Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes. Tim Stinovic from Bloomberg Radio, want to talk
Speaker 1: a little bit more about Facebook because we do have
Speaker 1: a day ludship big tech names after the close today.
Speaker 1: Facebook is out, Charlie mentioned lower, although it looks like
Speaker 1: it's just a little change, a little bit lower right
Speaker 1: now in the after hours after a steeper loss right
Speaker 1: after the numbers came out. Apples to come, Tesla is
Speaker 1: out and that stocks down, as Charlie mentioned, about three
Speaker 1: percent lower in the after hours. Let's start that with
Speaker 1: what we heard from Facebook. Joining us is John Arlokman
Speaker 1: anchor being in Bloomberg's The Open correspondent for CTV National News,
Speaker 1: on the phone from Toronto. He's also got a great
Speaker 1: tweet out today about Sandra Bullock and the Internet you have.
Speaker 1: If you haven't seen it, you should go and see it. Um, John,
Speaker 1: good to have you here. Yeah, thanks. I mean, one
Speaker 1: of these days I hope I can talk to Sandra
Speaker 1: Bullock about for early days on the internet, don't we all?
Speaker 1: An interesting time back was it was it was good
Speaker 1: to remember that there was a time when there wasn't
Speaker 1: the internet or it was really kind of pretty basic
Speaker 1: and primitive. Not basic, not primitive is Facebook. It's come
Speaker 1: a long way. Uh, investors initially sold off John the
Speaker 1: stock in the after hours. It's now little change what
Speaker 1: jumps out for you. Well, this is that period, of course, Carrol,
Speaker 1: between when the executives field questions from analysts and when
Speaker 1: the market is reacting, when we try to determine where
Speaker 1: the stock could be going, and some of the early
Speaker 1: takeaways and Sarah Fryer from the Bloomberg team already writing
Speaker 1: a story about this. We're trying to figure out what
Speaker 1: because the numbers for the fourth quarter for Facebook we're
Speaker 1: strong as always. I mean, it's become an ad behemoth,
Speaker 1: even with all the uncertainty that we read about and
Speaker 1: saw tied to the uncertainty for Facebook's business and uh,
Speaker 1: you know the uncertainty in Washington. The reality is during
Speaker 1: the pandemic, people were on their phones, they were on Facebook.
Speaker 1: And I would would argue it's hard without getting really
Speaker 1: deep into the numbers, but I would argue, more and
Speaker 1: more of this story is becoming an Instagram story, Carol.
Speaker 1: I mean the team of Bloomberg already estimated the intelligence
Speaker 1: team that Instagram makes up at least the enterprise value
Speaker 1: of Facebook. And I don't know about you, but in
Speaker 1: my household, people were scrolling Instagram. People were shopping through Instagram.
Speaker 1: And so they have my daughter's shop. That's how my
Speaker 1: daughter's shop. She's seventeen, that's how she's shops going through Instagram,
Speaker 1: that's right. So the so the primary driver of that
Speaker 1: business for Instagram are the ads, and they do just
Speaker 1: about everything they can to get people talking about product
Speaker 1: and facilitating commerce because if that is successful, then those
Speaker 1: brands will want to advertise more on Instagram. And you know,
Speaker 1: it's interesting even the CFO Facebook and some prepared commentary
Speaker 1: is highlighting what happened last year which might not happen
Speaker 1: this year. What I mean by that is we all
Speaker 1: bought a lot of stuff we were at home. You know.
Speaker 1: Maybe it did some stuff with the pool, maybe you uh,
Speaker 1: you know a lot of new death because you're working
Speaker 1: from home, maybe about a new TV set. Whatever. Instagram
Speaker 1: is all about stuff you can buy, uh, And so
Speaker 1: that was also helping their advertising business last year. If
Speaker 1: we cross our fingers and hope that the vaccine roll
Speaker 1: up can be successful, could be more about services. Maybe
Speaker 1: we'll go out to restaurants more. Maybe we'll finally take
Speaker 1: that trip. And so they're already warning that that shift
Speaker 1: in spending could ultimately hurt them, but we'll have to
Speaker 1: see with times. So I think they had a big quarter,
Speaker 1: a monster even in the face of what are seen
Speaker 1: as some regulatory head ones for Facebook. And now we
Speaker 1: try to figure out who are the post pandemic winners.
Speaker 1: If you will, Well and John, I guess a question
Speaker 1: for me is, yeah, even if I mean, this is
Speaker 1: a company where a fourth quarter sales jump and as
Speaker 1: you said, online shopping was feeling a lot of that.
Speaker 1: But you know, if we have a company where a Facebook,
Speaker 1: where sales jump fifteen or twenty, those are still strong numbers,
Speaker 1: you know what I mean, even if there's an adjustment,
Speaker 1: but maybe investors just have to kind of potentially potentially
Speaker 1: adjust those expectations. Well, I've always tried to be measured
Speaker 1: in these earnings reactions, dating back to when I was
Speaker 1: based in San Francisco for Blueberg, and we recovering these
Speaker 1: earnings out there because the numbers are truly astonishing. And
Speaker 1: to your point, last year their odd revenue jumped another
Speaker 1: twenty plus percent. Now is that a couple percent off
Speaker 1: what we saw on the previous year. Sure, but again
Speaker 1: we're talking about people. We're talking about one of the
Speaker 1: most traumatic years of our lives, and this company is
Speaker 1: talking about well into double digit advertising revenue growth. And
Speaker 1: that's gotta that's got to come from somewhere. That's not
Speaker 1: like the pie is getting bigger right now. So I
Speaker 1: think Facebook continues to be in a pole position thanks
Speaker 1: to that savvy billion dollar purchase in so Puny looking
Speaker 1: back for Instagram ahead of their I p O. But
Speaker 1: I think we also know beyond just what the financial
Speaker 1: outlook the company shares with us is, they're going to
Speaker 1: have to navigate these waters in Washington. Um. I think
Speaker 1: even with the core Facebook product, we've all learned our
Speaker 1: lesson of these last few months of you know, the
Speaker 1: the negative side of what can happen on social media
Speaker 1: and being accountable and responsible for that not only takes
Speaker 1: a change in how you get the business, but also
Speaker 1: it costs money, and they're spending a lot of money
Speaker 1: to try and fix those problems too, and that investor's
Speaker 1: watch as well. And it's not just this you know,
Speaker 1: US regulatory environment. They also mentioned some concerns about data
Speaker 1: transfers to and from Europe that could be heard with
Speaker 1: new regulations. So you know, increasingly this these types of
Speaker 1: companies are facing potentially greater regulation, whether it's here in
Speaker 1: the US or over in your uh, looks like a
Speaker 1: pretty good quarter, John Man as always right, underestimate speaking
Speaker 1: this this this big numbers game, a big teg. The
Speaker 1: symbolism of reaching a hundred billion dollars or I guess
Speaker 1: in this case more than a hundred and eleven billion,
Speaker 1: as you pointed out, Um, how unprecedented this really is
Speaker 1: in corporate America. I mean, there's just a handful of
Speaker 1: companies and in the next few days, and sure we'll
Speaker 1: be talking about the mighty Amazon, But think about the
Speaker 1: business of Amazon, at least for the most part in
Speaker 1: their growth. Yeah, that that the cloud business, which is astonishing,
Speaker 1: but really it was about moving goods. Walmart, we know,
Speaker 1: has already reached this threshold of being able to generate
Speaker 1: more than a hundred billion and a quarter, and it's impressive.
Speaker 1: But again the nature of Walmart's business is different. Move
Speaker 1: everything we can, and our margins are razor thin. Apple,
Speaker 1: there are limitations on how far they're blull and go
Speaker 1: in selling product because they like those big margins. So
Speaker 1: I think going back to what we talked about earlier
Speaker 1: with people staying home during the pandemic and school going
Speaker 1: through Instagram, they were, indeed but getting new iPhones, and
Speaker 1: you know, if the kids were at home, they were
Speaker 1: buying some of the other gear. And then there's that
Speaker 1: services business, Carol, which is that's the leg of growth
Speaker 1: they're they're leaning on right now, John, Where else though?
Speaker 1: I always think about my European grandparents who came over,
Speaker 1: you know, um where else would you get a product
Speaker 1: that's roughly especially if you you know, depending on which model,
Speaker 1: But you can spend a thousand dollars on something that
Speaker 1: you are going to consider disposable because at something like
Speaker 1: in a couple of years, you're going to replace it
Speaker 1: or maybe sooner. I mean, we've got two new iPhones
Speaker 1: in our house. Uh you know, I just look at
Speaker 1: I understand what you're saying, Like the limitations in terms
Speaker 1: of you know, they want to stick with those high margins,
Speaker 1: but it works for them. Like everybody said, you got
Speaker 1: to go mass market, you gotta go down market. Well
Speaker 1: maybe you don't. Well they and we should be clear again,
Speaker 1: there were pandemic winners, and Apple clearly was one of
Speaker 1: them because is there was just that simple need for
Speaker 1: us to make sure we had good take at home.
Speaker 1: And and when you're a consumer and you're making a decision, um,
Speaker 1: you might have to cough up a little bit more
Speaker 1: for an Apple product, but you're you're pretty confident in
Speaker 1: what you're getting with that product. Now the question becomes,
Speaker 1: if you were busy buying Apple stuff last year, are
Speaker 1: you going to need to go out and get something
Speaker 1: in two thousand and twenty one. I think that's again
Speaker 1: why before the pandemic hit. And we've talked for years,
Speaker 1: Carol about how, yeah, they still have the big product days,
Speaker 1: but they're not as exciting as they once were when
Speaker 1: the iPhone was brand new or you know today, uh
Speaker 1: in two thousand and ten was when Steve Jobs first
Speaker 1: unveil the iPad. Right, it doesn't feel like there's a new,
Speaker 1: flashy product that gets as excited. Although I have to
Speaker 1: tell you I love my AirPods, and you know, there
Speaker 1: wasn't as much fanfare around the launch of those a
Speaker 1: few years ago. So I think you'll continue to see
Speaker 1: Carroll this company really focus on their services business revenue
Speaker 1: there was substantial at more than fifteen billion dollars. And
Speaker 1: that's things like yeah, it's it's it's what you're putting
Speaker 1: in the cloud. But it's you know, getting you to
Speaker 1: choose Apple Music over Spotify. It's getting you to use
Speaker 1: the Apple TV service, you know, right in the mix
Speaker 1: there with Disney Plus and Netflix. Uh. And then you
Speaker 1: know if they if they can sell you on some
Speaker 1: of the other stuff, you know, wearables is is still
Speaker 1: a growing category for them. People are still picking up
Speaker 1: the Apple Watch, and I think after the initial excitement
Speaker 1: of the quarter, will probably go back to that storyline
Speaker 1: of what else does Apple That's That's what I'm thinking about.
Speaker 1: How many times over the years we've we've said like,
Speaker 1: you know, come on, Apple, you've got to diversify, You've
Speaker 1: got to diversify. And yet here we are, like, hey, listen,
Speaker 1: these are these are pretty impressive numbers. You know, I
Speaker 1: feel like we talk about Apple, it's always in a
Speaker 1: whole other category. Just got about twenty seconds left here, John,
Speaker 1: any final thoughts. The one thing I'll just note is
Speaker 1: in China, sales were up substantially. They were north of
Speaker 1: twenty one billion that was up from about fourteen billion
Speaker 1: a year ago. And we know that the China recovery
Speaker 1: stories something people are already talking about. Yeah, exactly in
Speaker 1: our own Mark German, who we follow so closely. Also
Speaker 1: when it comes to Apple, talking about the wearables, home
Speaker 1: and accessories boost due to major updates in that line
Speaker 1: in including you talked about two new Apple Watch models,
Speaker 1: the air Pods, the air AirPods Max headphones. John was
Speaker 1: talking about the headphones there and also the home Pod Mini.
Speaker 1: So he said Apple went out all on accessories this
Speaker 1: past quarter. John, great to have you back with us
Speaker 1: breaking everything and anything you need to know. When it
Speaker 1: comes to Facebook and Apple, John is anchor up Being
Speaker 1: and Bloomberg's the open correspondent for CTV National News. This
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stinovic from Bloomberg Radio. So Tesla is also
Speaker 1: at It's been a big day. Uh. In the after
Speaker 1: hours for earnings Tesla shares, I should point out they
Speaker 1: are lower in the after hours right now, They're just
Speaker 1: down about four point eight percent. So listen, it was
Speaker 1: an outperformer last year. Up it was already an outperformer
Speaker 1: this year up heading into these earnings, growth stock, auto stock,
Speaker 1: tech stock, battery stock, It's many things. So let's get
Speaker 1: into it with Bloomberg News reporter Ed Ludlow. He's with
Speaker 1: us from our Bloomberg nine sixties studio in San Francisco,
Speaker 1: along with Ross Gerber, president CEO of Gerber Kawasaki Wealth
Speaker 1: and Investment Management. He's on the phone from Santa Monica.
Speaker 1: He owns Tesla Shares, owns Tesla Cars. Um, guys, let's
Speaker 1: get into it, and I'm going to start with you
Speaker 1: what jumps out because I just want to say I
Speaker 1: just saw a headline that Tesla expects to achieve fifty
Speaker 1: average annual growth and vehicle deliveries. That was in their letter. Yeah,
Speaker 1: that was in the letter. The thing that wasn't was
Speaker 1: basically a stated delivery goal for right consensus going into
Speaker 1: this was around eight hundred thousand units. And perhaps, you know,
Speaker 1: the market a little bit disappointed that Tesla didn't just
Speaker 1: stay outright what they think they will deliver this year. You,
Speaker 1: I guess you could ask Ross about that. Well, let's say,
Speaker 1: crass Rus, what do you think about that? Oh? I
Speaker 1: think he wants learned his lessons about you know, telling
Speaker 1: people what his goals are and then everybody jumps on
Speaker 1: him if he's short. So he's doing what an Apple
Speaker 1: and all the other companies are doing and leaving a
Speaker 1: little more wiggle room for error. And maybe the more
Speaker 1: I think the market is reacting a little bit more
Speaker 1: towards missing on the on the EPs side than per
Speaker 1: se what we expect out of deliveries. Alright, ed, go
Speaker 1: ahead and pick up what else stands out for you, yeah,
Speaker 1: you know, and beyond that, I mean credit where credit
Speaker 1: is due. Tesla says that they're on tracking in Berlin
Speaker 1: with the Giga factory and also in Austin to start
Speaker 1: deliveries from those locations this year, which is pretty astonishing,
Speaker 1: right based on you know, how quickly they built the
Speaker 1: Shanghai plant. They've now brought Shanghai up to installed annual
Speaker 1: capacity of four and fifty thou vehicles, which is impressive,
Speaker 1: and they're basically touting in the earnings release that they
Speaker 1: expect Germany at least and perhaps Austin to go the
Speaker 1: same way. There is some pressure on operating margins that
Speaker 1: Tesla says is largely from aggressive price cuts in China.
Speaker 1: The average selling ice for test of vehicles came down,
Speaker 1: which is interesting, right because Ellen, Musk and Cove talked
Speaker 1: for a while about wanting to make their vehicles more affordable,
Speaker 1: but that is completely at odds with where the rest
Speaker 1: of the industry is going. We're seeing high average setting prices,
Speaker 1: particularly in combustion engine cars. And the final thing is
Speaker 1: that executive compensation was very high, which eight into margins
Speaker 1: as well. Yeah, hey, listen, well, okay, So I wonder
Speaker 1: Ross Garber, uh, if there's a bit of a pullback,
Speaker 1: are you going to be buying into this? Well, no,
Speaker 1: because we think where we'd like to buy Tesla is
Speaker 1: much lower than it's going to go tomorrow. How well,
Speaker 1: you know, we see Tesla as a buying around five
Speaker 1: dollars a share, you know, and that that's figuring looking
Speaker 1: at a hundred times this year's estimate for us in
Speaker 1: five dollars. So so you know, like, to me, paying
Speaker 1: five is is what I would pay, you know, But
Speaker 1: I also paid seven dollars for all my shares, so
Speaker 1: you know I'm in No, I don't need to sell,
Speaker 1: I don't need to do anything. So I'm a holder
Speaker 1: of Tesla's as it bounced around here, and if I
Speaker 1: get a real correction in Tesla, I'm certainly going to
Speaker 1: add to it. All right, And what what do you
Speaker 1: like about this quarter? What don't you like about this quarter? Ross? Well,
Speaker 1: I like the top line. The top line numbers are great.
Speaker 1: But I think you guys kind of hit on on
Speaker 1: the topic. Margins were definitely hit, whether it's from price
Speaker 1: reductions or increasing expenses. Uh, they were definitely hit from
Speaker 1: what they should have been on an operating level, and
Speaker 1: that's I think is why you're seeing the Staco down.
Speaker 1: But I also look at those things is not material
Speaker 1: in the story of Tesla, which is really about a
Speaker 1: company that's growing incredibly fast. I'm completely innovating in several
Speaker 1: industries and has just the most incredible long term future
Speaker 1: of any company I own. So so I I don't
Speaker 1: want to look at this as anything meaningful. Yeah, well, Russ,
Speaker 1: let's jump into the story that you're describing. If you
Speaker 1: look at the kind of action that we saw of
Speaker 1: the last twelve months in the share price, every time
Speaker 1: a street end lists raised their price target, a lot
Speaker 1: of that was based on future revenues. Higher margin software revenue.
Speaker 1: ROBOTAXI are you disappointed we didn't hear more about that
Speaker 1: from Tesla in terms of progress and autopilot. What are
Speaker 1: you listening for on the cool on those kind of
Speaker 1: value add and other business areas outside of the business
Speaker 1: of just building e vs. Yeah, you know, it's it's funny,
Speaker 1: that's a it's a great way to look at it.
Speaker 1: So from a fundamental perspective, a lot of those things
Speaker 1: like ROBOTAXI, I don't even factor into my analysis because
Speaker 1: I look at that as those will happen when they happen. Okay,
Speaker 1: what matters to me is how many cars they're gonna
Speaker 1: sell and batteries and solar they're going to sell in
Speaker 1: the next two years, and what is the ramp of
Speaker 1: these products moving forward. So, for example, you brought up
Speaker 1: the rapid growing of the factories and how quickly they're
Speaker 1: getting this production up. The monthing I'm focused Laser focused
Speaker 1: on is on cybertruck and semi you know, production and delivery,
Speaker 1: because that's going to be the next big leg up
Speaker 1: for Tesla is taking over the trucking business in America,
Speaker 1: and so like that's what I care about because I
Speaker 1: think it's gonna be hard to build the cyber truck,
Speaker 1: and we've seen it with every time they build a
Speaker 1: new vehicle, it's kind of a nightmare. So what I'm
Speaker 1: really focused on is are they going to execute, you know,
Speaker 1: successfully with cyber and semi in the next twelve months
Speaker 1: or is this thing going to get delayed and we're
Speaker 1: gonna run into problems and run into issues that could
Speaker 1: hurt the stock. So so that's what we're really focused on.
Speaker 1: Is the next market for Tesla is trucks. We want
Speaker 1: them to dominate this market, and that's the most important
Speaker 1: step besides getting full self driving done, which they're working
Speaker 1: with simultaneously. But with the new battery cell structures and
Speaker 1: what they're building on the long term looks amazing. But
Speaker 1: as far as what's going to drive the stock, it's
Speaker 1: getting the truck business going roster. We need to look
Speaker 1: at this as more of a battery company in addition
Speaker 1: to being an auto or tech company. Absolutely. In fact,
Speaker 1: that's where I think they now have the biggest mode
Speaker 1: because every other company trying to build VS is trying
Speaker 1: to get batteries from the same three players. And we've
Speaker 1: now made significant investment in other terry companies and other
Speaker 1: battery technologies because basically, there isn't enough of this stuff.
Speaker 1: There isn't enough cells, There isn't enough way to fill
Speaker 1: the demand that all the automakers want. So when Fisker
Speaker 1: says they're going to build a car GM, where are
Speaker 1: they going to get all the batteries? That's gonna be
Speaker 1: the good question. So with Tesla doing this all in house,
Speaker 1: but inventing a new cell that six or seven times better,
Speaker 1: this is going to differentiate them from the competitors for
Speaker 1: the next decade. Ross in one word, does does Tesla
Speaker 1: Needle must need to start acknowledging competition more from the
Speaker 1: likes of Riva and Lucid, etcetera. They're not competition, No,
Speaker 1: they're not competition. Who's what's the competition. They don't even
Speaker 1: have a truck, you know, So like when they get
Speaker 1: a truck and they can actually make the truck and
Speaker 1: I can get in this truck and drive it. And
Speaker 1: so the competition I see is in China. And that's
Speaker 1: why they lowered prices in China. There are some good
Speaker 1: cars in China being made, whether it be by Neo
Speaker 1: or b I D or whatever. And then we're also seeing, uh,
Speaker 1: this new car from Lucid kind of getting towards production
Speaker 1: and which is a really nice car. To hence the
Speaker 1: refresh of the models, so you know that refresh was
Speaker 1: a big thing. So I'm really stoked about it. You
Speaker 1: guys are the best. Ed Ludlow Auto reporter of Berg News,
Speaker 1: Russ Gerber, Overber Kawasaki Wealth and investment management guys. Thank
Speaker 1: you so much. Great breakout of Tesla