Dan Ives, Managing Director of Equity Research at Wedbush Securities, joined Closing Bell's Kristen Scholer to discuss Tesla's Q2 results, as the EV maker looks to hit its 2022 delivery target despite multiple shutdowns at its Shanghai factory.

Closing Bell

Tesla Stock Jumps After Earnings Beat

the news is closing bell. Everyone Kristen schiller down here on the floor of the stock exchange and Tesla reporting those second quarter earnings yesterday after the market closed, exceeding earnings expectations. A little bit of a miss on sales though. But the big question now is whether the E. V. Maker will hit its 2022 delivery target with some optimism Coming from the company in this latest report. Clearly investors liking what the company had to say the stock's up 10% today following the release and joining me now is the resident Tesla expert himself dan Ives, managing director of equity research at Wedbush Securities dan. Always good to see you. What is this report signal about the strength of Tesla's business. Look, I mean, Armageddon expectations coming in but because of the april and may shut down in china that took about 70,000 units based on our estimates out of the quarter. But I think what the street liked is margins held in better than feared in terms of auto gross margins And the drum roll. The big focus was really reiteration of 50 growth for units second half. It's going to be a ram. But if you look at the run rate that they're on, it could be two million going in 2023. So that's that's what the street like. Remember many test investors are willing to sort of see far through the tree as you know, as they look at this company. So definitely a 10% point gain on the stock dan good news today. There's no arguing with that. But we did actually see those gross margins Decline in the latest quarter by several percentage points from the first quarter down about roughly 0.5% from the same time a year ago. What was behind that? And do you think the Tesla can recover some of those lost margins in the current period? Yeah, well two Q was it was an ugly quarter, especially because of china because when you take out that china shut down, I mean they probably would have beat original expectations, but that was a big part of the margin issues As well as also the build out with Giga, Berlin and Austin because those are gonna be two keys as we go in 2023. So this is sort of a, I'll say it's a one quarter past now you have to see it start to ramp especially as we go into year end and in 2023 that would be what I call the debatable point between the bulls and the bears. No, we believe they can get there, but, but importantly, and I think this is really not just for testing, but actually just a broader, you know, across the food chain hearing Tesla and must saying that demand hasn't softened. I think that was music to the ears of investors that were really nervous, not just going to Tessa, but just going into overall earning season, especially on on auto and tax, here's another question for you dan. Just this week preceding Tesla's results. We saw other legacy automakers, General Motors for Volkswagen all unveiled new electric vehicles themselves is more competition, good or bad for Tesla. You see, I'm I don't view it as bad because my view is where we are in E. V. It's still the first inning of this all playing out. And I think there's been multiple winners that we've talked about. I I do believe four will be a winner in terms of f 1 50 a lot of stuff are always been doing and you're gonna have VW is going to be a winner as well. I think gm obviously has a lot of success potential on the horizon as well as, you know, some of the pure plays, but it's the biggest transformation to the auto industry since 19 fifties. I don't view it as a zero sum game and I know some do, but I continue to view it in terms of the E. V. Environment, it continues still to be Tesla's world and everyone else is paying rent but a rising tide is gonna lift a lot of boots here and you're gonna see a lot of automakers special out of Detroit Star Wars well, another question um that I have is clearly we're starting to see an economic slowdown dan questions as to whether or not we're in a recession, prices are rising across the board and consumers are increasingly digging deeper and deeper into savings to actually just get by with prices like shelter or gas and food really high right now, does that hurt the overall demand for an electric vehicle? Or do you think that electric vehicles can still continue to see an influx of new buyers even amid the current economic situation? Look, I think on the edges you're still, you're gonna see demand destruction because you know, Tessa is not, you know, they're not immune from what everyone else is seeing in terms of tech auto cap packs as well as even on housing. So, a recession potential on the rise and it's going to hurt them I think. But but when you look at overall demand, demand still outstripping supply by about 15% based on our estimates? And I think that's really the key here. They get hold margins in and then you start to get Berlin and Austin ramped up, Get on a two million run rate. I mean, this is a different story a year from now than it is today. And I think that's when investors see in the quarter, but they're gonna have to execute. And if any sort of covid shutdown in china, that's the elephant in the room that could hurt not just the Tesla story, Apple semis and really the whole tech food chain dan, can you make the case that electric vehicles priced higher by thousands of dollars, sometimes tens of thousands of dollars than their traditional gas powered vehicle counterparts are wise vise and investments in this environment. Well, I think it depends on gas prices, right? I mean, when you go to a pure economic decision, I mean, there's a certain break even, you know, as you go out called 345 years depending on how much you drive. But that's why like when, when you look at $3 gas or a $5 gas, it changes the decision. But then also tax credits are significant in terms of where that ultimately goes to an E. V. S. But especially with the sweet spot for E. V. S, it's not gonna be 70 $80,000 TVs. It's really that 40 $50,000 price points. That's the golden goose where everyone wants to get. And that's also why This is the drum roll to afford in the F150 next year because I think that's really gonna be a seminal release just across the board for the E. V. industry. All right, dan Ives always good to get your take, especially after a big day with Tesla reporting Dance, the managing director of equity research at Wedbush Securities