Welcome to the Bloomberg p m L Podcast. I'm pim Fox. Along with my co host Lisa Abramowitz. Each day we bring you the most important, noteworthy, and useful interviews for you and your money, whether you're at the grocery store or the trading floor. Find the Bloomberg p m L Podcast on Apple Podcasts, SoundCloud and Bloomberg dot Com. A rally in the shares of Tesla after the company reports
his first quarterly profit and a positive free cash flow. Uh. Here to tell us more about it is David Coudla. He is, of course, the chief investment strategist, founder and chief executive of Mainstay Capital and Bloomberg Markets. Brought to you by Commonwealth Financial Network, the number one r I, a broker dealer that JD Power has named highest and independent advisors satisfaction among financial investment firms five times in a row. Learn more at Commonwealth and dot com and
we turned out to Mr Coula to learn more about Tesla. So, David, are you a believer or are you still skeptical about Tesla? I am still skeptical skeptical about Tesla, and I am was very excited about the news yesterday very excited about the rally and after hours trading. Unfortunately, I was only able to short the stock at a high of three twenty one. Today. Maybe I'll have another chance to short
it higher. It's trading about three twelve now. Um. But you know, we we expected with yearning announcement pull ahead, we'd have some good results, and we did even better than expected. But it's about the sustainability of those results, which we don't think they could maintain, and all that they did in the third quarter to generate these great results and as good as they are, best quarter by
far in two years. Uh, you know, everything negative cash flow, negative, earnings negative in this whopping quarter and the stock is trading at three eleven. Yeah. Well, actually I was going to just say, what is your target? Because I'm looking right now. Bank of America, Mary Lynch. Their target is two hundred dollars underperform. Goldman Sachs target to sell. Cowen
price target to fifty underperform. What's your price target? Our twelve month price target on the stock is one eight, and we think that longer term, the stock has to settle somewhere, uh, down between a hundred and a hundred and fifty and we and we say that just compare to stocks, compare to automakers general motors trading at a PE of about five or six. And if we take this number and extrapolate it a number which we don't
think they can maintain in terms of earnings. UH. Going forward, Tesla is trading at would be trading at a price to earnings multiple at forty to fifty times, which is higher than any automaker anywhere in the world. And you know, we know that as we go forward, they have a debt repayment that Elon must said in the call last night would probably mean a flat you know, no earnings in the first quarter. They've got a Model Wide to fund, they've got a China Giga factory to fund, They've got
other operations to fund. And we know, you know, when you pass through the numbers, UH, there was a little bit of accounting tomfoolery to to uh, to make a good number. Elon Musk has been managing this company, headlined to headline. In the second quarter, it was about being able to say they built five thousand vehicles in one week. They only average a little over four thousand Model threes.
They only averaged a little over four thousand model threes per week in the third quarter, after hitting that five thousand a week benchmark. Now he's got the headline of this great quarter. Um, you know, are our bare thesis is meant like some bears on on Tesla going bankrupt.
It's just that it's someday that the stock comes down to reality and trades closer to where other automakers trade, even if it is a sustainable business and it's not going to be at three hundred or three fifty or four hundred dollars a share, how do you respond, David, to those investors or even those analysts who say that
Tesla is not just an automobile company. Tesla is a technology company, and it will expand its offering to not just include automobiles sold through their own dealerships, but an attempt to lease automobiles for rides sharing or to compete against Uber and Lift, and also to provide charging that
would really change the way people interact with their vehicles. Right, So, uh, I understand that that thesis that both talked about, But we've got now a ten year old company that drives more than of its revenue from selling automobiles less than ten percent of the revenue comes from those other businesses, whether it's solar panels or energy storage or UH solar roof shingles, all of those those other business activities in
the energy division and solar divisions of the company. H As we look forward into the future of mobility, there is this assumption and Elon Musk talked about it last night in the conference call. There's this assumption by the Tesla bulls that that Tesla will just own the future of e V it will own the future of autonomous, it will own the future of ride sharing, it will own the future of robotaxis and autonomous Weymo is recognized
as the industry leader UH. You know General Motors when when UH, When UM soft Bank UH passed on an investment in Tesla, they made an investment in General Motors Cruise division. When Honda, Japanese automaker wanted to look for their next generation of electric vehicle battery architecture, they bought it from GM. When they wanted to team up with somebody to work on autonomous, they did with GM. So
there are a lot of competing technologies out there. I know there are those faithful UH people, followers of Tesla, but the future is going to look a lot different than what they might think and maybe what Elon Musk might might be preaching. David Coodla, thank you so much for being with us and sharing your views. David Coodla's founder, chief executive officer, and chief investment strategist of Mainstay Capital Bold call shares below two hundred and the next twelve
months interesting to see. Right now shares up eight point four percent, trading just below three huh actually right now nearly three hundred and twelve dollars to share. There has been a report in the New York Times about President Trump's phone, his cell phone, his personal cell phone, uh, and the fact that he continues to use it and it makes him susceptible to hacking. He has denied this, so has the Chinese government. What do we make of this?
I don't know, but Clint Watts probably does. He's senior fellow at the Foreign Policy Research Institute, also senior Fellow at the Center for Cyber and Homeland Security at the George Washington University. Thank you so much, Clint for being with us. So what was your impression of this particular story? Do you believe it? I want to say no, but every time I say no in a story like this, it turns out to be a yes. So I think there are some important things in the article um to
think about. And one was the notion that the Chinese government essentially identifies friends of President Trump and then goes to influence the friends to tell Donald Trump and his friends what to think about different issues. And whether that happens on a cell phone intercept or in reality through business associates, this is a very adept influenced strategy I've
also seen. I think this is actually the second or third story that I've seen about the president's cell phone maybe not being secured or used in a secure way. If you remember back to the start of the Obama administration when President Obama was addicted to his BlackBerry, you know this has come back to the two cousin eight, and there was a lot of worry about how they would secure it. I think they eventually convinced him to
not use it because of the security issue. I'm not sure that that sort of convincing has been done in in the White House. And and one thing just tangentially is we've also seen a White House where a lot of aids, a lot of people that work in the
White not S are recording each other. So every time I have doubt about these stories that we would have on secure lines that could be intercepted, I do find uh that there are users in the White House of cellphones uh, making recordings, uh, using things sort of in a loose fashion, which could could lead to something being insecure.
So I'm not convinced one way or another yet, but I think the approach, whether it's intercepting a cellphone conversation or trying to influence the president through his business associates, uh,
that I think it's very true. Clint Watch, Do you believe that authorities will intercept those individuals or individual who is responsible for those packages containing crew pipe bombs and envelopes with white powder that were addressed to the Clinton's at their Chappaquad, New York home, or to Barack Obama in Washington, d C. Or indeed John Brennan att CNN New York Studios. Yes, I would actually expect him to
do it fairly quickly. Um, if you look at the packages they intercepted overnight, it seems like that they know what to look for. They've gone through the US postal system and been able to identify other ones that have been distributed. This gives them very strong leads to go back to where was the point of origin for these packages when they were disseminated. The other thing that's interesting about to ask this case as opposed to the last
reason one, which was Austin. If you remember we had bombings in Austin, this show is a very weak delivery system. You know, there wasn't much reconnaissance done and the packages are are rendered to law enforcement and they're not exploded. This gives you tremendous amount of human forensics to look for. You can actually look at how they were constructed, if they had ever maybe tried to test these before. And so I imagine right now there's actually quite a bit
of evidence. I think it's ten packages that I have seen have been intercepted or picked up. There's they've been routed to UH targets to make sense based on UH certain ideological mindset. So they're going to you know, descend on that fairly quickly. I think they actually have a lot of evidence to go on, as opposed to some like in the Austin bombings back in March, when the devices are exploding when they are are delivered you know, directly by the assailant or set up in an I e. D. Fashion.
That's much tougher to go on. So Clint, do you have any sense of why the packages didn't explode and whether they were intended to explode or more intended as a warning. Yeah, just looking at it, you know, just from the pictures I've seen. Usually look for a few things. One, what is the actually the explosive material, and if this is mostly black powder from what I've heard, or or other things just packed into a pipe, that is usually
your least sophisticated. If you remember back to the terrorism era with al Qaeda and the Zazi case for example, we were worried about peroxide based explosives. Um plastic or military grade would be even more sophisticated. But the other part of the device with the triggering device is that a remote that needed pressure debtonated. None of these went off, which means these could just have a device trapped to the outside that never could have you know, detonated the
device at all. What we do know those these were explosive devices, That's what you know. We've seen that from several reports now and that they could have exploded. So I think the danger is there. I think the signal has definitely been sent, but it's not the most sophisticate,
sophisticated bomb maker that you might encounter. Clint, I'm wondering, from your experience in the U. S. Army and as an FBI Special Agent on Joint Terrorism, I'm just wondering, do you think that the risk from domestic domestic terrorism has increased more than it has been in recent years. I don't even think it's increased more now. That is definitely the case. Domestics should be our main focus as opposed to international. But even going back about six years,
you could see this train coming. If it wasn't for ISIS, and they're sort of spectacular attacks, success attacks overseas um rallying a lot of Americans to join online, we would probably be more focused already on domestic extremism. To me, it's is far outpacing international extremism. UM. That doesn't mean, you know, in this case, we couldn't. This could be an international extremist for some reason, trying to cloak themselves. I think that's unlikely. Uh. And so just based on
the targets and impact. It looks like it's it's towards domestic extremism, but we should also look at a sort of a wild card hypothesis too, which is, if you want to create panic in the United States, particularly in these very divisive times of an election period, it's also an opportunity for a foreign government UH an intel service to create a provocation which stirs peer and panic in
the audience space too. I think that's highly unlikely, but we shouldn't entirely rule that out, and I'm sure that's what the invest investigation the FBI is pursuing right now is trying to determine. Clint Clint Watts, Thank you, Senior Fellow, Foreign Policy Search Institute, also Senior Fellow at the Center for Cyber and Homeland Security at the George Washington University.
You can follow him on Twitter at Selected Wisdom, and his most recent book is Messing with the Enemy, Surviving in a Social media world of hackers, terrorists, Russians, and fake news. Yesterday Wall Street hated big Tech. Today it loves it, and we're looking at green on the screen, led by Twitter shares up nearly eighteen percent after reporting earnings that beat expectations. Amazon and Alphabet parent company of Google.
Such a report earnings after the bell, but those shares also climbing higher up give or take about four percent. Scott Kessler joining US now head of equity research for cf are, a Research in New York. Scott, let's just start with Twitter because we actually have data to look through. Can you talk about how they outperformed and what this means about sort of some of these big tech companies and social media companies being responsible when it comes to
having members that count or users that count. Thanks. Yeah, Um, look, I mean when you see a stock like this moving in by the way, I mean, Twitter is no stranger to post earnings um volatility. I mean it's a stock that moves quite a bit after their report results. Um. This time, it seems they are performed pretty nicely. I think most notable was the revenue increase, which was far
above the consensus. They reported about seven fifty eight million dollars in revenue and folks were looking for about seven million dollars in revenue. And I think there are a number of factors that contributed to that, but most obviously as they're continuing to focus on their strategy of health on the platform as well as providing a good experience
for both users and marketers. And then in addition to that, I think we would be remiss if we didn't acknowledge that they might have been benefiting to some extent from some of the challenges that Facebook has been going through recently. Scott Kessler, can you speak to the video aspect of Twitter's strategy? And also as a disclaimer, Bloomberg of course provides at TikTok, the twenty four hour streaming network for business and financial news for Twitter, tell us about video
and how that plays into their future. Yeah, so him, I think it's pretty clear that UM over the last year or so, Twitter is kind of refocused its strategy to some extent, and one of the big kind of UM thrust for them from a growth perspective is video. So they highlighted UM a number of UM new agreements with respect to their Live initiative, and their live initiative is you know, really at the core of a company is about which is really about UM getting people information
and content exactly when they want. If you use a search engine, if you use UM some type of news portal, you might have to wait until it's surfaced with an algorithm or someone can actually report on it. Um. Twitter, I think for a lot of people is really the go to source when it comes to breaking news, and so they've really capitalized on that by um, I think focusing on video as an opportunity, and they've done well.
They've signed a lot of agreements, I think importantly though, they've gained some traction and you can charge more for the video advertising than the run of the mill um advertising that Twitter might have been uh, you know, involved with predominantly over the last number of years. All right, Scott, Let's shift for focus a little bit to Amazon and Alphabet both expected to report earnings after the bell today. Amazon shares up nearly fift year to date, pretty massive run.
Do they have to actually know that they're able to generate a big profit this time or do people still not care? You know? What's interesting about these companies? And I can put everyone from Amazon to Twitter um in this kind of bucket of companies where people absolutely want to see the growth. But growth is by far um the most important thing. But then when you can throw in um profitability or significant profitability, especially when you might
surprise people, and I think Amazon has done that. I think Tesla did that yesterday. I think that the magnitude of Twitter's beat was pretty significant. Even a company like Microsoft that reported yesterday, they're upside in terms of the UM revenue and earnings numbers versus expectations. Those give people confidence and that's really what I think a lot of
investors are looking for right now. Scott Tesler, do you believe that Amazon, with its variety of revenue streams, whether the Amazon Web Services or it's hardware sales, it's online offerings, and of course the actual store itself, do you believe that Amazon is set for another round of growth? Well, Pim, what I can say is, um, we have another team member here to Nomobile who covers Amazon, and so my
thoughts on the company are more broad. But I think it's fair to say, and we've been positive on the stock for UM years at this point. Um, Yes, there are a lot of levers for growth. UM. They seem to be doing a very good job at moving into new categories. But I would also say that there are competitors everywhere and they're looking to take share from Amazon. I think in the court e commerce market it's pretty challenging and it's becoming challenging and some of the cloud
services offerings as well. But there are other areas that they're moving into where they're the upstart, they're kind of trying to take share, and so it'll be interesting to see how that plays out in the context of what they report later, especially from a cost and expensive perspective. Everyone's looking at UM cost going up because of UM the US Postal service contract and UM increasing expenses related to that. All right, thanks very much for spending time
with us. Scott Kessler is the head of equity research for c f r A Research, and he can be followed on Twitter at Kessler c f r A. I'll just say that where the tech companies go is really where the market is probably going to go in the near term. Anyway, they've been the real driver, right so if these are disappointing earnings, it'll be an interesting day. Right now, though shares a Twitter higher by more than seventeen per cent. You're listening to Bloomberg Markets. I'm pim
Fox along with my co host Lisa abron Woods. We are broadcasting live from the Bloomberg Interactive Broker's studios. Brian Eggar joining us now Senior Gaming and lodging analyst with Bloomberg Intelligence to talk about his experience buying a ticket to win one point six billion dollars in the Mega Millions competition that was drawn Tuesday night. Did you win? I did not win. That's why I'm here today, as I explained to him. But with the one out of chance,
would you have? I don't know if I would have quit, but my sense of urgency might have might have been modified. I'm so glad you didn't win, because we're so pleased to see you. So let's just talk about how much attention both this as well as the record powerball drawing that will occur Saturday night, how that's brought to the
entire lottery industry, and who's benefiting from that business wise. Sure, so, there is a bit of a trend the watery operators that basically tighten y odds somewhat, which brings in more play, results in less frequent but much harder jackpots, and that in turn attracts more lottery ticket sales. And watery ticket sales for multi state games have grown in about a four and half percent, Ray Brannam over the last number of years. Brian, the companies behind this technology i GT
International Game Technology and Scientific Games. Right, this is basically a duopoly because there's been a lot of consolidation in this industry. Yeah, that's true. I g T is nearly eight of US watery sales. Side games is about twelve percent. There's a company called Intra lot that's tem percent. But you're absolutely right, it is effectively duopoly. Okay, so it's just the states. Are the companies that run the lotteries for the states or the duopoly that make the money.
But are there any other companies that sort of benefit as people get into the mood to plunk down money that they may most likely will never see again. So the way, well, there's the states themselves, if you will get South Carolina with a big winner or New York State. Basically, thirty cents on a dollar spent goes to various state
education funds. The lottery companies themselves basically get a small percent one or two percent of the lottery ticket sales in return for basically either running these facility management contracts or a lottery management agreement. So the lottery players do get a piece of the action, if you will, when people buy tickets. Brian, is this also a case of being able to adjust the odds. That is something that happened back in two thousand, fifteen and seventeen the Powerball
and Mega Millions lotteries slightly tighten the odds. I mean, it is true that the resulting higher payouts and less less chance of winning results in a little more excitement, more media attention, and that does result in an elevator level of ticket sales, which, if it's a secular trend, would benefit UM, the I D T s and side games of the world. You know, I gotta say, do you buy lottery tickets? Him? Do you buy lottery tickets? Brian?
On a regular basis? On a regular basis, I do not. Um. Do you know that two thirds of Americans gamble and that last year they spent nearly seventy three billion dollars on traditional lottery tickets and that is equal to more than two hundred dollars a person. Is there evidence that people are more likely to increase that amount if the total jackpot is bigger but they have fewer chances? In other words, is this like a get rich quick kind
of scheme? Or is there enjoyment and sort of you know, see what you get chances if you get ten bucks, great, if you get one out of three hundred and three million, that's correct, So it's power. What happens, um is that although the jack pots are quite large and the odds of winning become infinitestinally small, nevertheless that the headline of that jackpot size and the associated excitement does bring in
a little bit more play. And I think that's exactly what the lottery operators, as well as the wattery equipment suppliers White to White to observe. And is it worth noting that the companies behind the lottery and gaming and slot machines I G T and Scientific Games, these are international businesses, the internationally you know. I G T is actually fifty owned by an Italian conglomerate, the Augustini, and they get a large percentage of the watery business in
Italy itself. And look at I G and Scientific Games. They age get about their business from kind of the North American lottery business, and of that a certain percentage goes to these multi state draw games which have become ever more popular. Yeah, you know, I'm gonna be a Debbie downer here for a second. But the sort of traditional belief is that lotteries are taxes on the poor. That's sort of something that a lot of people will say because people who are lower income are more likely
to buy tickets. That is sort of the feeling. Is that true? I mean, that regressive scenario maybe maybe accurate. I think one one thing I have read is that as the jack bots get larger, uh, some of more affluent individuals would not be drawn to a smaller jackpot, might be more inclined to play. That being said, the odds, of course at one out of three hundred point to five million to one are not exactly making that a rational expectation of winning. But nevertheless, there is a little
bit more excitement in the jackpots attract attention. So I think he's just said yes, but it's everybody. And honestly, I mean I know a lot of people who of all types who bought for this particular And there are forty four states that have watteries and and basically in terms of the contracts I g. T s and twenty five of them, and scientific games is about ten of them. So it is, with the exception of four continental states, a very popular activity. Well, we're very glad you didn't win,
because We're very glad to have had you here. Brian Edgar is our senior Gaming and Lodging analyst for Bloomberg Intelligence, telling us all about the one and a half billion dollar Powerball winner and the technology behind it. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
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