Tesla, Inc. (NASDAQ:TSLA) shares slid in premarket trading on Thursday after the EV giant’s second straight double miss in the fourth quarter.
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00:00 Good morning, Gordon. How you doing today?
00:03 - I'm hanging in. How are you guys doing?
00:05 Thanks for having me.
00:06 - Okay. We don't need to give the numbers.
00:09 We could just look at the price reaction here.
00:11 You've been following this stock for a long time.
00:15 Give us your short term and your longterm take here
00:19 on this earnings report.
00:20 - Yeah, so I think the earnings report was in line
00:24 with what we expected.
00:25 I think it was weaker than what the street expected.
00:28 There's three key things I'll highlight.
00:30 There's a number of things we talked about,
00:31 but number one, right?
00:33 Tesla had on every previous earnings basically release,
00:38 talked about a 50% CAGR.
00:42 They said they were gonna grow 50% annually.
00:44 They completely took that out
00:46 of the most recent earnings slide.
00:48 That's number one.
00:48 Number two, they gave guidance of notably lower growth.
00:53 So their growth in units last year was 37%.
00:57 The street has them growing like 22% this year.
01:01 They're saying notably lower than 37.
01:04 So I think that's gonna be below the 20%
01:07 the street has them growing this year.
01:08 And then they said a number of times,
01:10 they said their gross margins effectively
01:13 are gonna go lower from Q4.
01:15 So they said the benefits of gross margins
01:18 are gonna be worse going forward.
01:20 So it looks like their margins have peaked,
01:22 whereas a lot of people are saying the margins have dropped.
01:24 Couple of other things.
01:25 They said their tax rate is now gonna be 25%.
01:29 Whereas in the third quarter, it was 8.17%.
01:33 And in the fourth quarter, we can get into this.
01:35 They had a $5.7 billion tax benefit.
01:39 We could talk about that,
01:40 but it reeks to high heavens at our view.
01:43 And then lastly, they talked about this next gen model,
01:49 but they said it's not coming until the end of 2025.
01:52 So you're talking about two years with no new models,
01:54 stale models, low volume production.
01:57 And they said they're gonna produce
01:59 that $25,000 car in Texas, right?
02:02 They were supposed to produce that in Mexico.
02:04 We know they delayed their Mexican facility indefinitely.
02:07 Then they said they were gonna do China.
02:09 There were a number of other countries that were rumored.
02:11 Why is it important they're doing in Texas?
02:13 Here's why it's important.
02:15 Texas is a high cost production market.
02:17 You're talking about paying your factory workers in Texas
02:20 roughly $50 an hour versus $10 an hour in Mexico,
02:24 $5 an hour in China.
02:26 There's no way in our view that car is gonna be competitive
02:28 if they make it in Texas.
02:30 So them saying that suggests to us
02:32 they're not ramping any more new facilities.
02:34 So I think overall, this is quite bad near term
02:37 'cause you're talking about street numbers that are too high
02:39 and I think it's very bad longterm
02:41 'cause this is a stock value that 100 times
02:44 our 2024 EPS estimate
02:47 that we think earnings growth is gonna be negative.
02:49 That's absurd.
02:50 So I think that's the setup.
02:53 - Gordon, what about the consumer?
02:55 Let's just look and just take a look at the overall consumer
02:58 'cause I've argued for a while,
02:59 maybe this isn't even just gonna be a Tesla problem.
03:02 I mean, we've had higher interest rates.
03:05 Does this not impact the consumer's ability to buy new cars?
03:09 Like I mean, Ford, GM,
03:11 and obviously you don't cover those stocks,
03:12 but they've backed off on EV production here.
03:16 Is there a case that the US consumer
03:17 just may have less money in 2024 to buy new cars?
03:21 - Well, no, that's something Elon Musk is saying
03:23 to try to kind of shield himself
03:25 from weak demand for Tesla's cars specifically.
03:28 Demand for ICE cars is still strong.
03:31 Demand for cars that people want are still strong.
03:35 Look, the reason why people are exiting the EV space
03:38 is simple, it's because they're not profitable.
03:41 Think about this.
03:42 Tesla's net margin in Q4 was 7.9%.
03:47 They just told you their tax rate
03:50 is going from 8% to 25%,
03:52 and they've already done a price cut in Q1 of 2024
03:56 equivalent to 5%.
03:57 So they're now a profit,
03:59 they're again now a profitless EV manufacturer.
04:02 That's why Ford, GM, VW, Toyota,
04:07 and the battery manufacturers, Panasonic, LG, CATL,
04:13 that's why they're pulling back billions of dollars
04:15 they plan to invest in EVs
04:17 because it's just not profitable.
04:19 So I think that the reason why Tesla has problems
04:22 is because the consumer just doesn't like
04:25 and doesn't wanna buy EVs.
04:27 That's the real issue here.
04:28 And I know I'm the only guy who says that,
04:30 so it's hard to grasp,
04:32 but you can see the guys who know this market
04:34 see the market much better than any of us, me included,
04:37 that the auto manufacturers and the battery manufacturers
04:40 are pulling back hundreds of billions of dollars
04:42 in investment.
04:43 So the proof is in the pudding, if you will.
04:45 - Gordon, one more for you.
04:48 - What I'm looking at on Twitter here this morning,
04:51 and I've seen a lot of talk about it,
04:53 even though the car's obviously not selling
04:55 quite as much as maybe what the numbers weren't as good,
04:59 I'm seeing a lot of people who talk about these humanoids.
05:01 I'm seeing a lot of people talk that,
05:03 you know what, Tesla's not just a car company,
05:06 it's a technology company,
05:07 and they have these humanoids coming
05:09 that they're eventually gonna sell
05:10 and make a lot of money with.
05:11 Some people saying it's gonna be
05:12 the most valuable company in the world
05:14 because of the humanoids.
05:15 Where are they in this production,
05:18 and how far are they from being able
05:20 to actually sell these things?
05:22 - So two years ago, you would have told me the same thing,
05:24 but you would have said Cybertruck.
05:26 Four years ago, you would have told me the same thing,
05:28 but you would have said FSD.
05:30 Six years ago, you would have told me the same thing,
05:32 but you would have said the Tesla Semi.
05:34 Listen, this is our opinion,
05:36 but this is a pump and dump scheme at this point.
05:38 They have all these products.
05:40 Where's the ventilators?
05:42 Where's the Semi truck that actually we have specs on?
05:45 Where's the $40,000 Cybertruck?
05:47 Where's the $25,000 car?
05:49 Where's the factory that makes the factory?
05:51 I mean, Elon Musk comes up with a lot of these products
05:54 that are years out, and then he doesn't execute on them.
05:57 It's not like he promises and delivers late.
05:59 He just doesn't deliver at all.
06:00 Where's the 100,000 solar panels or whatever he said,
06:05 the fake solar panels he showed to sell SolarCity?
06:08 We never saw those.
06:09 There's always this carrot that he puts out there.
06:12 With respect to humanoids, Boston, what is it?
06:15 Boston Analytics. - Boston Dynamics.
06:17 - Dynamics, I'm sorry, has been at this for decades.
06:20 And the video that Elon Musk just showed,
06:25 we now know it was a complete fake.
06:26 There was a guy controlling it to the right of the video.
06:29 Where are they at with humanoids?
06:31 I don't think it's ever coming,
06:32 but it's a way for people like, excuse me,
06:35 Morgan Stanley and Kathy Wood to put a valuation
06:40 not justified by any reality.
06:41 Think about this, right?
06:42 Think about this.
06:44 For years, Elon Musk has said Dojo,
06:47 the Dojo computer teaches their cars to drive themself.
06:50 They have millions of miles of data, right?
06:53 In fact, in September of last year,
06:55 Morgan Stanley, Adam Jonas did a 60 page note
06:59 where he took his price target, I think from 250 to 400
07:02 and gave Dojo a $500 billion valuation, right?
07:07 Dojo is not mentioned in any 10Q or K of Tesla.
07:13 And last night, Elon Musk said, it's quote, a long shot.
07:17 So he's been basically selling this to people for years.
07:21 And last night, he effectively almost completely
07:24 discounted it out of the Tesla story.
07:26 You gotta look at these things, right?
07:29 You gotta look at these promises he's made.
07:32 And the fact that my peers on Wall Street,
07:34 highly respected firms are giving this company
07:36 hundreds of billions of dollars
07:38 of valuation for this vaporware.
07:40 It's crazy, we believe it's analytical malpractice.
07:43 And I think that the results this year
07:46 are gonna prove that this company has big problems.
07:49 - Let's move on to another sector.
07:51 You just mentioned the SolarCity takeover.
07:54 I can remember that a long time ago.
07:57 But let's say, since we're kind of like the bearish theme
08:00 here, talk to us about the solar sector here.
08:03 Is there any recovery, short term or long term
08:08 for the solar sector?
08:10 - Yeah, so look, I just wanna remind you guys,
08:12 you can make money shorting stocks too, right?
08:14 You can short stocks and make money.
08:16 It seems like shorting is like, you know,
08:18 the plague these days.
08:19 Last year, we had a big call, short solar.
08:23 And it worked out fantastic.
08:25 It was a fantastic short.
08:27 It was probably one of the best shorts in the stock market.
08:29 The problem with solar is simple.
08:32 We put out a note this morning highlighting this.
08:35 China is reaching grid constraints.
08:37 China is roughly 50% of global solar demand.
08:40 Last year, China grew 40%.
08:43 The expectation is China is not gonna grow at all this year.
08:46 Given the over capacity in the solar space,
08:49 if China doesn't grow, you're gonna see a further collapse
08:52 in prices, and that is not factored in.
08:55 So I think the parts makers, the Jinko Solars,
08:58 the Canadian Solars, the solar edges of the world,
09:01 I think are gonna see tremendously more downside.
09:04 They're gonna incremental downside this year.
09:06 So I think those shorts are gonna work out quite well.
09:09 And then moving to the Sunruns and the Sunovas
09:13 and the Sunpowers of the world,
09:15 these aren't really solar companies.
09:16 They're effectively specialty finance companies.
09:20 I call them subprime solar roofers.
09:23 The problem is if interest rates go up,
09:25 which clearly they are, and they have been,
09:29 these companies are facing basically extinction.
09:32 Sunpower has already defaulted
09:35 on one of their warehouse facilities.
09:38 They're close to being forced into bankruptcy.
09:40 And I think Sunrun and Sunova aren't far behind.
09:44 The problem is their loans don't generate cash.
09:47 So I think there's two distinct plays in the solar space.
09:51 You wanna play the supply demand story on the parts makers
09:54 to the downside, and you wanna play the interest rate story
09:58 and the potential bankruptcy story
10:01 on the resi rooftop side.
10:05 - All right, Gordon, so say you wanted to play
10:07 the kind of clean tech trade long,
10:10 are there any sectors within clean tech that you do like?
10:14 - We love uranium.
10:15 We've liked it for a while.
10:16 I think we were one of the first,
10:18 I think we initiated on Cameco around, I think like 13 bucks.
10:23 I think the stock's just under 60, it may be 60 now.
10:26 It's a very simple story.
10:28 You know, everybody wants to go net zero.
10:31 You know, with intermittent peak load power
10:35 like solar and wind, you can't do that.
10:37 You need distributed base load.
10:39 And the only way to do that is nuclear.
10:41 And globally, governments are moving towards nuclear now.
10:45 And when you add to that,
10:47 you have these financial players like Sprott
10:49 who have come in and brought up all the excess spot supply.
10:54 You're talking about a powder keg under prices.
10:57 Clearly prices have went a lot higher.
10:59 We're talking about $100 U3O8 per pound right now.
11:04 But you could see another, you know,
11:06 stair step higher in those prices.
11:07 And if that happens, that will be reflected in the stocks.
11:11 We think there's tremendous upside in these stocks.
11:13 We think there's gonna be a move out of solar,
11:15 out of EVs, into uranium at some point.
11:18 So you're gonna get that, you know,
11:20 euphoria play we believe as well.
11:22 We would be very aggressively buying,
11:24 buying Cameco at this point.
11:27 - Yeah, and we saw, I mean,
11:28 when the Russia-Ukraine war started
11:31 and Europe was having all these energy problems,
11:33 France was actually in a better position
11:34 than a lot of other countries
11:36 because it did have more nuclear in it.
11:38 It's building more.
11:39 Do you think we can see that in the United States
11:42 at some point in the next 10, 15 years?
11:44 It seems like our leaders here in the United States
11:47 are so against this type of clean energy.
11:50 - That's a great question and a great point.
11:52 You look at Diablo Canyon out in California,
11:55 they were supposed to decommission that, they didn't.
11:57 You're talking about a lot of talk and support
12:01 around small module nuclear reactors in the US.
12:05 The US is clearly moving back towards nuclear
12:08 as are other countries.
12:10 And you're talking about, you know,
12:13 people are, for instance,
12:14 people are expecting a lot of incremental supply
12:16 from Nextera.
12:17 But the question is, is that mine real?
12:20 I think nobody's looked into that.
12:22 We've started to.
12:23 So I think the US has to move that way
12:26 because if you want, again,
12:27 you wanna move towards net zero,
12:29 but you want reliable power that is cost effective and works,
12:33 you gotta do nuclear.
12:34 Solar and wind just don't work.
12:36 And you see that with respect to Hawaii
12:38 having to move completely away from solar
12:41 because they did too much rooftop,
12:43 it constrained their grid.
12:44 And California effectively doing the same
12:46 with the NEM 3.0 rules.
12:48 So I think the US has to move that way.
12:51 It's not a factor of if, it's a factor of when.
12:54 And I think the win is now.
12:55 And you're also having other countries move back to nuclear.
12:58 So we like the space.
12:59 And I think that once, you know,
13:01 it becomes more popularized,
13:03 you have people like me talking about it, more people,
13:05 I think you're gonna have that euphoric trade
13:07 in the uranium space as well.
13:09 - We've been on the line with Gordon Johnson.
13:12 He runs GLJ Research,
13:15 joining us here on Benzinga's Pre-Market Prep.
13:18 Gordon, thanks for coming on
13:20 and we'll be dialing you up again real soon.
13:22 Thanks again.
13:23 - Absolutely, thanks for having me.