April 24, 2024 • 24 mins
Featuring:
Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Manager joins the show to discuss Tesla's earnings reports and how it reflects attitudes in the auto industry.
Jasmine Enberg, Principal Analyst at EMARKETER, joins us to discuss how TikTok plans to fight the US ban and its impact on social media overall.
Stash Graham, Managing Director at Graham Capital Wealth Management, sits down with us to share his perspectives on markets.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2 (00:27):
After the bell, Tesla reported worse than expected profit and
revenue for a third consecutive quarter. The company continues to
buckle under the weight of slower demand for electric vehicles. However,
Tesla said it is accelerating the launch of more affordable models.
It plans to start production on the cheaper cars before
the second half of twenty twenty five. That could ease
(00:48):
deterioration in profit margins and sales. The market sort of
seized on that as a positive, but Gerber Kawasaki's Ros
Gerber says he's not sure Tesla can deliver on that
new claim.
Speaker 3 (01:01):
I just don't believe that statement. I don't see how
they're going to pull forward production of this vehicle to
be ready in a year after they just laid off
fifteen thousand people and a lot of factories and a
lot of high quality individuals just lost their jobs. So
I'm kind of curious to you know, we can say things,
but we know that when Elon says something, it often
(01:21):
takes four years after the initial comment.
Speaker 2 (01:25):
That's Ross Gerber, the co founder of Gerber Kawasaki, and
he has formerly been a massive bull on Tesla. And
as I said, the market really seized on this, because
Tesla scheres was thirteen percent in late trading.
Speaker 4 (01:39):
Well.
Speaker 2 (01:39):
Joining us now for some discussion on this is Steve Mann,
Bloomberg Intelligence Global Autos and Industrial's research manager taking a
closer look. So, as you mentioned, the market, Steve really
seized on the idea of a cheaper car. So a
lot of companies have thought about and have tried to
make cheap evs. Can it really be done? I think
(02:00):
we have to say that with Tesla, this is a
CEO who landed spent rockets on a barge. Should we
believe him?
Speaker 5 (02:09):
Hey, Brian, thanks for having me on. I think I
think this is a very important earnings release for Tesla.
Stock's been down forty percent since the minion of the year.
They really need to come out and really soothe the
concerns of like basically two groups investors. One those who
just believe Tesla is an automotive company, not a tech company,
(02:31):
and there are the other majority that believes this is
a tech AI company and not so much of an
auto company. So coming out and you know, announcing that
you know they're going to launch a more affordable EV
not in the second half of twenty twenty five, actually
moved it up to the first half of twenty twenty five.
(02:53):
That really resonated with I think the automotive group of investors.
And then I think, more importantly, as you know, this
stock's valued quite valuation is quite high on the back
of you know, their AI endeavor, and I think launching
a more affordable EV is critical to get scale more
(03:16):
vehicles on the roads to actually help them scale up
AI training. So I mean it was a really good
good call for Tesla, really, I mean, the numbers were bad,
but I think the outlook is positive.
Speaker 1 (03:29):
Maybe I'm going to be a little skeptical and I'm wondering, Steven,
and you can weigh in on this, whether the move
the eleven percent move that we had in late trading,
any amount of that move that may be attributable to
kind of short covering here because we know, as you
said earlier, this stock year to date is down by
more than forty percent, and the street was prepared for
(03:50):
kind of, you know, pretty bad report here for the quarter,
and I'm wondering whether maybe a little bit of short
covering was involved in late trading.
Speaker 5 (03:59):
It seems like. But you know, I think, uh, I
think your last segment, one of your guests that you know,
have some reservation in terms of how they're going to
execute and launching this new vehicle, that that is a risk.
It's always been testless risk in in execution. But I think, uh,
you know, I think they're still going ahead with some
(04:20):
of the new production facilities that they're looking to to
erect uh in in Mexico. But I think, uh, you know,
with slowing sales in the Model three and Model Y,
they're taking advantage of the additional capacity to pull that,
uh pull that launch of the affordable e V ahead. Now.
(04:41):
I mean they've I mean it's not new to them,
they've I think if you look at the Models three,
they went through production Hell. They also went to through
production hell for the Model X years ago. They're doing
they're doing the same thing with cyber truck. And by
the way, cyber Truck, it's actually got faster than the
(05:01):
market has anticipated, and cyber Truck has been a huge
drag on earnings.
Speaker 2 (05:07):
So anyway, Steve, Yeah, I mean part of the problem
is execution, as you highlight there, and and it's management.
We had two key executives leave the company now. Today
Martin Vieca, who's the head of investor relations, announced his
resignation on the call. Should we be concerned about management there?
Speaker 5 (05:27):
Yeah, I think I think we we We shouldn't. I
don't think I'm too worried about the management change. You know,
these individuals have been with the company for a long time,
since you know, the Model three launch, since the sn
X launch, since the inception of the company. And you know,
(05:47):
they have a very good team. Teamwork is I mean,
it's probably one of the best in the industry, in
the auto industry. So you know, they still have very
strong individuals that they've hired over the past you know,
five years, they've been in a hiring spree in those
past five years. I think it wouldn't hurt to bring
(06:08):
some new blood into into UH, into the game and
UH and and kind of kind of look at look
in the future and and you know, maybe take take
the company in a little bit direction and in uh
in growing the AI and and and the in the
rest of the auto business.
Speaker 1 (06:25):
He's still, when I say, he Elon Musk is still
committed to this idea of robot taxis. Do you think
this is a smart bet given everything that this company
is dealing with in terms of headwinds right now?
Speaker 5 (06:38):
Well, I still think, uh, robo taxi is still many
years away. I think in the call, one of the
things that was discussed was, uh, you know, policy regulations
around robo taxi and au Thomas driving. I think there's
still a lot of work with the regulators that needs
to be done to get that going. But look, it's
(06:58):
even even the r N the development work that's been
that's going on today. You know, I don't think they're
going to get to robo taxi anytime soon. You know,
in our model, we actually don't think they'll launch in
until as early as you know, twenty twenty seven, and
probably won't able to gain you know, revenue and profits
well into the next decade. So it's going to it's
(07:20):
gonna take some time, but I think I think the
launching of the affordable ev really resonated with the investors,
and that's why you see the stock react to it.
Speaker 2 (07:31):
Our own reporting, as you heard from Ed Ludlow, is
that they have made some moves to be able to
to produce these more affordable models early. But one thing
that wasn't immediately clear was whether or not these models,
whether this refers to the model too that has been
talked about in the past. Can you clarify that, is
that what they're talking about.
Speaker 5 (07:52):
It's actually unclear. You know, it could take a couple
of forms. It could be a new platform, which is
the model too that you know the market has been
talking about. But look, they've done a really good job
in vertically integrating their manufacturing that have allowed them to
cut costs and you know, allowed them to be the
you know, one or two most profit or the one
(08:14):
or two profitable EV maker in the world. Nobody's nobody's
generating profits other than you know, Tesla and probably one
other Chinese company bid uh. So they've done a lot
in vertical ingrading manufacturing that allows them to cut costs.
So the other possibility is really adding an upgrade another
(08:36):
variant to the existing Model three and Model hy and
that allows them to actually sell that variant at a
cheaper price. And by the way, this is critical. This
cheaper model is critical because it allows Tesla to actually
expand geographic reach very quickly.
Speaker 1 (08:55):
Steve, before we let you go, you mentioned China there
and byd give me your sense of the challenges that
lie ahead for for Tesla in China.
Speaker 5 (09:04):
Uh, it's it's it's really tough over there. It's it's
a very very high, hyper competitive market. But I think
what's going positive that's going well for Tesla as well
as the Chinese ev maker is battery price has been
coming down. If you look at c at L, one
of the major global battery makers in the world, a
Chinese glow battery maker in the world, you can see
(09:27):
their margins have improved while prices have come down. So
that what it means is that, you know, the efficiency
the costs of prices of battery are still coming down rapidly.
Speaker 2 (09:41):
Yeah, it's a good thing, all right, Steve, thanks so
much for joining us as Steve Mann there from Bloomberg Intelligence.
Joining us now is Jasmine and Berg, principal advisor at
E Marketer to take a closer look at what this
(10:02):
TikTok bin would mean. Well, there's so many different angles
to this, Jasmine. I'm curious about whether or not you
think that this gets lost in court for a year
or two, or whether we see some other sharp edged
moves by China and perhaps a sale.
Speaker 6 (10:19):
Yeah, it's a great question. TikTok has made it clear
that it intends to launch a legal battle against this bill,
and I expect it will be a long and drawn
out and intense battle. So it's definitely not the end
of TikTok here in the US just yet, even though
it does certainly feel like the clock is ticking at
(10:41):
least in terms of how TikTok operates now, because this
battle could really last for months or even for years.
And you know, if TikTok does is able to divest,
even that would be you know, another it would have
up to a year to find a buyer and to
make a sale. So you know, there's still quite a
(11:03):
long road ahead before we see what truly happens to TikTok.
Speaker 1 (11:08):
I'm wondering, given the connections that you have in the industry,
whether there is an opinion that is developing here on
what happens to TikTok. Is there a consensus developing or
is it simply too soon to say so.
Speaker 6 (11:21):
I think there's a consensus around you know, the bill
inevitably becoming law. I think people are still, you know,
somewhat torn over what happens after that. There are still
a lot of ifs and questions that need to be answered.
And of course, this isn't TikTok's first rodeo. I mean,
this is an issue that we've all been covering and
(11:42):
dealing with for you know, the past couple of years,
with several different attempts to ban TikTok. Of course, this
one is is very different. It's felt different from the
start and the speed at which it passed through the
House and now the speed at which it's advancing through
the Senate. I mean, it just it feels like a
different moment, and it's something that at least we are
(12:03):
looking at much more closely, and the advertisers and the
brands that I speak to on a regular basis are
also looking at very closely.
Speaker 2 (12:10):
Right now, Yeah, you wonder who would benefit the most?
I think a lot of people are saying meta and
it's interesting with the options that China has, it could
conceivably try to sell TikTok minus the algorithm and keep
it out sell it for a diminished amount. That would
very much hurt American owners, American shareholders in ByteDance itself.
(12:34):
How do you see the possibilities of a sale and
whether or not you know that might be the most
likely outcome is that it gets sold but no algorithm.
Speaker 6 (12:44):
I mean, the algorithm question is a great one, right.
It's one of the most coveted parts of TikTok, and
I'm sure there are many companies here that would love
to get their hands on the algorithm, and to your point,
it would lessen the valuation of TikTok and perhaps expand
a list of potential buyers. No matter what, though, I
do think finding a buyer is going to be a
(13:05):
difficult task for TikTok. While there are a lot of
companies again that would like to get their hands on
the company, it is one that has been heavily scrutinized
over many years, not only here in the US, but worldwide.
So this buyer would have to have a strong pocket,
a strong stomach excuse me, as well as deep pockets
to be able to buy it, and companies like Meta
as well as the rest of big tech would pretty
(13:27):
much be out of the question because of antitrust and
regulatory concerns.
Speaker 1 (13:33):
Yeah, former Treasury secret see is Steve Menuschen has already
said that he's assembling a group of investors that would
make a move to buy TikTok's US operation. Now we
know that Oracle is already hosting a lot of the
data that TikTok has for users here in the States,
which I think approaches around one hundred and seven million users.
(13:56):
Does Oracle, I know they have about eighty seven billion
in debt, But would that kind of emerge as a
company maybe that could take over TikTok or should we
be thinking about other firms? I mean you mentioned Microsoft
maybe as a possibility. Meta clearly out of the question.
Is you know, obviously with antitrust concerns there, But are
(14:19):
there companies like Oracle that you can see that may
have a chance at buying TikTok in the US.
Speaker 6 (14:25):
So one of the companies that I think would be
a good fit, although I don't know how possible a
deal would be, is Walmart. It did you know propose
a deal I believe with Oracle in twenty twenty, so
there is some history there, and TikTok and Walmart, of course,
also have a long history of working together and partnering together.
(14:47):
The two of them also need to fend off Amazon,
so it would be a partnership that, at least in theory,
would make sense to me.
Speaker 2 (14:55):
You know, there aren't many Chinese companies that have such
a massive presence in the United State, so it might
not be all that unusual if TikTok was just sold.
You mentioned Walmart. That's probably one company that has deep
enough pockets to consider buying TikTok. But let's talk a
little bit about how much this company might sell for.
(15:16):
I might have gotten a little bit out over my skis.
I told Doug that I thought the company would be
valued over one hundred billion dollars, and who could really
afford that. There's only a handful of companies that could,
and some of them would be blocked because of out
of trust, as Doug suggested. So what sort of value
does TikTok have.
Speaker 6 (15:34):
Well, I've seen estimates that range anywhere between forty billion
and one hundred and fifty billion, again depending on whether
the algorithm is included. That's a little bit outside of
the purview that I have. We focus more on advertising,
which of course is a core part of TikTok's business.
And if you think about the size of TikTok's AD
(15:55):
business here in the US, it is by no means
a small player. We're expecting it to rake in about
ten billion dollars in US AD revenues in twenty twenty four,
assuming of course that it does not get banned. So
it is one of the largest social media ad players
out there and by no means again a small business.
Speaker 1 (16:15):
So ten billion, how does that compare to what Meta
rakes in in terms of AD revenue.
Speaker 6 (16:20):
So based on our estimates, we are predicting that Meta
will rake in about sixty four billion dollars in US
AD revenues this year. So it is significantly larger still
than TikTok. But if you think about the time that
TikTok has been here in the US and how rapidly
it has grown, it really has been able to cross
that ten billion dollar mark very very quickly. But back
(16:43):
to the previous question about whether you know Meta would
be one of the beneficiaries, of course, it would be,
but thinking about again the size of its AD business
versus the side of TikTok's ad business, any reallocated TikTok
AD dollars would still be pretty much incremental to that
is already expected to bring in.
Speaker 2 (17:03):
Okay, briefly, the one difference between the House bill and
the Senate bill is this three hundred and sixty days
for TikTok to be divested by byte edance. Is three
hundred and sixty a big deal?
Speaker 6 (17:16):
Well, it's one of the reasons that it was able
or that it has more support now in the Senate.
I mean it does give you know, TikTok more time
to find a potential buyer. So I think it's one
of the reasons that it was able to be pushed
through into the Senate and one of the reasons that
it's more likely to become law now.
Speaker 2 (17:36):
Yeah, and it gets this past the election. I guess
that's good. Jasmine, thanks so much for joining us, Jasmin Enberg,
Principal analyst at eMarketer Stosh Graham joins us managing director
at Graham Capital Wealth Management to take a closer look
at markets. Stosh equities seem to regain some of the
(17:59):
momentum that was lost in the month of April. Most
of the month we were trending to the downside and
more acute last week. But these two days of gains
have recouped about half of the five to six percent
pullback that we saw. City Group says stocks are more
attractive as the slide removed some of the market fraud.
Speaker 4 (18:17):
How do you see it, well, Brian, in regards to
market movements, say, for the rest of the year. Certainly
this pullback has been a point where by the dive,
by the dip, buyers have come back. I think looking
into the near term future, you're looking at largely two
things financial conditions primarily, and then secondarily, can investor sentiment
(18:42):
still be very positive? We know it's not as positive
at where it was three to four weeks ago, but
certainly sediment is still positive compared to historical norms.
Speaker 1 (18:54):
What about purchasing managers sentiment? We had the flash April
composite PMI from S and P Global. Today, I mean
we're almost flirting with the line between expansion and contraction.
In fact, if you look at the measure of orders,
I mean we dipped into contraction for the first time
in six months, So the economy is softening. Is that
(19:14):
enough that would cause the FED maybe to give the
equity market a little bit of relief here and begin
to cut rates, let's say, twice before the end of
the year is out.
Speaker 4 (19:27):
That is the big question, certainly amongst institutional money managers,
I know, just being on the terminal, that has been
a primary point of discussion because we have seen a
material amount of rate cuts come off over the last
quarter and a half. Look where markets are right now
and where they were or how they were reacting really
(19:51):
last five to six months. In this remarkable rally, you
had a dynamic of which you indirectly referred to it.
In some situations you had bad economic news being seen
as good for markets, and then second early you had
good economic news being used as good news for markets. Again,
when you have those dynamics, you get a little bit.
(20:12):
You get worried that markets could be throthy, and when
you look at investors sentiment and how strong it's been
over that period of time, the market's taking a breather,
I think is a natural reaction. But again, looking in
the near term future, financial conditions are still pretty loose,
(20:32):
and right now capital markets again are very favorable for
companies that have strong balance sheets.
Speaker 2 (20:38):
Well, I think Doug raised an interesting point because if
you think about it, interest rates are not the be
all and end all. Their one input into the cost
side of doing business, and inflation is sticky, so we're
not expecting the FED to really cut. So why would
stocks you go up? Well, they would go up if
one of the other inputs, which is growth, is higher.
(21:00):
And even more important than growth is how the companies
manage are their earnings higher? So if the earnings are higher,
you're probably feeling pretty good here. But then if growth
is faltering, as suggested with the latest uh, the latest
ism numbers, then it is something to be concerned about.
I'm not sure that that's entrenched yet, about a weakness
(21:20):
in growth. How do you see growth?
Speaker 4 (21:22):
No, absolutely, And I would say that is for personally,
for us in our firm, that is the risk that
the market is not fully appreciating. I think one of
the difficult dynamics with using various economic data points, whether
it's the variety of reports from the jobs report, uh,
you know we referenced PMI, A lot of these reports
(21:44):
get revised at a later point in time, and how
the data is collected, and you're specially you're seeing this
with the labor market where you have an initial jobs
report and then a month later, three months later, the
numbers have been getting revised and generally speaking being revised lower.
And it's not necessarily due to some nefarist mean, it's
(22:04):
just the way or the inefficiencies of how the numbers
or how the data is collected. So while I think
in the short run, again largely because investment sentiment and
financial conditions are very favorable, and historically that has been
your your your most or that's been your strongest variables
for near term market movements. What we're talking about, which
(22:26):
would be you know, concerns about a week economy and
how that can impact financial asset markets and especially equity markets.
That is that's your intermediate term. So I would say
six to twelve months that is the risk because earnings growth,
as you've been alluding to, generally have been pretty strong
so far this quarter or this earning season.
Speaker 1 (22:46):
So do you seek shelter in companies that have very
strong balance sheets holding on to a lot of cash
and I'm thinking of big cap tech, Does that make
sense to get a little defensive here, under the umbrella
of big cap tech. Are you just frightened the evaluations
being too high.
Speaker 4 (23:03):
Exactly for us in terms of information technology, which to
be fair, has seen the strong over the last six
months has seen the strongest earning's revisions higher of all
sm P five hundred subsectors, and it's largely it's tied
to artificial intelligence and the expected spending in that respective technology.
(23:27):
But again, valuations are very rich in the information technology space.
A sector that we have been watching for some time
that is generally unloved is energy. Now the recent price
movements in WTI or various other commodities has produced a
nice wind or tailwind last thirty days.
Speaker 2 (23:50):
Yeah, we'll see if it continues. Stash, Thanks very much,
Stosh Graham, Managing director at Graham Capital Wealth Management.
Speaker 1 (23:59):
This has been the Bluemberg Daybreak Asia podcast, bringing you
the stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify or anywhere else you listen,
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(24:19):
Bloomberg business app,
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2 (00:27):
After the bell, Tesla reported worse than expected profit and
revenue for a third consecutive quarter. The company continues to
buckle under the weight of slower demand for electric vehicles. However,
Tesla said it is accelerating the launch of more affordable models.
It plans to start production on the cheaper cars before
the second half of twenty twenty five. That could ease
(00:48):
deterioration in profit margins and sales. The market sort of
seized on that as a positive, but Gerber Kawasaki's Ros
Gerber says he's not sure Tesla can deliver on that
new claim.
Speaker 3 (01:01):
I just don't believe that statement. I don't see how
they're going to pull forward production of this vehicle to
be ready in a year after they just laid off
fifteen thousand people and a lot of factories and a
lot of high quality individuals just lost their jobs. So
I'm kind of curious to you know, we can say things,
but we know that when Elon says something, it often
(01:21):
takes four years after the initial comment.
Speaker 2 (01:25):
That's Ross Gerber, the co founder of Gerber Kawasaki, and
he has formerly been a massive bull on Tesla. And
as I said, the market really seized on this, because
Tesla scheres was thirteen percent in late trading.
Speaker 4 (01:39):
Well.
Speaker 2 (01:39):
Joining us now for some discussion on this is Steve Mann,
Bloomberg Intelligence Global Autos and Industrial's research manager taking a
closer look. So, as you mentioned, the market, Steve really
seized on the idea of a cheaper car. So a
lot of companies have thought about and have tried to
make cheap evs. Can it really be done? I think
(02:00):
we have to say that with Tesla, this is a
CEO who landed spent rockets on a barge. Should we
believe him?
Speaker 5 (02:09):
Hey, Brian, thanks for having me on. I think I
think this is a very important earnings release for Tesla.
Stock's been down forty percent since the minion of the year.
They really need to come out and really soothe the
concerns of like basically two groups investors. One those who
just believe Tesla is an automotive company, not a tech company,
(02:31):
and there are the other majority that believes this is
a tech AI company and not so much of an
auto company. So coming out and you know, announcing that
you know they're going to launch a more affordable EV
not in the second half of twenty twenty five, actually
moved it up to the first half of twenty twenty five.
(02:53):
That really resonated with I think the automotive group of investors.
And then I think, more importantly, as you know, this
stock's valued quite valuation is quite high on the back
of you know, their AI endeavor, and I think launching
a more affordable EV is critical to get scale more
(03:16):
vehicles on the roads to actually help them scale up
AI training. So I mean it was a really good
good call for Tesla, really, I mean, the numbers were bad,
but I think the outlook is positive.
Speaker 1 (03:29):
Maybe I'm going to be a little skeptical and I'm wondering, Steven,
and you can weigh in on this, whether the move
the eleven percent move that we had in late trading,
any amount of that move that may be attributable to
kind of short covering here because we know, as you
said earlier, this stock year to date is down by
more than forty percent, and the street was prepared for
(03:50):
kind of, you know, pretty bad report here for the quarter,
and I'm wondering whether maybe a little bit of short
covering was involved in late trading.
Speaker 5 (03:59):
It seems like. But you know, I think, uh, I
think your last segment, one of your guests that you know,
have some reservation in terms of how they're going to
execute and launching this new vehicle, that that is a risk.
It's always been testless risk in in execution. But I think, uh,
you know, I think they're still going ahead with some
(04:20):
of the new production facilities that they're looking to to
erect uh in in Mexico. But I think, uh, you know,
with slowing sales in the Model three and Model Y,
they're taking advantage of the additional capacity to pull that,
uh pull that launch of the affordable e V ahead. Now.
(04:41):
I mean they've I mean it's not new to them,
they've I think if you look at the Models three,
they went through production Hell. They also went to through
production hell for the Model X years ago. They're doing
they're doing the same thing with cyber truck. And by
the way, cyber Truck, it's actually got faster than the
(05:01):
market has anticipated, and cyber Truck has been a huge
drag on earnings.
Speaker 2 (05:07):
So anyway, Steve, Yeah, I mean part of the problem
is execution, as you highlight there, and and it's management.
We had two key executives leave the company now. Today
Martin Vieca, who's the head of investor relations, announced his
resignation on the call. Should we be concerned about management there?
Speaker 5 (05:27):
Yeah, I think I think we we We shouldn't. I
don't think I'm too worried about the management change. You know,
these individuals have been with the company for a long time,
since you know, the Model three launch, since the sn
X launch, since the inception of the company. And you know,
(05:47):
they have a very good team. Teamwork is I mean,
it's probably one of the best in the industry, in
the auto industry. So you know, they still have very
strong individuals that they've hired over the past you know,
five years, they've been in a hiring spree in those
past five years. I think it wouldn't hurt to bring
(06:08):
some new blood into into UH, into the game and
UH and and kind of kind of look at look
in the future and and you know, maybe take take
the company in a little bit direction and in uh
in growing the AI and and and the in the
rest of the auto business.
Speaker 1 (06:25):
He's still, when I say, he Elon Musk is still
committed to this idea of robot taxis. Do you think
this is a smart bet given everything that this company
is dealing with in terms of headwinds right now?
Speaker 5 (06:38):
Well, I still think, uh, robo taxi is still many
years away. I think in the call, one of the
things that was discussed was, uh, you know, policy regulations
around robo taxi and au Thomas driving. I think there's
still a lot of work with the regulators that needs
to be done to get that going. But look, it's
(06:58):
even even the r N the development work that's been
that's going on today. You know, I don't think they're
going to get to robo taxi anytime soon. You know,
in our model, we actually don't think they'll launch in
until as early as you know, twenty twenty seven, and
probably won't able to gain you know, revenue and profits
well into the next decade. So it's going to it's
(07:20):
gonna take some time, but I think I think the
launching of the affordable ev really resonated with the investors,
and that's why you see the stock react to it.
Speaker 2 (07:31):
Our own reporting, as you heard from Ed Ludlow, is
that they have made some moves to be able to
to produce these more affordable models early. But one thing
that wasn't immediately clear was whether or not these models,
whether this refers to the model too that has been
talked about in the past. Can you clarify that, is
that what they're talking about.
Speaker 5 (07:52):
It's actually unclear. You know, it could take a couple
of forms. It could be a new platform, which is
the model too that you know the market has been
talking about. But look, they've done a really good job
in vertically integrating their manufacturing that have allowed them to
cut costs and you know, allowed them to be the
you know, one or two most profit or the one
(08:14):
or two profitable EV maker in the world. Nobody's nobody's
generating profits other than you know, Tesla and probably one
other Chinese company bid uh. So they've done a lot
in vertical ingrading manufacturing that allows them to cut costs.
So the other possibility is really adding an upgrade another
(08:36):
variant to the existing Model three and Model hy and
that allows them to actually sell that variant at a
cheaper price. And by the way, this is critical. This
cheaper model is critical because it allows Tesla to actually
expand geographic reach very quickly.
Speaker 1 (08:55):
Steve, before we let you go, you mentioned China there
and byd give me your sense of the challenges that
lie ahead for for Tesla in China.
Speaker 5 (09:04):
Uh, it's it's it's really tough over there. It's it's
a very very high, hyper competitive market. But I think
what's going positive that's going well for Tesla as well
as the Chinese ev maker is battery price has been
coming down. If you look at c at L, one
of the major global battery makers in the world, a
Chinese glow battery maker in the world, you can see
(09:27):
their margins have improved while prices have come down. So
that what it means is that, you know, the efficiency
the costs of prices of battery are still coming down rapidly.
Speaker 2 (09:41):
Yeah, it's a good thing, all right, Steve, thanks so
much for joining us as Steve Mann there from Bloomberg Intelligence.
Joining us now is Jasmine and Berg, principal advisor at
E Marketer to take a closer look at what this
(10:02):
TikTok bin would mean. Well, there's so many different angles
to this, Jasmine. I'm curious about whether or not you
think that this gets lost in court for a year
or two, or whether we see some other sharp edged
moves by China and perhaps a sale.
Speaker 6 (10:19):
Yeah, it's a great question. TikTok has made it clear
that it intends to launch a legal battle against this bill,
and I expect it will be a long and drawn
out and intense battle. So it's definitely not the end
of TikTok here in the US just yet, even though
it does certainly feel like the clock is ticking at
(10:41):
least in terms of how TikTok operates now, because this
battle could really last for months or even for years.
And you know, if TikTok does is able to divest,
even that would be you know, another it would have
up to a year to find a buyer and to
make a sale. So you know, there's still quite a
(11:03):
long road ahead before we see what truly happens to TikTok.
Speaker 1 (11:08):
I'm wondering, given the connections that you have in the industry,
whether there is an opinion that is developing here on
what happens to TikTok. Is there a consensus developing or
is it simply too soon to say so.
Speaker 6 (11:21):
I think there's a consensus around you know, the bill
inevitably becoming law. I think people are still, you know,
somewhat torn over what happens after that. There are still
a lot of ifs and questions that need to be answered.
And of course, this isn't TikTok's first rodeo. I mean,
this is an issue that we've all been covering and
(11:42):
dealing with for you know, the past couple of years,
with several different attempts to ban TikTok. Of course, this
one is is very different. It's felt different from the
start and the speed at which it passed through the
House and now the speed at which it's advancing through
the Senate. I mean, it just it feels like a
different moment, and it's something that at least we are
(12:03):
looking at much more closely, and the advertisers and the
brands that I speak to on a regular basis are
also looking at very closely.
Speaker 2 (12:10):
Right now, Yeah, you wonder who would benefit the most?
I think a lot of people are saying meta and
it's interesting with the options that China has, it could
conceivably try to sell TikTok minus the algorithm and keep
it out sell it for a diminished amount. That would
very much hurt American owners, American shareholders in ByteDance itself.
(12:34):
How do you see the possibilities of a sale and
whether or not you know that might be the most
likely outcome is that it gets sold but no algorithm.
Speaker 6 (12:44):
I mean, the algorithm question is a great one, right.
It's one of the most coveted parts of TikTok, and
I'm sure there are many companies here that would love
to get their hands on the algorithm, and to your point,
it would lessen the valuation of TikTok and perhaps expand
a list of potential buyers. No matter what, though, I
do think finding a buyer is going to be a
(13:05):
difficult task for TikTok. While there are a lot of
companies again that would like to get their hands on
the company, it is one that has been heavily scrutinized
over many years, not only here in the US, but worldwide.
So this buyer would have to have a strong pocket,
a strong stomach excuse me, as well as deep pockets
to be able to buy it, and companies like Meta
as well as the rest of big tech would pretty
(13:27):
much be out of the question because of antitrust and
regulatory concerns.
Speaker 1 (13:33):
Yeah, former Treasury secret see is Steve Menuschen has already
said that he's assembling a group of investors that would
make a move to buy TikTok's US operation. Now we
know that Oracle is already hosting a lot of the
data that TikTok has for users here in the States,
which I think approaches around one hundred and seven million users.
(13:56):
Does Oracle, I know they have about eighty seven billion
in debt, But would that kind of emerge as a
company maybe that could take over TikTok or should we
be thinking about other firms? I mean you mentioned Microsoft
maybe as a possibility. Meta clearly out of the question.
Is you know, obviously with antitrust concerns there, But are
(14:19):
there companies like Oracle that you can see that may
have a chance at buying TikTok in the US.
Speaker 6 (14:25):
So one of the companies that I think would be
a good fit, although I don't know how possible a
deal would be, is Walmart. It did you know propose
a deal I believe with Oracle in twenty twenty, so
there is some history there, and TikTok and Walmart, of course,
also have a long history of working together and partnering together.
(14:47):
The two of them also need to fend off Amazon,
so it would be a partnership that, at least in theory,
would make sense to me.
Speaker 2 (14:55):
You know, there aren't many Chinese companies that have such
a massive presence in the United State, so it might
not be all that unusual if TikTok was just sold.
You mentioned Walmart. That's probably one company that has deep
enough pockets to consider buying TikTok. But let's talk a
little bit about how much this company might sell for.
(15:16):
I might have gotten a little bit out over my skis.
I told Doug that I thought the company would be
valued over one hundred billion dollars, and who could really
afford that. There's only a handful of companies that could,
and some of them would be blocked because of out
of trust, as Doug suggested. So what sort of value
does TikTok have.
Speaker 6 (15:34):
Well, I've seen estimates that range anywhere between forty billion
and one hundred and fifty billion, again depending on whether
the algorithm is included. That's a little bit outside of
the purview that I have. We focus more on advertising,
which of course is a core part of TikTok's business.
And if you think about the size of TikTok's AD
(15:55):
business here in the US, it is by no means
a small player. We're expecting it to rake in about
ten billion dollars in US AD revenues in twenty twenty four,
assuming of course that it does not get banned. So
it is one of the largest social media ad players
out there and by no means again a small business.
Speaker 1 (16:15):
So ten billion, how does that compare to what Meta
rakes in in terms of AD revenue.
Speaker 6 (16:20):
So based on our estimates, we are predicting that Meta
will rake in about sixty four billion dollars in US
AD revenues this year. So it is significantly larger still
than TikTok. But if you think about the time that
TikTok has been here in the US and how rapidly
it has grown, it really has been able to cross
that ten billion dollar mark very very quickly. But back
(16:43):
to the previous question about whether you know Meta would
be one of the beneficiaries, of course, it would be,
but thinking about again the size of its AD business
versus the side of TikTok's ad business, any reallocated TikTok
AD dollars would still be pretty much incremental to that
is already expected to bring in.
Speaker 2 (17:03):
Okay, briefly, the one difference between the House bill and
the Senate bill is this three hundred and sixty days
for TikTok to be divested by byte edance. Is three
hundred and sixty a big deal?
Speaker 6 (17:16):
Well, it's one of the reasons that it was able
or that it has more support now in the Senate.
I mean it does give you know, TikTok more time
to find a potential buyer. So I think it's one
of the reasons that it was able to be pushed
through into the Senate and one of the reasons that
it's more likely to become law now.
Speaker 2 (17:36):
Yeah, and it gets this past the election. I guess
that's good. Jasmine, thanks so much for joining us, Jasmin Enberg,
Principal analyst at eMarketer Stosh Graham joins us managing director
at Graham Capital Wealth Management to take a closer look
at markets. Stosh equities seem to regain some of the
(17:59):
momentum that was lost in the month of April. Most
of the month we were trending to the downside and
more acute last week. But these two days of gains
have recouped about half of the five to six percent
pullback that we saw. City Group says stocks are more
attractive as the slide removed some of the market fraud.
Speaker 4 (18:17):
How do you see it, well, Brian, in regards to
market movements, say, for the rest of the year. Certainly
this pullback has been a point where by the dive,
by the dip, buyers have come back. I think looking
into the near term future, you're looking at largely two
things financial conditions primarily, and then secondarily, can investor sentiment
(18:42):
still be very positive? We know it's not as positive
at where it was three to four weeks ago, but
certainly sediment is still positive compared to historical norms.
Speaker 1 (18:54):
What about purchasing managers sentiment? We had the flash April
composite PMI from S and P Global. Today, I mean
we're almost flirting with the line between expansion and contraction.
In fact, if you look at the measure of orders,
I mean we dipped into contraction for the first time
in six months, So the economy is softening. Is that
(19:14):
enough that would cause the FED maybe to give the
equity market a little bit of relief here and begin
to cut rates, let's say, twice before the end of
the year is out.
Speaker 4 (19:27):
That is the big question, certainly amongst institutional money managers,
I know, just being on the terminal, that has been
a primary point of discussion because we have seen a
material amount of rate cuts come off over the last
quarter and a half. Look where markets are right now
and where they were or how they were reacting really
(19:51):
last five to six months. In this remarkable rally, you
had a dynamic of which you indirectly referred to it.
In some situations you had bad economic news being seen
as good for markets, and then second early you had
good economic news being used as good news for markets. Again,
when you have those dynamics, you get a little bit.
(20:12):
You get worried that markets could be throthy, and when
you look at investors sentiment and how strong it's been
over that period of time, the market's taking a breather,
I think is a natural reaction. But again, looking in
the near term future, financial conditions are still pretty loose,
(20:32):
and right now capital markets again are very favorable for
companies that have strong balance sheets.
Speaker 2 (20:38):
Well, I think Doug raised an interesting point because if
you think about it, interest rates are not the be
all and end all. Their one input into the cost
side of doing business, and inflation is sticky, so we're
not expecting the FED to really cut. So why would
stocks you go up? Well, they would go up if
one of the other inputs, which is growth, is higher.
(21:00):
And even more important than growth is how the companies
manage are their earnings higher? So if the earnings are higher,
you're probably feeling pretty good here. But then if growth
is faltering, as suggested with the latest uh, the latest
ism numbers, then it is something to be concerned about.
I'm not sure that that's entrenched yet, about a weakness
(21:20):
in growth. How do you see growth?
Speaker 4 (21:22):
No, absolutely, And I would say that is for personally,
for us in our firm, that is the risk that
the market is not fully appreciating. I think one of
the difficult dynamics with using various economic data points, whether
it's the variety of reports from the jobs report, uh,
you know we referenced PMI, A lot of these reports
(21:44):
get revised at a later point in time, and how
the data is collected, and you're specially you're seeing this
with the labor market where you have an initial jobs
report and then a month later, three months later, the
numbers have been getting revised and generally speaking being revised lower.
And it's not necessarily due to some nefarist mean, it's
(22:04):
just the way or the inefficiencies of how the numbers
or how the data is collected. So while I think
in the short run, again largely because investment sentiment and
financial conditions are very favorable, and historically that has been
your your your most or that's been your strongest variables
for near term market movements. What we're talking about, which
(22:26):
would be you know, concerns about a week economy and
how that can impact financial asset markets and especially equity markets.
That is that's your intermediate term. So I would say
six to twelve months that is the risk because earnings growth,
as you've been alluding to, generally have been pretty strong
so far this quarter or this earning season.
Speaker 1 (22:46):
So do you seek shelter in companies that have very
strong balance sheets holding on to a lot of cash
and I'm thinking of big cap tech, Does that make
sense to get a little defensive here, under the umbrella
of big cap tech. Are you just frightened the evaluations
being too high.
Speaker 4 (23:03):
Exactly for us in terms of information technology, which to
be fair, has seen the strong over the last six
months has seen the strongest earning's revisions higher of all
sm P five hundred subsectors, and it's largely it's tied
to artificial intelligence and the expected spending in that respective technology.
(23:27):
But again, valuations are very rich in the information technology space.
A sector that we have been watching for some time
that is generally unloved is energy. Now the recent price
movements in WTI or various other commodities has produced a
nice wind or tailwind last thirty days.
Speaker 2 (23:50):
Yeah, we'll see if it continues. Stash, Thanks very much,
Stosh Graham, Managing director at Graham Capital Wealth Management.
Speaker 1 (23:59):
This has been the Bluemberg Daybreak Asia podcast, bringing you
the stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify or anywhere else you listen,
and always on Bloomberg Radio, the Bloomberg Terminal, and the
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