Tesla Reports Huge Miss on Earnings for Second Quarter

You think about what we heard from Tesla adjusted EPS coming in at 33 cents. That is well below the analyst expectation of about 51 cents on average. It's not often that you see a miss of that magnitude for a company as mature and as large as Tesla. So back this out for me and sort of make the math work. >> Katie, I think it's compounded in that they beat the topline revenue by close to $3 billion. So you have a massive topline beat and then you have this bottom line uh huge mess and in the car business that's pretty straightforward math. They are falling to the temptation of feeding the top line uh which is a beast to continue to keep growing with discounts. >> And when you discount uh in the form of price and in the form of the APR that people are paying and they've done both you see what happens to margins. they can they can have a huge topline beat because of course people are going to buy a less expensive product or a below market price product but then the profitability falls dramatically and in this case they miss me DPS by more than a third and I think that's the story here this is not an AI investment story this is a story in the base business and the base business I think is giving hints that the the product lineup is older it's dated and in in order to move that product you've got to discount it >> and that hits that hits the bottom line and that's exactly I think what we're seeing here in these earnings. >> Yeah, absolutely. A big tension there and you think about uh the issues that they are having when it comes to their base business, the car business. How much of a setback is that for some of the ambitions that we know that the stock has been valued on when you think about uh AI, autonomous vehicles, robotics, the list goes on. Well, I think the the original plan was you've got a cash flowing auto business that's going to fund you to the future of autonomous cars, robo taxis, and robots, but you got to have that cash flow. And that cash flow has to be healthy. And to the extent that your base business isn't funding the future, now you've got to go out and either fund it through equity or debt uh on top of this. And so I think that's the question for investors is to look forward and and to really try to determine how much capital it's going to take to get to that future and then uh where that capital is going to come from. I think we see this across industries. It's one of the reasons we formed Vista Shares is because the the market tends to focus on end producers like Tesla and the the the money is actually made in the supply chain. The supply chain has double the profit margins that Tesla has in the end. Uh, and so although Tesla's getting squeezed by the end market, their supply chain is likely much healthier and that's probably where investors want exposure versus betting on Tesla as an end producer here. >> But I mean I but don't they kind of go hand in hand, John? And I and I mean you raised an issue here about kind of uh the staleness, my words, not yours, of of their uh product lineup. And from at least what we know, it doesn't appear to be anything major on the horizon unless uh uh Elon Musk is holding back on us. We were also supposed to see the robo taxi roll out midyear. Uh I don't see any real mention of that in the earning statement itself. Um so what is that sort of flywheel from the actual production of cars to these other anciliary areas? >> Roma, you're you're right and I think you nailed it. What they would say I think and what probably what they're going to be talking about in the earnings call is trying to get the investors to focus on robo taxi as that flywheel. Robo taxi is the next car product. Robo taxi is the bridge uh into the robotic future that they see. The challenge is as you said they haven't had much luck rolling out robo taxi. Uh it's very small numbers much smaller than they've originally proh projected much fewer uh vehicles much fewer cities uh and lower capability. And so I think it would be helpful if they could provide an honest assessment of where they are, where they see the roll out. Uh because the the car business really depends on the robo taxi business to get uh Tesla into the robot business, which is their Optimus robots. >> Well, well, let's talk a little bit more about and they do actually mention that here, but I think uh at least based on what we know publicly, that still seems a long way off. And we talk about some of your ETFs, obviously a focus on robotics, but also space. And I do want to kind of get to the elephant in the room, which is that a lot of investors uh seem to be uh speculating and betting on this idea that Tesla will be folded into SpaceX in some way or another, what the time frame for that would actually be if it were to happen. But if it was, just to talk hypotheticals here, John, is Tesla additive to SpaceX or does it actually detract from what SpaceX is trying to do? >> I think it's it's highly complimentary if I'm sitting in Elon's chair making that decision of thinking about a couple things. Number one, as you know, he's a he he's a fan of simplification. So, uh, running one public company is easier than running two, for sure. The second is is the is the AI assets that are now sitting within SpaceX really are much closer aligned to the Tesla business. Robo taxi is an AI business. Robots are actually an AI business. And uh and so those assets should be closer to each other. I think the third problem this solves on Elon's list is control. He's always been concerned about control share at Tesla. He doesn't have it. he does at SpaceX and a combination of the current valuations of SpaceX and Tesla would mean that he would now have uh the control he sought for so long at Tesla. So I think if you put yourself in his shoes and the problems that are front and center for him, this makes a lot of sense. Uh both from simplification uh from the cap table in control and from the proximity of the assets just having teams not have to cross companies to work on things like robo taxi. So John, before we let you go and this broadens it out beyond Tesla, but when we got there at that last earnings report out of Nvidia, Jets Wong talked a lot about kind of this physical AI sort of the next stage of this AI cycle and there was a big focus on robotics and obviously uh Elon Musk and Tesla are trying to be a part of that as well. But when I look at your ETF, uh the your R2 ETF, which is focused on robotics, I'm struck by one thing, and it's something that someone raised when uh Jensen Wong talked about this, how so many of the robotics companies, at least the ones that seem to be poised to really take advantage of this, aren't based in the US. And some of your largest waitings in there are companies based in Asia. In fact, I was going down the list, you can correct me if I'm wrong, but the first US company, at least in terms of your waiting, was Rockwell Automation. Why are we seeing so many uh non US companies uh sort of at the top of the list? Why are they ahead of the United States in that race? Gosh, Roma, it's a really good insight on your part and a good question. Uh that is because China is the largest supplier of robots in the world. They're the largest deployer of robots in the world. And not far behind them is Korea. So you've got a corner of the world that is really focused on robotics and executing at a very high level and executing at volumes far greater than the US. So as we went and combed the world for the supply chain and which stocks we wanted to have in that ETF, you're absolutely right. It turns out to be a lot of Asian exposure and some European exposure as well, but mainly Asian exposure because the end producers are there and therefore the supply chain is there and that's really where the action in robotics has been uh for the last 5 to 10 years and it's been quiet like we haven't paid a lot of attention to this in the west. We're starting to pay attention to it now, of course, but um but those two areas in terms of China and Korea, they're they're the countries to beat as it comes to a robotics war and a robotics uh race to the finish One.