Tesla announced Q2 2022 earnings after the close.  Results were mixed, with an adjusted EPS of $2.27 and revenue of $16.93 billion.  The electric vehicle maker also shared it plans to hit its delivery targets for 2022.  Sean O'Hara, President of Pacer ETFs, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Tesla Reports Rise in Quarterly Profits in Q2 2022 Earnings 

well, ken, I do want to bring in our markets guest as well, joining now is Sean Ohara president of Pacer E T F, which does have an E T. F with holdings of Tesla in it. Sean thanks so much for coming on the show. Let's start by getting your reaction to Tesla's results. What do you think? Well, thanks for having me, you know, pretty I guess a pretty impressive result on the top line in terms of the revenue number, a little bit concerning on the margin side. Um, and a little bit concerning on, you know, the potential future snags with the supply chain. Um, you know, Tesla's stock, you shouldn't probably bet against, I mean every time you bet against it, you get proven wrong. Um, it is off quite a bit from its all time high and if you look at like a two year trend line down and it's probably in line with or slightly below where it should be based on its current growth rate. So, um, I think it was a pretty interesting quarter, you know, the big challenges you just mentioned coming into this is that the input costs are really a challenge. I mean, you have a lot of, you know, so rare earth materials and commodities that go into the manufacturing of these batteries. Um, and the chips that go into these cars that are going to continue to be a headwind for, for Tesla going forward. Look Tesla, we know is now a component of the major indexes Sean, which many investors probably have exposure to, in some capacity, whether that's in their retirement accounts or brokerage account via mutual funds or E. T. F. S as the president of an E. T. F. Company. How important is the health of Tesla, its stock price performance true. The strength of these overall major indexes? Well, I mean it's a great point and people should be aware that, that these major indexes that we track and, and we talk about and we report on on television are really heavily weighted to a small group of high market cap stocks. And so they can tend to distort what's really going on in the broader market. Um, if those, you know, high market cap stocks are doing well, they can drag the overall index up, even though the rest of the names aren't going up and vice versa is true. They can drag the major indexes down if they, you know, suffer some poor performance. And so I think investors need to be aware of how heavily attached they are and what they, what appears to be a broad based investment in an index, how how attached they are to a handful of names that have these mega market caps. And we're sort of seeing that this year, the big, the big mega cap names are really suffering a major multiple contraction. Tesla is one of those names that suffered through that as well as, you know, amazon and google and and Apple and so forth. And so, you know, in those periods of time, you need to be looking at other places throughout the indexes to find pockets of opportunity. Uh sean one of the other questions that I have for you is we've seen a pretty nice rally, right? Is it a relief rally? Have we put in a bottom at the S and P. 500 more than 8% from its june low technically out of a bear market right now, down about 17.5% from its high at the start of the year. What's your take on the overall state of the staff market? I think it depends on what we hear on the earnings front going forward. I'm not that worried about this particular series of earnings. You know, I think we're still you know, solidly beating on the upside of a vast majority of names. What I'm worried about is the guidance going forward and how persistently damaging higher interest rates and inflation are to the overall earnings of companies. And so that's what I would be looking at. My my guess is, or my hunch is that, you know, we're gonna see a little bit of a slowdown in earnings. So we've seen a pretty major multiple contraction which happens every time interest rates and inflation rises, sort of an inverse relationship with P. E. Multiples. Um If we see earnings start to slow, I think you'll see some more multiple contraction, but I would say we're probably nearer to the bottom than uh than we were then to the top if you will. So I think there might be a little more downside throughout the summer and then into the fall I would expect that things would have probably already bottom down and start heading back up in the right direction. Well in this environment sean, what would you advise investors do? Should they be looking to get in at these levels? Should they be staying in cash or maybe even considering shedding some of their holdings? If you do think that the market could fall a bit further from here. Well, so if you said your time horizon was five years, I think you could pretty aggressively by this market. You know, there's this little saying that the advance is permanent in all declines are temporary. So you're buying stocks off of their all time highs. And so if your time horizon is long enough, then I would say you could be, you know, a buyer in these markets if you're concerned that you might chicken out because of the volatility or because of some of the downside pressure, then I would say by higher quality companies that haven't been subject to this multiple expansion that that reversal is hurting and by companies with high free cash flow and free cash flow yields because you're getting a current return in this inflationary environment and this higher interest rate environment and lower your overall portfolio. Pe there were being a little bit more defensive in this market. All right, Sean Ohara, president of Pacer A. T. F. Sean, thanks so much for coming on the show.