Tesla Bulls’ Last Straw… And U.S.-China Relations In Focus 4/2/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Unmitigated disaster. That is what one of the biggest Tesla bulls said about the EV makers first quarter deliveries. The stock is down close to 35 percent this year. Is the worst still to come? We will debate that. Plus, tanked tops, pants and more shares of PVH falling more than 20 percent after the Calvin Klein and Helfig repairant gave weak guidance for the rest of the year. Is this a warning that will ripple through retail and later the battle for the boardroom? We are just hours away from the end of Disney's knockdown, drag-out fight with Tri-Anne's Nelson Peltz.

0:37The winner, the loser, and the impact straight ahead. I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Courtney Garcia, Dan Nathan, and Guy Adami. Stocks falling further on the second day of the new quarter. The Dow dropping nearly 400 points. The NASDAQ down nearly a percent. Meantime, rates are back on the rise. The yield in the 10-year Treasury touching 4.4 percent for the first time since last November. We're going to get to more on that in just a minute. But we start off tonight with a potential turning point for Tesla. Shares sinking nearly 5 % after the EV maker reported Q1 deliveries that fell far short of even the most bearish of estimates.

1:13The company getting fewer than 390 ,000 cars to customers. Its first year-over-year delivery declined since the height of the pandemic. And its biggest miss in five years. The report prompting even Uber Tesla bull Dan Ives to raise a red flag, calling it, quote, unmitigated disaster that is hard to explain away. He still rates, though, the stock an outperform with a$300 price target, a level it hasn't seen since September of 2022. But is this the straw that finally breaks the Tesla bulls' backs? Are we at an inflection point for this stock? Guy, what do you think? Huge level in the stock. Yes is the answer to your question.

1:49You've got to believe that trough margins we thought we had three quarters ago. That's a bit of a pipe dream. So I've thought margins are a story. That last, I think it was three quarters ago when they said, you know what, that's it in terms of margins. We're going to start to reaccelerate. I think the stock went from like 185. That was a move up to, I think, almost 300 bucks from the 185 level. We're right back there now. Critical level, this is where we took off from last April. Traded a decent amount of volume today, but you still got to wait, in my opinion, until the earnings release, I think on the 23rd.

2:18And if margins are disappointing on the back of what you heard today, that level that we saw, that low that we put in, that 113 low, that's in the cards, I think. I mean, I think it's going to have to deliver on more than just margins at this point in time. They're also going to probably give the full year guidance and have to ratchet that down. I mean, nobody expects them to hit that number at this point. No, it seems like we're in a period, too, where there's not going to be a lot of great news until we either have more on models, until we either have some kind of a pickup. And the questions are coming off of the first down delivery quarter since, I think, second quarter of 2020 is what's causing it.

2:51Is it self-inflicted? Is it demand? Is it macro? Have all the early EV adopters gone bye-bye? And frankly, it seems like it's a little bit of everything. I don't think this is, you know, I don't think this is Chinese competitors in the U.S. market for sure. I think this is certainly to be said China has been weak for them. I do think it's margins. I do think that incentives so far in March show they're not even helping here. So ultimately it gets back to if you're an investor. I'm not sure. Look, you don't have to wait for good news and catalyst to actually go buy a stock. In many cases, they bought them in advance of that.

3:25Is that what's going on here? Because I think the good news for Tesla has to now be three or four quarters out. I just think that, you know, the silver lining is, again, they finished. They finished. Actually, they're now ahead of BYD in terms of BEV deliveries, at least on a global basis. But that's just because I think that's a very volatile series there for the Chinese. I mean, we already knew that from the company itself that it was going to be between two waves of growth. Right. And so here we are in this sort of trough. And so how how do we navigate this trough? How bad does it get during this volatile period until the promised second wave of growth that we should see, according to the company?

4:02And I think it's going to come down to, and you alluded to this, where it's coming from. Because what Tesla did come out and say is it's issues with some of their factories, maybe on the production side. My question is how much that's on the demand side. Like, they're starting to get a lot more competition. Definitely competition, specifically in China, has been an issue for them. But also they just lost the, it was like$7 ,500 in EV credit. Tax credit just went away for a lot of their Model 3s. So how much of that was people getting the Tesla's before that went away? Now you have a lot less demand.

4:28Now the tax credit's gone. I think we'll have to see, is that a one-time blip or is there a lot less demand? And people we've all seen are going more towards hybrids, less towards full electric vehicles. I just wonder how much the demand is the picture. We don't have that yet, but I think we need to see that. That's the missing piece, demand. You know, listen, this is not going to be a popular opinion here, but it looks like the most genius CEO on the face of the planet has miscalculated on so many different ways over the last five years. And none more punctuated by this gambit with like the cyber truck.

4:56You know, this was like a smoke and mirrors sort of thing. Let's get this thing out here. Let's make 300 a week. Let's kind of get, you know, all the bros really excited about this sort of thing and all the stuff that it can do. And like and what did they do? They literally like they just dropped the ball on a low end EV that is kicking their butt in China right now by a lot of local competition, a lot of local competition that nobody wanted to acknowledge for years and years. And we spent a lot of time on this desk talking about, well, Detroit's going to come from and Korea is going to come from the Germans.

5:22That didn't even matter. Half the output comes from Giga Shanghai. And if the cars that they don't sell there, they ship to Europe and the like. So there's a lot of competition all over the place, but most importantly in China. And you think about this, the other thing that the company really miscalculated on this whole idea of price elasticity. Right. And as soon as they started cutting the prices, it just kept on pushing demand further and further. And the thing that I said last night, and I probably said it 50 times over the last year or so, and this company hasn't even seen a really bad economy in the U.S.

5:54since COVID, the last time that they had year over year delivery decline. So to me, I just think it's kind of interesting. I think at some point this stock is likely on its way. I don't think it's a great press on the short side. I know a lot of people who watch this show, they don't really short stocks. They don't buy puts. They don't do this, that or whatever. OK, but it's probably going to 100. It's probably going back to that level that it got to. I think it was in late, you know, like January, you know, that that period of 2022 when it just kind of fell off a cliff from 200 or whatever. Look at that chart right there.

6:22I mean, this is one of the worst looking stock charts I've ever seen in my life. And I mean that. And this was a trillion dollar market cap company at the end of 2021. So I just think that it's not a great story. The sentiment's really bad. It doesn't make for a great press on the short side. But by the same token, to Tim's point, the fundamentals are not likely to get better for a couple quarters. And I think the analyst community has to follow through. And this is just kind of how it works. There's going to be a slew of downgrades here, which aren't going to help. Doesn't mean that some people haven't.

6:49Probably. Yeah. And I think even there will be some folks that are going to make numbers changes based upon this. I also think that if you if you look at the broader market investing environment where there really has been a lot of momentum, there has been a lot of, you know, let's call it speculative activity. The fact that Tesla is not participating at all, I think, is right. And I think that the cult nature of this stock, you haven't seen an unwind of that. Those are the people that have been holding in. So this was an expensive stock that is getting more expensive by the day. And the question is, is this really a growth stock?

7:22It's clearly not right now. In terms of the miscalculations, I agree with you in terms of the price elasticity and them sort of moving the needle around on the price. Because what are consumers going to do? But in terms of the turn in demand for EVs, I don't know if anybody could have anticipated such a quick and dramatic turn. Well, if anybody should have, it should have been the company that pioneered the EV revolution. I mean, like the ones I mean, like, like, like, let's just be clear. And he's been whining about interest rates. He's been whining about an economy. When I see a whole host. Hey, make no mistake about it.

7:51This company was ground zero for AI. What do you think full self-driving is? It's AI. Every automaker, though, that had an EV offering miscalculated demand on EVs. They all had to ratchet back their EV plans. And look what happened to GM and Ford as soon as they started to do that. It's pretty interesting. So I think we're getting at an important question. I mean, do we think EVs, you know, that demand is shot, that this secular trend is at least we know people are going to continue to buy. We know that the internal combustion engine at some point becomes, you know, goes the way of the dinosaur, although it does seem like it's going to take some time.

8:24But that seems to be the question we're having here. Because if you're talking about EV, they're still out in front by a lot. And I'm not here to defend Tesla because, in fact, again, I've not liked this stock for a long, long time. And I'd like it less now. But I think if we are questioning EVs, there's probably a lot of people that could get up here and debate this. And I don't think you can say that demand for EV versus a hybrid and obviously versus an ice and an internal combustion. You can't tell me that EV demand has peaked. It hasn't. I don't think anybody is saying that. Here, at least.

8:57But I think that is the debate. Right. But it's not just about EVs. And I'm sorry, I'll let you guys in. This stock still has a half a trillion dollar market cap. And that's not because of EVs. OK, it's because of this belief about full self-driving, about this whole thing. That's what it's about. And so until they can demonstrate something on that front, I just don't know how the stock recovers. That being said, when they report and if they just kitchen sink it right the whole year and they talk about these waves, they have to get to that mass market$25 ,000. That's the thing that's robo-taxis.

9:27That's the thing that they can sell all over the world, you know, and do it at production and get the margins at a level that works, okay? That's the story. That's going to take quarters, all right? So right here, right now, when the stock breaks, it goes, it's going to go back to$100. I'm just telling you that. And you just start buying it because then you have the opportunity between there and$100 to get a 100 % move when they finally get their stuff together. So to me, I think that there's going to be an opportunity really soon. It's just not there yet. Think about the interest rates notwithstanding, which Elon Musk mentioned a couple quarters ago.

9:57Obviously, he was troubled by that. But think about the environment that they find themselves in, they being Tesla and the rest of these groups. Unemployment's historic lows still. People have jobs. People are clearly spending money. And gasoline, very quietly, has been going higher in a pretty meaningful way, which theoretically should lend itself to demand for these cars. It's not happening. So that's the environment that it should be happening. It's not. What happens if that switches, if the switch gets flipped in terms of unemployment? So if unemployment rate starts to go meaningfully higher, which I happen to believe it will, that's just one more headwind for this entire story.

10:29All right. Well, the road ahead may look rocky for Tesla, but our next guest sees today's news as a test of investor patience. Managing partner of Deepwater Asset Management and Fast Money friend Gene Munster joins us now. And Gene, you personally are amongst those legions of investors whose patience will be tested. So what are you waiting for? Indeed. Melissa, first, I am bracing as someone who's been supportive of what Tesla's doing and optimistic about where this company can go. I was just stunned today. I think that this caught me off guard. I was expecting it basically to be flat. Deliveries is down 9%.

11:05And the first question I asked, first order of business is how bad is it going to get the panels done a great job of articulating there's going to be more negativity. I just want to put that in the context is that going into today, the street was looking for about 15 delivery growth in 2024. If you look at the numbers they just reported and assume that they can grow deliveries 10 sequentially for the rest of the year, deliveries will be down 3 % for the year. So this is probably more ugly than it seems even today and given that change and look what happened in the stock, I don't think that's fully priced in.

11:39So I think Dan you've been clear about that$100. I don't think we're going to see 100 but I do believe that the stock is going to go lower because this is going to be what I think is going to be kind of the kitchen sink where you're going to see analysts. I had that job for a long time, throwing the towel and say that this is going to be over for a long time. So I want to point that start there. Second is the bigger picture. And I think Tim, you were talking about just, you know, this EV and the EV picture. Just to frame that in, that's a two and a half trillion dollar market. What's the auto market on a yearly basis?

12:11Eventually, of course, it's going to go EV. Panel appropriately talked about what's the timing of that. I think it's going to come faster than most people think, even though this is such an ugly day on the delivery numbers. And the reason is that I believe one of the biggest factors in this horrible number was that there was so much excitement around EVs. People who typically buy a car every five years probably moved it forward or bought it three years, pulled a lot of demand in. I think eventually that just starts. I'm guilty of being too optimistic, but I think eventually they get to the other side.

12:41And one final thought, Dan, you talked about FSD. I agree that that is an important piece here. If anybody's tried FSD, the beta that they just put out last week, it is a step function better than what they've ever done. And so I think that is going to come probably in the next year or two. And I believe that that's going to be another catalyst. So that's where I'm at. What can they tell us of anything in the next quarter or two that can sort of, I don't want to say solve certain issues, but for instance, if they come out with a lower cost model, Does that solve for some of the weakness that they will see in China and address that next wave of growth that investors are looking for?

13:19Is there sort of a couple of things that they can do that can make the story a little bit better? So you've got two camps. You've got the people who believe. And the reason why the stock's not down more today is because that camp still exists. The reason why this still has the market cap it does is because that camp still exists. They're not going to be influenced probably by another couple of punky quarters. That won't influence it. The people who are skeptical, there's nothing that Tesla's going to say over the next, when they report their quarter on the 23rd, that's going to get those people more optimistic.

13:49But as an investor, I think you need to fast forward to, I'm already thinking about mid-2025. And at that point, we're going to have some really easy comps. This is a down 9%. March of 2025, we're going to start to get easier comps. I think that starts getting reflected in the stock probably mid to late this year. So that's kind of the timeframe. It's going to be rocky for the next several months. I don't think there's much they can say, Melissa. Wow. Gene, thanks. Gene Munster, Deepwater Asset Management. We should be clear, Gene owns it personally. Deepwater does not. Mid-2025, that's a long time to wait.

14:23A lot can happen. I mean, overlay what's going to happen with rates, we don't know, with the economy and unemployment. The market will get ahead. Yeah, you're right. The market will get ahead of that. They'll sniff it out at some point, right? So maybe a mid-25, early 25 story in terms of the turn, but the market will sniff that out long before. It's a question of, and again, I think Dan said it. You're not pressing shorts here. I would say you're probably looking for an entry level at some point. And Gene just said, who's probably been as arnabal out there, that he thinks the stock goes lower.

14:50So have your sort of levels in mind and then swoop in when it gets there. Of course, the problem is when it gets there, it's going to look scary as possibly can be. That's when you have to sort of close your eyes and stick to your guns. All right, let's turn out to the markets. Major indices sliding for a second day in a row, weighed down by rising yields and oil prices. The Dow dropping nearly 400 points as the 10-year Treasury marches to its highest level since November. Where do we go from here as stocks retreat to kick off Q2? I feel like, you know, we've had this discussion many times about higher rates, sticky inflation, et cetera.

15:21And now the markets are saying, you know, oh, look at this. Well, you know, higher rates have been something that I think the market has digested at different times with different sense of velocity since July of 2020. So, I mean, I think I think rates have been going higher for four years or three and a half years. And I think they're going to continue to trickle higher. A lot of interesting, at least conversation being had on the deficit. What's sustainable? What what can be refinanced? The numbers don't really add up. And if you add in the dynamics of Washington and dysfunction and credit downgrades and you add in refunding schedule, T.R.A., things that we never really, you know, work the room on, it's not good for equities and it's not good for equities.

16:00Now, make no mistake, on Friday, if we get a really weak payroll number, yields are going to go lower. They're going to go lower before they go higher. That's ultimately what's going to happen. But ultimately, the U.S. economy is kind of like a stock. If GDP shrinks, you're going to have a dynamic where, you know, they're not making as much money in USA Corp. And that's really going to be terrible for yields overall. So I think for equities, let's get back to it's easy to be critical about where all the EPS growth has come from and where it's going to be. We know this in Q4. It was 68 percent growth by the top handful of stocks we all know, and the rest grew by 0.9.

16:36The street is expecting 12.9 percent earnings growth. Let's see. Right now, I also don't think you can necessarily throw away the fact that those big stocks are the ones that actually could carry us through a rising rate environment. Remember, these are the stocks that are very defensive during that time. Yeah. And at the same time today, we're getting Fed speak. That indicate three is still a good baseline, which is what we were sort of debating in the past couple of sessions. And I think that's what you're seeing is every time the Fed comes out, the markets are going to get ahead of themselves one way or the other.

17:03And they did come out. And, you know, they really kind of showed their cards early. Before they're actually lowering interest rates, they were really indicative they're going to do so. Now markets got overly excited. Now they're pulling back. So we've seen this push and pull several times. I don't think it's necessarily anything to be concerned about because the big question is still when are rates going to come down? We're still probably at a peak of them. At some point in time, they'll come down. Maybe they don't cut at all this year. I know people are talking about that more, which will only happen because the economy is on good footing.

17:27But I don't think they're going higher. And I think you're going to see some push and pull. But I don't think this is something to be overly concerned about these last two days. If Courtney's right, I don't think she's right with what she said in terms of no cuts. That might be the most bullish scenario for stocks that is out there. Somewhat counterintuitive, but that would suggest, you know what, things are going fine. There's no reason to cut three cuts still. Well, you know what, if they start cutting rates, those inflationary pressures, which are problematic, are only going to continue. I mean, this gold move and bond move basically took place on that seemingly interpreted as dovish commentary out of Jerome Powell a couple weeks ago.

17:59So they got to combat that now. And it's not happening. And it's not just energy. It's all the soft commodities that we talked about last week as well. Yeah. So 12 percent expected earnings growth to S &P 500. You have crude oil where it is right now. You have the dollar where it is right now. You have wages where they are right now. You know, that's going to be hard to come by. I mean, we might have gotten to peak margins for S &P 500 companies when you start getting peak margins. That's when you start kind of tweaking your valuation metrics a little bit and thinking about, OK, we talked about it last night.

18:26The S &P trading about 21 times. That's a few turns over the average over the last 10 years or so. This is the most uncertain environment that we have had in our lifetimes about inflation. And I've actually never seen you can say that there's a lot of clarity about what the Fed is saying and how they're kind of signaling what they might do. I've actually never seen more confusion on their part. If you think about what at least the markets were interpreting just three and a half months ago about how many cuts based on what they were telling us, I don't think they have a clue. And I think that we're going to see June cut priced out pretty quickly here.

18:58And, you know, I don't know. I don't know if like a one off, you know, like employment report on Friday is going to do the thing. The way rates just rallied, like moved over the last two trading days with that sort of thing. That was something that I think people really should pay attention to because we still have not seen a lot of equity volatility. We had a VIX that was trading at 12 and a half, what, two days ago? Yeah, I think the VIX was really maybe the story of the day. And I think that that's a function of rates. Guys talking about gold, I think gold goes a lot higher. Gold, the traditional correlations for gold have also kind of broken down.

19:29Gold's doing this with a higher dollar. Oil's doing this with a higher dollar. Commodities are doing this with a higher dollar. It tells you where people want to be. They want to be in terra firma. I do think interest rate sensitives, which have had a ridiculous move, and I would go to a Toll Brothers or some of these names, that I think, you know, I just feel like a little interest rate shock. There has been a trade going on here. And if you look at it, actually, the strength in rates, so rates moving higher in the fall and then getting weaker, actually took these things to new highs, as if that suddenly they were, you know, at the beginning of a cycle again.

19:59I don't think we are. We know what housing demand is. Coming up, all the intel out of Intel. The chipmaker updating investors on its new foundry business, what CEO Pat Gelsinger had to say about the company's vision and how it could impact the stock. Plus, Calvin declined. The PVH plummeting despite Nerding's beat. What the retailer's forecasting that had investors checking out and how it's leaving the whole space lower. Don't go anywhere. More Fast Money in two. This is Fast Money with Melissa Lee right here on CNBC.

20:37Welcome back to Fast Money. Intel providing an update for its foundry business in the last hour. CEO Pat Gelsinger and CFO David Zinsser on a call with investors right now. The stock down about 4 % after hours. It closed the day down more than 1%. Christina Parts Nevelis is monitoring that call. It joins us now with the very latest. Hey, Christina. Hi. Well, Intel looking to convince investors of better profitability as it separates the economics of its fabs from its chip designs. In other words, its manufacturing hubs, its foundry business, and its Intel products, which will have separate P &L profit and losses to better highlight the metrics of Intel's businesses starting in Q1 2024 with the hopes that it would improve its valuation.