right.

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<v Speaker 5>If we have sort of a very pauseitive Elon and

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<v Speaker 5>he's refocused and he's going to be working at Tesla more,

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<v Speaker 5>and you know, he can play the room right, maybe

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<v Speaker 5>we get a little rally on the stock, but it

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<v Speaker 5>doesn't change the fundamentals. If he doesn't play the room right,

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<v Speaker 5>this becomes a blood bath. So you know, I'm just

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<v Speaker 5>hoping that he understands the damage that he's done and

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<v Speaker 5>starts to mitigate this versus diving in and sort of

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<v Speaker 5>doubling down.

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<v Speaker 6>It will be interesting to see if Twitter comes up

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<v Speaker 6>or sorry X comes up, you know, because there is

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<v Speaker 6>this question in this sense that he's spent ge whiz

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<v Speaker 6>a lot of time talking about X, tweeting about X,

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<v Speaker 6>doing X related things. There's even a potential or they're

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<v Speaker 6>going to have a Grock integration inside of the Tesla's

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<v Speaker 6>And I think that to people who are really bought

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<v Speaker 6>into the ev story rather than the you know, Elon

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<v Speaker 6>Musk genius story, which those are two important constituencies here,

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<v Speaker 6>I think for Tesla Stock, you know, they would like

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<v Speaker 6>to see him spend less time on his social media network.

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<v Speaker 5>Yeah, well, it's not just less time, it's what he's saying,

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<v Speaker 5>you know. It's like it's not the time, it's that

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<v Speaker 5>what he's saying oftentimes is super divisive and basically racist.

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<v Speaker 5>So it's like, it's really hard to sell products to

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<v Speaker 5>people when the CEO says things that are really hurtful

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<v Speaker 5>to people, including me for that matter.

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<v Speaker 4>Now and we've talked with you about that, absolutely ross.

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<v Speaker 4>What could Elon say on the call, or Elon and

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<v Speaker 4>company say on the call that would make you more

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<v Speaker 4>excited about the company or once again say, you know,

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<v Speaker 4>kind of owe Elon really.

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<v Speaker 5>Well, if I had my dream come true, he'd say,

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<v Speaker 5>I'm coming back to work at Tesla, because he basically

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<v Speaker 5>doesn't work at Tesla, and he would say, I'm done

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<v Speaker 5>tweeting all this garbage and politics.

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<v Speaker 1>I'm going to really.

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<v Speaker 5>Focus on advancing sustainable transportation and energy and that we're

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<v Speaker 5>going to release this lower you know, priced car and the.

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<v Speaker 1>Strategy that we all bought into three.

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<v Speaker 5>Years ago, you know, and when the stock was at

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<v Speaker 5>all time highs and earnings were going up, you know,

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<v Speaker 5>fifty hundred percent a year.

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<v Speaker 1>You know, it was like it was like a different

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<v Speaker 1>world than today.

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<v Speaker 5>And it's amazing to me he doesn't understand this difference

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<v Speaker 5>that that really is his responsibility, and so as a shareholder,

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<v Speaker 5>I have to say it's an extremely distressing time because

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<v Speaker 5>the valuation of Tesla is premised off all these great

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<v Speaker 5>technological innovations, none of which have come to fruition yet.

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<v Speaker 1>So his focus is one hundred percent what needs to

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<v Speaker 1>be happening right now.

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<v Speaker 3>Hey, Ross, I do want to just end with one

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<v Speaker 3>last question about the cost of producing these vehicles. It

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<v Speaker 3>seems like Tesla is doing everything I can to bring

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<v Speaker 3>down the cost of producing these cars.

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<v Speaker 1>The cost of goods sold to.

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<v Speaker 3>Are they what numbers do you want to see there?

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<v Speaker 5>Well, they are, but their margins continue to go lower.

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<v Speaker 5>If you look at the report, which I've only had

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<v Speaker 5>a minute to look at, you know, their vehicle margins

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<v Speaker 5>continue to go lower. They're operating margins go lower, their

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<v Speaker 5>net margins go lower. So they're able to lower the

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<v Speaker 5>price of the car. But what they're not able to

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<v Speaker 5>do is keep that going as fast as they're they're

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<v Speaker 5>lowering the price of the vehicles, so it's still hurting

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<v Speaker 5>them even though they're lowering the cost of the car.

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<v Speaker 5>And it does bring in a bigger market, but you're

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<v Speaker 5>not creating any demand. And this is I have said

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<v Speaker 5>it a hundred times. Every company in America advertises or reason.

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<v Speaker 5>People need to know why your products are superior. And

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<v Speaker 5>all the Tesla people have bought in teslas, you know,

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<v Speaker 5>so all these YouTubers can tweet all they want, but

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<v Speaker 5>everybody wanted a Tesla bought a Tesla. So you've got

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<v Speaker 5>to get new customers. And the new customers are being

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<v Speaker 5>told that charging sucks and evs are bad and this

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<v Speaker 5>and that, and Donald Trump says they're bad, and this

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<v Speaker 5>is all they see all day, and then it's like,

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<v Speaker 5>why would they go buy a Tesla because there's not

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<v Speaker 5>one ad anywhere that tells you how great the cars

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<v Speaker 5>are because they are right.

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<v Speaker 4>Right, and you still own them right real quickly, yes

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<v Speaker 4>or no, yeah I do.

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<v Speaker 5>I just don't understand why they don't tell people how

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<v Speaker 5>great their vehicles are.

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<v Speaker 4>All right, Russ Gerbert, so appreciated. We know you've got to,

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<v Speaker 4>I think run over to our TV guys. President CEO

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<v Speaker 4>Gerber Kawasaki, so appreciate you joining us