Tesla's Vehicles Sales Have Investors Feeling Optimistic

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1:29Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, we've been talking a lot about Tesla this morning. Their delivery numbers came in weaker than expected. We had Dan Ives from Wedbush Securities on earlier, and he was just saying, hey, relative to maybe the whisper number, they came in a little bit better than expected. Let's get the broad overview of what's happening at our good friends at Tesla.

2:09The stock's up about 2.8 % today, but it's down about 24 % year to date. We turn to Pierre Faragou, head of global technology infrastructure at New Street Research. Pierre, thanks so much for joining us here. How do you think about these Tesla numbers? What does it mean for the near and intermediate term story at Tesla? Yes, as you said, there is a bit of a positive surprise, like people tracking very precisely deliveries in various markets were expecting slightly lower numbers. the surprise comes from the US. The US is a place where it's the most difficult to track the number of Tesla being delivered, and the US beat expectations.

2:47So that's a Model Y coming in, doing actually quite well. That's good. But then at the end of the day, you have to remember the big picture. We are down 13 % year on year. So we are facing a situation where Tesla is struggling to sell cars. Gross margin is in the low teens. To me, Tesla facing good demand should be able to defend like mid-20s gross margin. So we have, like we are facing like a core business, an auto business that is really at a very low point that is struggling. And so what's the difficulty? You have like one structural difficulty that is relatively, that we understand relatively well.

3:25It's that with their current product, Tesla has kind of saturated its opportunity. Tesla needs lower price points to keep growing. And that's in the plan. They're working on it. And then you have a number of other issues. You know, electric cars are less fashionable than they were a couple of years ago. The Tesla brand has suffered, particularly in Europe, where numbers are down like almost 40 % year on year. And so it is definitely, it's difficult to quantify, but it is a significant headwind as well. and overall you know the economy is not right the best you can imagine for auto auto demand yeah i mean when we look at the mag 7 stocks we see tesla as the primary laggard this year down about 23 percent and of course we know that investors have really been vying for musk's attention as he's been really politically involved so as we're seeing these numbers come through what do things look like moving forward are these numbers a massive impact or are the tesla loyalists still out there and is there some um further positivity to come yes you the tesla stock has been on on the roller coaster it's like a very low performance this year but it was like a clear out performer last last year and as you say you know it's following uh it's following you know some the political career if i may say of the ceo um inon musk uh and like this has created this situation now if you look at the stock you know since you know like for april 1st what you see is that what tends to really move the stock is actually the new flow around how the company is now focused on deploying fleets of robotaxes they've just started that in a couple of weeks ago like late late last month and i think that's going to be the primary driver of the stock going forward Of course, there is a lot of uncertainty on how fast Tesla is going to be able to deploy Robotaxi or even make profits, like generate the profits out of the Robotaxi fleet.

5:33But the size of the price is so gigantic and so much more than the auto business that this is probably what drives the stock going forward. Pierre, thank you so much for joining us. Always appreciate getting your thoughts there. Pierre Faragou, he's head of Global Technology Infrastructure at New Street Research. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.

6:11So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about? Keeping up with cyber threats.

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7:574certain. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, let's get back to Tesla. It's been a thing we've been talking about today. They reported some delivery numbers, came in a little bit light of forecast. Stock's up a little bit today, and Dan Ives from Wedbush Security suggested that might be because the whisper numbers out there were a little bit lower. so the company exceeded them. So we're there.

8:31But there's certainly been some negative sentiment around Tesla stock. It's down 25 % year to date. There's some concerns about Elon Musk and his commitment to the company. But there's still a lot to like out there about Tesla if you look at the numbers. And that's what our next guest does. Matt Winkler, he's editor-in-chief emeritus of Bloomberg News. He founded Bloomberg News. To me, that's the point here. And he joins us here in our Bloomberg Interactive Broker Studio. Matt, thanks so much for joining us. You've got a column out today with your colleague Shin Pei saying, hey, if you look at the numbers here at Tesla, it's an extraordinary story still.

9:06Yeah. And I, by the way, thank you for having me. And I would invoke our founder, Mike Bloomberg himself, who, when he was mayor of New York, would say often, in God we trust, everyone else bring data. Yep. And so the data compiled by Bloomberg shows that this EV startup we call Tesla, founded by engineers Martin Eberhard and Mark Tarpening in 2003, is still the world's largest automaker, ninth largest public company, and worth more than the gross domestic product of Saudi Arabia. And for all its might as a global sales leader, Toyota Motor Corp is about a quarter of Tesla's more than$1 trillion valuation as of today, after the very numbers that you reported.

9:55And by the way, the stock is up the most since June. Okay. So initially, the media take was negative, negative, negative. And people with the most at stake, which is where the data is, say, not so fast. And there's a reason for that. You know, what we did, my colleague Shin Pei and I, is we asked that very question. OK, with all this negative news that is prevailing, that is the prevailing narrative, why is that through thick and thin every single month this year, Tesla is still worth more than Toyota? And Bloomberg's own alternative artificial intelligence function, DSX, tells us there are plenty of reasons.

10:38One is that if you just took out the vehicle itself, there's still a trillion dollar market capitalization on the autonomous driving that is coming soon to everyone through Tesla. So there are all kinds of reasons why Tesla has the value that it has. But I would like to share with you something that I got from a Bloomberg user this morning, an email. He said we don't need AI to understand why Tesla critics are losing. Critics are either motivated by hate, we've seen that, politics, or a misunderstanding of time. Tesla represents the most extraordinary array of products, some of which are destined to become core components of the future economy and life of humanity.

11:22That's from our Bloomberg user, John Billings, who's in Washington, D.C. So this is a big part of the story that everybody misses. And if you just look at quarterly sales reports, that's not going to give you the picture. But I would say even in that context, the Model Y was the best selling vehicle in the world in 2023, 2024, and poised to be certainly the best EV selling vehicle in 2025 and maybe again repeat. And the reason why the deliveries were slow in the first and the second quarter was because they were retooling, renovating, updating the Model Y. Sales are way up in Norway and Spain, by the way.

12:07So, so much for the demand problem. How are you thinking about it in relation to peers? I mean, I know a lot of people have really been clamoring for Musk to turn his attention back to Tesla. And I mean, when we think about some of these numbers that were parsing, as you mentioned in your story, that everything about Tesla these days has really been ranging from bad to worse. So when you think about the future of the company in comparison to peers, you know, what are just some of the things that you expect in terms of performance moving forward? Well, let's just look at the past 10 years, by the way.

12:392015, most of the analysts that provide forecasts were negative about Tesla bearish. Don't buy the stock. But what happened? Tesla is$97.7 billion of revenue last year. is more than 30 times its sales a decade ago. Now, that outperforms even China's BYD, which has been the star of late in the media narrative. But if you look at something like Tesla's earnings before interest, taxes, depreciation, amortization, it's more than 300 times the company's profit a decade ago. Number two, BYD grew only 15 times. You know, if you look at Tesla's current market capitalization, it's 31 times its value a decade ago, which is just another way of saying that among the top 10 automakers that Tesla competes with, Tesla's revenue growth, its profit and its market value are superior, according to data compiled by Bloomberg.

13:43work. Always. Brand value. Last question. One could argue the valuation has always had a big, big Elon Musk premium based into it. His brand arguably has been diminished over the last six months with his political actions in Doge. A, is that a concern or should it be a concern for investors? And you think, is there a long-term brand issue, do you think? So I'm not qualified to answer that question. However, somebody who probably is, is Nicholas Colas, who's the co-founder of DataTrek. And he's been covering the auto industry since the 1980s, which is kind of when I sort of entered the picture.

14:23And he says there's something that is no algo spreadsheet can understand, which is why hero-led companies are often so valuable. Yep. Yep. Interesting. All All right, Matt, great column. As always, Matt Winkler, editor-in-chief emeritus, founder of Bloomberg News. I think he drives around one of these Tesla things. I kind of went there last time I got my youngest, a hybrid Honda. So I'm kind of getting there. But give me the gas engine. Give me the gas engine. Matt Winkler, thank you so much. We appreciate that. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.

15:01Eastern. on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. I tell you, one of the more competitive industries I see out there day in and day out is the wireless business. You've got the big three, AT &T, Verizon, T-Mobile. It's all, I mean, it's all on price. I mean, it's all kind of the same. I don't know. That being said, I've been with Verizon since the beginning of wireless. So maybe. Yeah, no churn going there. John Butler, he covers all this stuff for Bloomberg Intelligence. John Butler, senior telecom analyst for Bloomberg Intelligence.

15:35He's based down there in Princeton, New Jersey. John, what's the state of the wireless industry today? Again, you've got those big three. How competitive is it? Hyper competitive, Paul. It really is interesting. Just as you said, there's a lot. The big three, AT &T, Verizon, T-Mobile, they're always slugging it out with themselves. But now that you've got the cable operators coming in, offering wireless a very enticing price points and their brand strength is getting better. And so they're becoming more and more of an issue quarter in and quarter out. What we as analysts sort of measure as the health of a telecom in any given quarter is we look at the number of net new smartphone subscribers that a carrier adds or phone net adds, as they're called.

16:23And what we've seen every quarter is the cable operators now are getting even up to half the net ads in a given quarter. So they're becoming a big factor. Having said all that, I'm impressed with how the carriers are keeping their service revenue growth pretty steady. You know, telecom is not a growth business. So if you're getting three to five percent growth in your service revenue, it's a pretty good quarter. And I think we're in for more of that this quarter, with the exception of Verizon. And we can talk more about that if you want. John, when I think about wireless carriers and I think about some of these phone providers, it feels as though everyone has their brand that they stick to.

17:04And as we were mentioning earlier, it doesn't really feel like there's necessarily anything to entice people to hop around. But given all of this in regards to marketing or really just being able to drive demand, where are you seeing, which company are you seeing as the biggest leader here? T-Mobile is the runaway hit, Nora. T-Mobile Tuesdays. They really, yeah. T-Mobile Tuesdays, they have giveaways once a week. They're brilliant marketers, just brilliant. And it's funny, if you rewind the clock 15 years, they had a near-death experience. Like I didn't think that carrier was gonna make it. They brought in a very dynamic CEO named John Ledger who really turned around the brand.

17:46He made himself the face of the brand. And they branded it as this sort of hip counterculture, consumer-friendly brand. People just love it. And in the meantime, they've done a great job updating the network and upgrading it. And after buying Sprint, of course, they now have the scale to really compete with AT &T and Verizon. They've gone from a distant third in the industry to now the second largest wireless carrier. and they just they lead the industry in net ads quarter quarter in and quarter out, which is a testament to the power of their marketing. All right. I'm a Verizon wireless customer.

18:27Been one since the beginning of this whole wireless thing. Me too, by the way. So what's the story for those guys in terms of how they're dealing with the competition? I think it's easy to sort of play armchair CEO here, But I think Verizon is making a bit of a mistake by not meeting rivals in promotions. They really take the high ground. They want to protect a premium brand image. For years and years, they had the best network out there. I still think they have the edge there. But that gap is closing, particularly in the minds of a lot of consumers that don't follow the industry. T-Mobile keeps banging away that they have the best network in the U.S.

19:07And so that sort of premium brand image that Verizon had is beginning to erode, and yet they're not meeting T-Mobile or the cable guys sort of tit for tat on promotions. And so on the margin, in recent quarters at least, they've lost phone subscribers. Not a lot, but it's beginning to really chip away for them, and it's chipping away at their service revenue growth. again, because I just don't think they're promoting enough. John, so you've got the big three. What is the latest with M &A in this space? Is there anything left to consolidate? Not much, Nora. You know, there's been where the telcos are really looking for growth is on the broadband side.

19:56And you've seen a lot of consolidation there with Verizon most recently buying Frontier, which is a big fiber provider. They really have strength in several states across the U.S. AT &T has done a really good job. They're buying Lumens fiber business, so you've got consolidation there. On the wireless side, you've seen T-Mobile snapping up a lot of the independent and private prepaid brands like Mint Mobile is one of their most recent. They're buying TDS, which is a small regional wireless carrier. So there really is nothing left here except for big transformational acquisitions, and they really would be gigantic on that scale.

20:42So I'm just not seeing it. So, John, just real quickly here, is this an ARPU story? Is this just raising prices to consumers? Is that the growth story here for most of these big guys? It's raising prices, Paul, definitely. that's how you're getting that 3 % to 5 % service revenue growth. But I think another part of the story and one to watch is that telco expansion into broadband. They're doing a great job there expanding into fiber and both that and fixed wireless access, which is getting broadband over the air. So I think we're going to see a lot of growth, an increasing amount of growth to be precise in coming quarters coming from that end of the business.

21:24All right, John, thanks so much for joining us. Always appreciate getting the update from you. John Butler, he's a senior telecom analyst for Bloomberg Intelligence. He's based down there in our Princeton office. Looking at this, you know, the telecom stocks here, they've actually got some decent returns this year. I was looking at AT &T, Verizon, T-Mobile. AT &T year-to-date is up 25%. Verizon is up 9 % and T-Mobile is up 8%. And on a trailing 12-month basis, AT &T is up 50%, Verizon 6%, and T-Mobile 33%. So for stocks that kind of grow top line, as John was saying, kind of three to 5%, some pretty decent returns as they try to expand their business lines away from their core wireline and wireless and get increasingly into broadband.

22:09So we'll keep an eye on some of those telecom names. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

22:47Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about? Keeping up with cyber threats. That's where MasterCard can help with access to tools that help identify cyber threats to better protect your business. Building your dream business, priceless. For cybersecurity in a changing world, there's MasterCard. Learn more at MasterCard.com slash smallbusiness.

23:24A business gift is never just a gift. It's a thank you, a milestone, a moment of appreciation. It's a message about how much someone matters and what your brand stands for. At 4imprint, you'll find thousands of customizable options, like premium apparel, branded drinkware, tech, totes, and more, each chosen not just for function, but for meaning. You can tailor every detail, your logo, your message, your presentation, so your gift feels personal and on-brand. And with expert support, dependable service, and thousands without a setup fee, creating something thoughtful doesn't mean making it complicated.

23:59Every order is backed by 4imprint's 360-degree guarantee, so you can be 4imprint certain it'll arrive exactly as expected, on time, and with the care your brand deserves. Because when the moment matters, the right gift speaks volumes, and the right partner makes it easy. Explore gifting with purpose and certainty at 4imprint.com. 4imprint. 4certain. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube. Jeffrey Palma joins us, Senior Vice President, Head of Multi-Asset Solutions.

24:41I'm not sure what that is, but I'm going to say it has to do with some alternative investments, maybe some real investments like real estate. Jeff, thanks so much for joining us here. Co-in-East Deers, I've known this asset manager on the street forever, but I've never done business with him because you don't really own media stocks, which was my game. You guys own real estate, REITs, stuff like that. But talk to us about how you guys look at the marketplace and where you see opportunity. Yeah. So thanks for having me this morning. So we focus, as you mentioned, on real assets and alternative income strategies.

25:15And those real asset strategies in particular, real estate, infrastructure, commodities, natural resource equities. In short, things that are exposed to the real economy that have real ties to the economy, inflation sensitive assets. So that's certainly been a really important part of the world these days. And then that all kind of fits in also to that alternatives universe that we think offers diversification to your traditional stock and bond portfolio. So I cover REITs for our equities team. So super happy to have you here. As I'm looking at REITs performance this year, I mean, we're seeing shares that didn't really do much.

25:52I'm looking at a gauge that's up about four tenths of a percent so far this year. What are you seeing in terms of performance and opportunities within the REIT space? Any particular subsectors that you're keeping an eye on? Yeah. So, I mean, we should also kind of think about the year has already been full of a whole bunch of rotation. It was a pretty good first quarter for REITs. They've cooled off a little bit in the second quarter. And that sort of is the mirror image from the broader S &P. Broadly speaking, we think that REITs are pretty fairly valued, actually, you know, attractive relative to broader equity markets.

26:22within the REIT space. You know, there's certain areas that we like. And then within the within the private real estate space, I would also add, you know, there's areas like open air shopping centers that have become, you know, to us, we think are finding a bottom. And in that private space is a little bit different than the listed space as well. In a private space, let's just like I always make the mistake of commercial real estate just thinking, oh, it's office. But I know it's so So much more. I've now learned that through people kind of pointing it out to me. In commercial real estate broadly defined, where do you guys see value in the private side?

26:55Yeah. So Nora will tell you that office is only about three or four percent of the total listed index. Now, that's down and our team has been underweight office for a long time. And so we've really benefited from that trade. So within that space, I mentioned in the private space that open air retail looks a little bit better. In listed markets, we favored things like multifamily homes within health care, maybe a little bit nichier, but, you know, senior living areas. Certainly data centers have been a very important part. That's true not only in real estate, but also things tied to that in the infrastructure space as well.

27:32So you mentioned open air shopping centers. Do you mind just explaining to our listeners what exactly that is? Because I know a lot of people were talking for a long time about the death of the mall. So speak to that. And this is not quite the mall. It's like the renaissance of the mall, if you like. So think about in some cases, outlet centers or in some cases, open air outside where you have necessity based shopping centers. So it might have a grocery anchor or a big box anchor, things that have durability to the Internet shopping cycle. But then it's sort of built around an anchor store. Those are areas where it looks like prices have bottomed.