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All right, everybody. Welcome to the special episode of Cyber Bulls. We have Dan Ives, managing director and senior equity research analyst at Wedbush Securities here with us today. Dan is a long-time Tesla bull, but he's now been making some very strong statements lately warning about the Trump tariffs, the Tesla brand, and Elon Musk.
He's called the Trump tariff as a economic tariff Armageddon. He's warning about the Tesla brand crisis. He's calling Elon Musk to step up, and what he does in the next 90 days is critical. And he's lowered his price target from 550 to 315. We also have Jeff Lutz here with us today. He's a supply chain expert, decades of global manufacturing experience.
Thank you both for joining us today. Yeah, great great to be here. Yeah. Hey Jeff, what's up? Hey Hey Dan. So, let's start with you know, first let's go with Tesla. And Dan, you have made a number of statements about Elon's political role in doge damaging Tesla's you know, brand reputation. You've talked about the brand crisis tornado.
And you're calling Elon to act. You're saying he needs to step up, read the room, be a leader in the next 90 days. And of course, you lowered your price target. We'll get to that, but just tell us what you're thinking there. Yeah, I mean Herbert, I'm I I didn't downgrade the stock, which is be clear.
I mean, I still are I'm bullish on Tesla, and it's one of my top picks over the coming years. But the reality is is that brand destruction's been real. And you know, Jeff and I have talked about this separately. You know, it as someone that's such a believer in Tesla in terms of the future, in terms of autonomous, in terms of robotics, the frustration is what's happening here.
It's affecting numbers real time in terms of what deliveries going to look like, in terms of earnings, in terms of what free cash flow is going to be. You know, look, I get it for a lot of those that say, "Okay, it doesn't matter for the next 5 10 years." And Jeff and I have talked about that as well.
However, in my opinion, is like between the brand destruction, being involved in you know, in in in this administration, I think it's backfired for months. Now, look, I get it. Some Some are going to disagree. But the numbers don't lie, and we had to lower the price target accordingly because of everything we see.
Yeah, I We talked about this in in a lot on on on these various shows. And and if you if you put get people in the room that build supply chains, that plan supply, that look at supply demand, that look at all these different things, you can look at Q1, you can say, "Okay, there could be some number greater than zero that's related to brand." I mean, you see people, you know, that are, you know, concerned about it.
You So, got it. But the highest order bid of what's actually happening, the 90-plus percent issue, is starting the quarter without cars in inventory. They had 12 days of inventory. Wait, Ford has 150 days of inventory. Okay? So, there's all these misleading things that are out there in the media of like, "Well, look at their sales and look at their sales." Well, one set of brands has a lot of stuff in inventory, which is, quite frankly, a cash problem and and and indicative of maybe a different kind of problem.
And then Tesla purposely drugged their their their inventory down to introduce their new car. We've talked about that ad nauseam. But that, if you looked at sales, if even if you looked at the individual countries, sales improved as cars improved. So, as cars became in stock, sales improved directly with it, and there was almost a one-to-one correlation.
There's also a one-to-one correlation of dragging down your inventory to out-of-stock levels and then impacting sales. So, I'm not in the camp of it's the number zero and don't worry about it. I'm more of in the camp of Tesla is creating products that while you have these brand issues on the margin, as the products keep getting better and those margins are much greater.
And then we're not even talking about, well, what what is the valuation of Tesla? How does it get a 100 times multiple? It doesn't get a 100 times multiple on 350,000 cars versus 380. It It honestly it's it's it's going to get that multiple on a robo-taxi service that's a fraction of the cost of anybody else delivering a human or a not or a a non-human.
I'm sorry, it looks like we lost We may have lost Dan. Did we lose Dan? Yeah. Yeah, maybe or maybe is it just me, Herbert? No, I can't I can't see him either and he's not uh Didn't want to Dan, are you there? Yeah, yeah, yeah, okay. No, no, and um Jeff, I Yeah. I I I I just want to spend a few minutes and Herbert, we could do another call.
Yeah, no worries. But look, I I just want to get the point across that like I had to make realistic price target relative to what's happened with numbers. Did I downgrade the stock? No. The reality is like I continue to be bullish in the name, but my view is that the brand issues are real and to watch what's happening is frustrating.
I think for investors and I'm also when I communicate things, this is also what a lot of institutional investors are focused on as well. So, you know, I just want to say So, look, I got a um I have to go Would you Herbert, would do a separate one too when uh when when uh you know, when everyone else Alexander and everyone else could join, but look, Jeff, I will say Jeff, me and Jeff talk supply chain for Tesla a ton.
And I agree with Fisker like almost everything he says, and you know, I think we have better days ahead, but we had to make a realistic assessment of what's happening. So, I just wanted to get that out, and I get if I get all the comments and stuff. I appreciate all the feedback one way or another. I just wanted to get that out, Herbert.
Okay? Yeah, okay. Sorry. So, does that So, you have to leave now? Okay. Yeah, yeah. I got to go now. Um Six minutes. Okay. No, but we'll um Well, there's something else that we'll finish this up in the next week, but uh I just want to get that across. Okay? Thank you. All right. Thanks, Jeff. Bye. Yep.
See you. Oh, that's uh that's too bad. We only had him for 6 minutes. Uh what do you want to do, Jeff? Do you you know? No, I mean, I think just wrapping up the points around around brand, it's a number greater than zero. It's probably on the margins. We'll have to see how this plays out. And the other point I was about to make is Musk seems to be distant like they're talking about his exit date from the White House.
They're talking and and he's firmly wedged in terms of what's being done from a trade perspective. He has clear feedback on how he sees this should go, and and it's not like he's fully aligned with everything. So, I don't think you can paint him with that broad brush. And finally, my other point was going to be is you don't unlock AI.
You don't unlock autonomy. You don't unlock humanoid without his proximity to the White House. So, yes, there is some good there's some there's some baggage that comes along with that, but what is the higher order bit of your valuation of the company? If it's bringing these three massive things to market, AI, real-world autonomy, and humanoid, there's both a regulatory environment that needs to be installed and a deregulatory event that needs to occur to make sure that the the path can be cleared.
I was going to hit that point. I was going to hit um the points on, you know, robo-taxis are in every economic zone right now in the world. They're They're called Tesla vehicles. There's millions of them and they're already deployed. They don't have to pass through another tariff anymore. So, they just have to be lit up with software as we get regional approvals.
That is there is there is now a new advantage. There is now a new advantage in this new global economic world because if you put this whole tariff event on a hand, like in poker term, put it on a hand, where is everything going to end at? There's probably still going to be some smaller tariff barriers.
They're not going to be these astronomical things, but they're probably going to be, you know, these smaller tariff barriers. So, they're already there. And I was just going to get into the BYD So, there's a commentary about just BYD and I was going to hit that commentary of it feels like they're underperforming if their average transaction price is $16,000 and they're only selling the same number of EVs as Tesla last year.
To me, that speaks to more underperformance than uh we have a problem. Sure, I mean, they're they're the competitor. They're number They're number two, I think, in sales. That's fine. There There There's good There's goodness there, but to always speak of them as a Tesla killer, but not actually look at it critically and say, "All right, why are you selling the same number of units with half the transaction price cost?
You should be selling double or triple the amount of units. And then, you know, why aren't you paying your suppliers in 275 days?" What's going on as they expand globally. So, there's there's definitely some commentary about that. I'm not I'm By the way, I'm not like super negative on BYD, but as Remember this, when you're in different economic zones globally, you have to abide by the kind of the rules of what that economic zone is.
So, for example, in China, they're apparently getting away with 275-day payment terms. Tesla's paying suppliers in 88 days in China. But when you come to the They're not saying to come to US, but you go to Europe, they're not going to be okay. Their local suppliers are not going to be okay with 275-day payment terms.
So, guess what? They're going to have to pay suppliers faster. What does paying suppliers faster do? It draws your cash down. So, this kind of setup they have in China with export and in domestic is good. They're building a lot of gas cars, sorry, hybrid cars and EV, but this There's something to be said as they expand globally in terms of how they're actually structured and how they perform.
And then yeah, we were going to talk through macro. Tesla's continues to be fairly insulated, although I'm at 104% tariffs, I mean, you go back and you do the analysis again of All right, what are we importing from China directly and what are we importing from these other countries? The equations change a little bit, not dramatic.
Tesla energy, different conversation. Okay? Tesla energy, we we we need to be having the conversation about how to be China free on, you know, battery cells for that. So, I think that's where the conversation has to go. So, we can wrap up. We can wrap up, but I just wanted to ask the one question I wanted to ask um Dan, and I'm sure we will in a future here is, you know, his his main point I think it's the big one is that he's he's hitting hard on Elon Musk.
He's saying, Elon, you need to step up, read the room, be a leader. Saying that the 90 days critical. Well, I mean, he did do his All Saints meeting. Um you know, do you think that the that Dan has been a little bit too much on that on what he's thinking or he's kind of said the same thing by the way when it was like last year in January, he kept calling for Elon to step up and do something then, too.
He seems to that's the thing that he's most upset with. I wanted to ask him about that because that seems to be the thing that for Tesla investors, they're really going like, "What do you Why are you asking for that? That's that What What's your position on this?" Well, it you have to look at the net effects of everything.
You can't just look at what um concerns you. You have to look at the good the good things happening. So, Elon's stature globally with global leaders, I mean, right, wrong, or indifferent. Yeah. I mean, he could make a phone call and and meet with any global leader. In fact, I wouldn't be surprised if at some point that he's tapped to help on maybe some sticky trade negotiations.
I'm not saying that that's happening or there's any Yes. In India and so forth. I mean, Yeah. Uh the the There There are There are things that can concern you. You can call them luggage or baggage. That's fine. And we can talk through all of those different things. He uh but the greater good, you know, it is is happening.
When you when you can make a pro- a product in every global local economic zone and be profitable, that that's key. Now, there's quite I mean, obviously, they're underutilized in Berlin. They've got to get that ramped up and so forth. But in China and in the US, that's a very powerful thing. Those economic zones want that activity.
You're employing tens of thousands of people and then many tens of thousands suppliers around you. They want that. So, it's a tough it's a it's kind of a I know what you're asking him to do. Like, he's he's I mean, if you're if you're asking him to to to not work on I mean, there's a plan. There's an exit plan regarding Right.
regarding Doge and his day-to-day. So, I It's It's not clear what um the ask is because he doesn't have to punch a clock. He doesn't have to show up uh on the doorstep and open the factory doors every day at each facility. He has He's built a team over two decades in his likeness to do that. But there you can tell by the strategy of Tesla the vision, the strategy, that's what CEOs do.
And you look at they have the most exciting product portfolio in the world. And that's what you want from your CEO. You want the strategy, the vision, and you want to enable the team to execute. And you know, so you have to just weigh the whole thing I think together. Yes, there's There's luggage, but you have to just have to you have to put the whole thing together.
I I wish I could ask him that question. He did say that he will come back. So we lost Dan. He was here for just a short minute. He had something else he had to to jump to because uh things just his schedule got moved. And uh so we'll reschedule this another time. Thank you so much, Jeff. I apologize everybody for the short uh call here. Thanks, everybody. Bye-bye.
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