Closing Bell - Closing Bell Overtime: Tesla & Alphabet Kick Off Big Tech Earnings 7/23/24

Episode Date: July 23, 2024

Tesla and Alphabet reported earnings and the stocks moved in opposite directions. We have you covered from every angle for these critical stocks, from instant analyst reaction to a Tesla former board member. Plus, reports from Texas Instruments, Visa, Mattel, Seagate and Capital One.  

That's the end of regulation. Enersys ringing the closing bell at the New York Stock Exchange. Q32 Bio doing the honors at the Nasdaq. Stocks trading in a tight range. Small caps broadly outperforming, up more than 1% ahead of a major hour of earnings on the way. Other averages giving up the gains. That's the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And one of the most consequential afternoons of earnings season gets underway now with reports from Alphabet, Tesla, Visa, Texas Instruments, Mattel, Seagate, and more. We've got an all-star panel ready to

break down Alphabet's results. Plus, a cannot-miss bull bear debate on Tesla with ARK Invest's Tasha Keeney and Guggenheim's bearish analyst as well. And a conversation with former Tesla board member Steve Wesley. And as we await those earnings, let's bring in our panel. Bespoke Investment Group co-founder Paul Hickey and Wedbush Securities Managing Director Dan Ives. Dan has an outperformed rating on both Alphabet and Tesla. Paul, I'm going to start with you here because we did. We faded the gains for the major averages.

The small caps, though, a more than 1% move. This is the ninth time we've seen this in 10 sessions. But now the focus is turning to mega cap tech with these earnings beginning here. So can this great rotation hold? How much hinges on what we hear in the next couple of moments? I don't think a whole lot will depend on what happens in the next few moments, but I do think this rotation into small caps, I think the last week people may have started doubting it a little bit. But what you saw is you saw the Russell close at its most overbought level on record,

massive outperformance versus large caps. Every time you've seen that in the past you've seen russell take a break average three and a half percent decline over that next week so i think you're going to continue to see a broadening out of the market you don't see moves like that um that are head fakes usually so i think going forward small caps can do well and can and and even outperform that doesn't mean these mega caps have to fall apart, though. I just think that there's greener pastures, so to speak, and even greener than Dan's jacket. All right. Well, speaking of green on the screen, Texas Instruments, those results are out. We're going through the numbers, but initial reaction in the stock is higher. It's up about 2% right now.

Dan, I mean, we talk about Tesla, when we talk about Alphabet, they have a few things in common, self-driving and autonomous vehicles. And I realize that's not a big part of Alphabet, but also AI. And of course, Alphabet is out now too. So we're going through those results as well. What are you watching for in these reports? Look, I mean, this is really right now all about cloud and the AI revolution. And I think when you look at what we see with Alphabet in terms of those cloud numbers, I think what we'll see with Microsoft next week and the CapEx dollars, that's what's fueling the AI revolution. Paul talked about small cap, stronger, getting stronger in tech. I believe

this is an earnings season that validates the AI revolutions here, 9 p.m. in a party that goes to 4 a.m. Pardon me for this moment. We got to get to Seema Modi, who's got the Texas instrument earnings results. Seema. John, the analog chipmaker reporting second quarter earnings, which came in above street expectations at $1.22. The estimate was for $1.17. Revenue coming in line with street expectations. And the third quarter guidance, which has been a big topic for the semiconductor companies, coming at the midpoint of the range. We're looking at shares up about 5% here in overtime. Elliott Management, the company did take, the activist investor did take a $2.5 billion stake

in the company in May. On the earnings call, John, at 4.30 p.m. Eastern, we'll be looking to see if Texas Instruments responds. And Willie talks about free cash flow, which is what the activist investor is pushing for. Again, we're watching the stock here higher in overtime. Thank you, Seema. Tesla's results are out. We're going through those.

We're ready with Alphabet's those. Steve Kovac has those numbers. Steve? Hey there, John. Yeah, it's a beat on the top and bottom lines here for Alphabet. We have EPS coming in at $1.89. Street was looking for $1.84. As for revenue, that was a slight beat, $84.74 billion. Street was looking for $84.19. And then let me give you some more bonus numbers here. YouTube advertising revenue, a slight miss of expectations here, $8.66 billion. miss of expectations here, 8.66 billion.

Street was looking for 8.93 billion. And then Google Cloud, this is a big AI demand indicator here. Another slight beat in this segment. Google Cloud revenue, $10.35 billion. Street was looking for 10.2 billion. John Morgan, I'll send it back over to you. All right, Steve. Thanks, Paul. On Alphabet here, this is CFO Ruth Porat's last earnings call as CFO. She's moving into a president role. Anat Ashkenazi is coming in from Lilly at the end of the month. Ruth Porat was in place as CFO for nine years, came from Morgan Stanley. The stock is up nearly 7x since then. What do you think the legacy is here and that they're going to a scientific company for the next CFO, not a bank? Well, so, yeah, so they're a high tech company. They went to financial services first and now they're going to health care. So

they're going outside of their lane and, you know, which served them great the last time around. I think in many respects, though, what she did at Lilly oversaw a massive investment and rollout of the commercialization of all the diabetes and weight loss drugs. That's a multi-year effort, and to guide that through into fruition. And this similar respects what this AI investment revolution is going to be. There's a lot of investment, and then there's going to be bringing that out more into commercialization and monetizing that. That's what the market is looking for, the results of all this investment. So I think they seem like two completely different paths, but there are some similarities there, I think.

Okay. Dan, I want to get your reaction to what we just heard from Alphabet. You got revenues up 14% year on year. It's driven by search. Cloud, for the first time, exceeded $10 billion in quarterly revenue and a billion in operating profit as well. We know it's still a small piece of the pie, but one that gets watched very closely by investors. What did you like? What didn't you like so far?

I thought it was a Goldilocks quarter. I mean, cloud beat, that's important in terms of now really they're narrowing the gap versus Microsoft and I think extending versus Amazon. You look at search, that's in line with all of our advertising data and surveys that we did throughout the quarter. This is a company that's now gotten back its mojo. Still think many investors are underestimating where this goes. If you're a bull, you like these numbers. And I think to actually just put further fuel into that sort of bull thesis that I think goes in 2025. OK, we got Mattel earnings out. Kate Rogers has those numbers for us. Kate. Hey, Morgan, a mixed quarter here for Mattel. EPS beats 19 cents adjusted better than the 17

cents estimated by analysts. Revenues, though, a miss, 1.08 billion, a little lower than the 1.1 billion that the street was looking for. The company reiterated full year guidance. They're also highlighting significant gross margin expansion. And the company's CEO said in a release here, Mattel is well positioned for the second half with new product innovation and increased retail support. We're in a strong financial position to execute our strategy to grow our IP-driven toy business and expand our entertainment offering. Stock down around 7% year-to-date. As you can see, it's up just over 1% on this earnings report. Back over to you.

Okay. Kate Rogers, thank you. Don't miss Jim Cramer's exclusive interview with Mattel's CEO. That's coming up at 6 p.m. Eastern on Mad Money. And now to Tesla earnings. Phil LeBeau has them. Phil. Notably lower than the growth rate achieved in... turn on Mad Money. And now to Tesla earnings. Phil LeBeau has them. Phil. Hey, John, thank you very much. We have the numbers for Tesla. And the reason you're seeing a little bit of pressure right now is that this is a miss in the bottom line. The company earning 52 cents a share adjusted. The street was expecting 62 cents a share. Revenue coming in better than expected at twenty five point five billion dollars. The estimate on the street was $24.77 billion. We're going through right now in terms of what the company is saying for the outlook,

if you will. The only thing they're saying is language that we have heard before that for 2024, the volumes may be notably lower than what the company has established as its growth rate. And we've heard this before from the company. So the question becomes, they delivered 1.8 million vehicles last year. The estimate going into this report was 1.82 million, which would mean a big second half of the year. If they're not going to hit that, they're not giving us a number at this point. But clearly, that's some of the pressure that you're seeing on shares of Tesla.

I think the bigger indication of where these shares go will come during the conference call, which is at 530. That's when we will hear perhaps more about robo taxi plans as well as plans for a lower priced model. That's where people will be focused on what happens with Tesla. And I think that's where you see the direction of the shares moving. Right. Can't put too much on that initial move. Phil, thank you. Dan Ives, not used to seeing a top line beat and a bottom line miss makes me worried about gross margins. How do you feel about that? Yeah, look, they're going through clearly margin stabilization, but that's the important thing. Is this sort of the bottom?

Do we have a bottoming process in terms of price cuts and now see stabilization there with demand that we believe turning around in China? And as Phil talked about, this is a company now that's gotten back, I think, really the momentum in terms of the China story. Price cuts, I think 95%, 98 percent are in the rear of the mirror. And you look at this quarter, what I believe on the conference call, it's going to be a much more confident Musk.

Talk about demand second half. Robo-taxi day, we believe, you know, call it early to mid-October. A lot more things now, I think, going positive for Tesla than it was even three months ago where a New York City cab driver was bearish in this thing. All right. Well, we've got Visa earnings out. Leslie Picker has those numbers for us. Leslie. Hey, Morgan. It's essentially a match with estimates on the bottom and top line. We're seeing $2.42 per share on the EPS side. Special items in the quarter included $118 million related to the release of the indirect tax reserve previously recognized in fiscal 2021, $67 million related to the donation of investment

securities to the Visa Foundation, as well as $10 million for litigation provision. And that is associated with an interchange multi-district litigation case that Visa is undergoing. On the top line, the company reporting for the third quarter, this is Visa's third quarter, $8.9 billion in revenue. It's a slight, slight, ever so slight miss relative to consensus, but about 10% higher on a year-over-year basis. And then on an operating expense standpoint, coming in at $3 billion in the quarter, that's a little bit higher than analysts were expecting there. You can see Visa shares down about 1.8% in after-hours trading, guys. All right. As we digest that, Seagate earnings are out as well. Let's get to Pippa Stevens with those. Pippa. Hey, John. It's a top and bottom

line beat for Seagate during Q4. EPS coming in at 105 adjusted. That was 30 cents ahead of estimates. Revenue at 1.89 billion, slightly ahead of the 1.87 billion that analysts were looking for. The company did also point to an improving cloud demand environment, of course, noting that its customers benefit from its AI offerings. The stock now up 6.4 percent. John? All right. Thank you, Morgan. I think this is an interesting one. That's a big move for Seagate, that percentage in particular. And citing cloud demand, it reminds me in a way of Seagate of sorry, pure storage. Yeah. And of course, we know

that these are names where perhaps, you know, they've been beaten down a little bit. Bar was arguably low going into Seagate results. Paul, I want to get your thoughts on this, whether it's Tesla, whether it's Visa, whether it's Seagate, some of these others that we've just run through a lickety split. Yeah, so I just start with Seagate there. As John said, that's a pretty big move for Seagate, especially given that this quarter, the June quarter, they've lowered guidance the last three years in a row. And so

there was optimism that the cycle was bottoming here. And so the fact that they're more optimistic going forward and the stock seeing this positive reaction, it says those hopes were founded. And I think that's a pretty important signal for not only Seagate, but for some of the cloud providers and tech in general. Dan, I want to go back to Google parent Alphabet now. You said it was a Goldilocks quarter, but right now, pre-call granted, and they don't give guidance, but the action isn't exactly exciting, right? Does that say something about either valuations or where expectations were? Perhaps does the YouTube number leave something to be desired for some investors? Yeah, I think, look, some will fret about some of these numbers that they're going to hope maybe a little more bull case. But to me,

this story is about search, advertising and cloud. And I think if you go back three, six months ago, as you know well, I mean, everyone was so negative on the Alphabet to Google story. This is massively turning in front of our eyes. And I think you talk about M&A, obviously, whiz deal, you know, not going to happen. But this is a company now that's going on the offensive, no longer back against the wall. What Kurian's doing on Google Cloud, I think noteworthy. And I think this is important in terms of some of the parts. These knee-jerk reactions I always view,

you got to take with a grain of salt into the call. There's nothing as a bull that you look at and feel less bullish on these numbers. Dan, I just want to stick with that for a second because we are still dealing with a fallout from CrowdStrike and this outage that took place on Friday. Are cybersecurity stocks a buy here? And how much has that propelled this narrative around the courtship and now, I guess, failed courtship of Alphabet for the Wiz? Yeah, Morgan, great question, because I think now, as that marriage is not going to happen, that's bullish for names like Palo Alto, Zscaler, looking at names like CyberArk. I think Microsoft, they're going to go aggressively

on the M&A path, and so will Alphabet. I mean, I think if you look at what the Google and the cloud ecosystem, and this is for Amazon as well, cybersecurity I view as the pound the table into these quarters. ARK checks, that's probably the best subsector that we've seen in our checks. CrowdStrike, clearly a black eye moment for them, but others will benefit. And we still are bullish on CrowdStrike.

I think right now a lot worse is baked in here. I do think they navigate through, obviously, this code red situation. Interesting stuff for sure. Dan Ives, Paul, thanks to you both for joining us. Thank you. Well, we're just getting started on this packed hour of earnings. Up next, much more on Alphabet's quarter and the news of the failed deal with cybersecurity firm Wiz. And later, a bull bear debate on Tesla you do not want to miss.

ARK's bullish strategist and Guggenheim's bearish analyst making their competing cases for that stock with shares moving lower after earnings missed the mark. We've got a big overtime ahead. Stay with us. Welcome back. Capital One earnings are out. Leslie Picker has those numbers for us. Leslie. Hey, Morgan. Yeah, those shares have been a little volatile in after hours trading. The firm reporting $3.14 per share on EPS. Unclear at this time whether that is comparable to estimates. The top line, though, a very slight miss, reporting $9.5 billion in revenue there. Looking at net interest income, that was essentially in line, maybe a slight miss there as well. Same is true with non-interest income. Provision for credit losses, though, this was a pretty sizable miss relative to consensus. The company reporting

$3.9 billion in provisions related to $2.9 billion that analysts had been expecting there. There are a couple of special items as well in the quarter that did have an impact to diluted EPS, including an allowance billed for Walmart program agreement loss sharing termination, as well in the quarter that did have an impact to diluted EPS, including an allowance billed for Walmart program agreement loss sharing termination, as well as some contra revenue impact from that Walmart program. The company also citing Discover integration expenses impacting that diluted EPS by about six cents and another FDIC special assessment charge impacting by two cents. There's a quote in the release from Richard Fairbank, though, who is the founder, chairman, and CEO of Capital One, where he says regarding the Discover acquisition that the company is, quote,

all in and working hard to complete that acquisition, which will create a consumer banking and global payments platform with the potential to enhance competition, deliver compelling financial results and create significant value for merchants, small businesses and consumers. Guys. OK, Leslie Picker, thank you. Shares down about 2 percent right now. We have a news alert on Coca-Cola. Kate Rogers has those details. Kate. Hi again, Morgan. That's right. Coca-Cola announcing retirements of three of its board directors today. Barry Diller, Alexis Herman and Mark Boland are retiring from their duties as directors on the Coca-Cola board effective August 1st. Now, the three directors combined have 48 years on the Coca-Cola company board. And Coca-Cola CEO James Quincy said Coke will continue its ongoing work to refresh the board with new directors in the release.

No nominees have been announced at this time. And as you can see, the stock is essentially flat after hours on this news. Back over to you. All right. OK, thanks. Now let's get another check on Google Parent Alphabet shares currently in the red after a beat on the top and bottom line. Well, no, they're not in the red. They poked into the green about flat. Joining us now, Rohit Kulkarni from Roth, MKM, Brent Thill from Jeffries. Guys, welcome. Rohit, I'm wondering about this YouTube number. I mean, Dan Ives was saying it's a Goldilocks quarter. A lot of good here. There are beats, but 8.66 billion, that's up a billion year over year, but about a third of a billion short of what the street wanted. What does this say about brand ads and does it put pressure on

commentary on capital spending? I think you hit the nail on the head, John. I think YouTube, our checks were positive heading into the earnings. So this is a negative surprise versus what we thought they would print for YouTube. With somewhat slight acceleration in revenues, they're going in the wrong direction here. This puts a slight wrinkle on companies that rely on brand ads, and probably that would mean smaller social media players like Snap or Pinterest. So that's something to dig deeper into as we learn more about brand ads spent from Google and others coming down the pike. But overall, I think this was a fantastic quarter. We like Google here as probably the best AI player across the board. They have infrastructure, enterprise, and direct

to consumer, unlike any other company that we see. Brent, on the other side, Google Cloud looking pretty good, a little bit better than expected there. And, you know, Amazon has been looking strong lately as well. So is this strong enough? Is there commentary around that that provides some valuation help, even though we do expect for the spending levels on AI to be probably high for Alphabet overall? Yeah, I mean, Google Cloud was fine. I mean, they're contending being the number three player. They're not number one. Amazon's dominating 50% market share, Microsoft's two, and Google's the distant third. So good to see momentum. But I think, honestly, there's better momentum at Azure. There's better momentum at AWS. So the Googles have this issue. You've seen all the M&A chatter. Are they going to buy HubSpot, are they going to buy Wiz? They can't figure out what they want to do, right? They're going to buy an application company, you're going to buy a security company, they're all over the map.

So the reality is when you're the number three and you're not the number one, you got to figure out how do you reverse that? And right now, I think everyone we talk to is saying they're living in an AWS slash Microsoft world. Google is in a good spot. We're not going to take anything away, but they are not number one or number two. And in this game, those two are going to be the ones

that everyone's going to go to. Yeah, and of course, it raises the question, Rohit, about spending and how much investment is going into this new era of cloud compute, this new era of generative AI, where we know Alphabet and Microsoft are really, at least right now, sort of cast as the leaders here. It looks like CapEx for the quarter is coming in at $13.2 billion, which is about a billion higher than street expectations. How much does that matter here when investors have been focused on the halo effect of these mega cap tech names and the investments they're making and pushing out to the marketplace?

I think that's the biggest yellow flag in the print, in my opinion. The slope of the curve of CapEx, that's TBD in investors' book. Whether they exit 24 at $ billion dollars capex from the rate higher lower that's the biggest question mark and that leads a bigger question that okay over what period if you're spending about 55 billion dollars run rate capex this year then what does ROI look like and over at what period so that that adds to feel to that fire of that question that capex okay you're spending right now probably it's an aggressive move but when do we get roi so in my opinion

leave aside youtube search strength and all the other things good things going on in google that's the biggest question to get answered too all right bro hit brent thank you well after the break the great bull bear debate on Tesla. We're going to hear both sides of the trade. Love both sides. With the stock on the move following results. And check out Lockheed Martin kicking off defense earnings today, hitting a 52-week high after a beat and raise quarter, driven by demand for things like radar systems and missiles.

CFO Jay Malave telling me international demand will continue to grow faster than U.S. demand for all of these weapons systems over the coming years. You can see those shares finished up today. We'll be right back. Welcome back. Let's get back to Steve Kovac, who just spoke with Alphabet CFO Ruth Porat. Steve. Hey there, Morgan. Yeah. And by the way, this is Ruth Porat's final earnings as CFO before she steps down and hands over to her successor. Let me talk about what we heard on the call with Ms. Porat here. Capital expenditures. This is a big one as Google continues to build up its artificial intelligence capacity.

Now, she did tell me they're going to have more details about forward looking CapEx on the call. But for now, telling us that roughly CapEx is roughly going to be at or above the first quarter level, so a little bit even there. And then we also asked about the Wizdeal falling apart. No comment there, but did talk up quite a bit the Google Cloud cybersecurity products. And then we also asked about AI Search, and that's the new product launching on the Google homepage where you search and get an AI-generated answer, and how much that's contributing growth to the overall search product. No answer there, but again, we're going to hear more on the call she told us, which begins in about 90 seconds here. So guys, I'll jump back on with any updates we get out of that call. Sounds good. And Alphabet stock up about a percent.

Time for a CNBC News update now with Julia Boorstin. Julia. It's official. New Jersey Senator Bob Mendez sent a resignation letter to Governor Phil Murphy today, which was obtained by NBC News. Governor Murphy confirmed the resignation this afternoon and said he'll appoint a replacement soon. An Iowa judge is allowing a restrictive abortion law to take effect on Monday. It would prevent women in the state from getting the procedure after six weeks of pregnancy, a drastic difference from Iowa's current 20-week limit. The Iowa Supreme Court ruled last month the state has no constitutional right to abortion and allowed the law to go through. It will go into

effect Monday. And last Sunday was the hottest day ever recorded. The average air temperature on Sunday reached 62.75 degrees Fahrenheit, slightly higher than the record set last July. According to the EU's Copernicus Climate Change Service, this week could top Sunday's record as a heat wave continues around the world. Back over to you. Having a heat wave. Julia Borsten, thank you. Tesla shares moving lower after reporting earnings moments ago. It topped street estimates on revenue but missed on EPS. Free cash flow also coming in light. Looks like gross margin X credits also lighter than expected. Joining us now is ARK Invest's Tasha Keeney and Guggenheim's Ron Yovsikov. Ron, I'm going to start with you because we've been teasing it like this and I think this is correct. It's a bull bear debate here. I'm going to start with the bear,

given the print we just got and some of these key misses, including, as I just mentioned, gap gross margin, X credits coming in at 14.6 percent. You had said to us a couple of weeks ago when the RoboTaxi announcement was pushed to October that the quality of Q2 earnings was going to matter more. Your thoughts today? Yeah, I mean, I think the key takeaway looking at the numbers, you mentioned the gross margins X credits missed. But I think the key takeaway is the second derivative of the business actually isn't improving here. I think there was some debate coming out of 2Q deliveries if the quality of deliveries was good. And the reality is we see with the gross margins X credits line this quarter

missing by quite a bit that Tesla effectively bought a lot of business this quarter. And I don't really see how that change is going forward. We've already seen quite a few new promotions launched to start the third quarter. Tasha, I want to get your thoughts on these results, especially since I know ARK is a long-term investor in Tesla. And you've come on the show before and laid out the case for autonomous driving and robo taxis. But even if that is the future, it's arguably years away. So why buy the stock now? Yeah, so actually, I think, you know, when we're talking about robo taxis, this is something that will happen, we believe, within the next five years. So in fact, our five-year price target, we think that Robotaxis will contribute over 90% of the enterprise value of Tesla at that point. So I think, you know, I'm looking forward to hearing more detail on the call.

What we've been seeing from Tesla is, of course, incremental software updates. You know, they have a latest version of FSD where it's very limited and it's released currently, but they're adding the functionality to take your hands off the wheel. They said in the letter that they expect the take rate of the full self-driving software to increase based on the increased functionality that they see. So I'm looking forward to hearing more about that rollout, because I think to ignore robo taxis today is a huge mistake with this stock because ultimately it's an AI play. OK, Ron, I don't understand the robo taxi business model case. I mean, the entire market cap of Uber right now is about one hundred forty one billion dollars.. And if Tesla's robo taxis wipe out the need for Uber

and they take all of that, it's still not that much. Plus, if they're that good, doesn't that mean I don't need to buy a Tesla? And won't it be really hard to make the numbers work if people buy fewer Teslas because they can just get a robot driven Uber? Yeah, I think the argument that robo taxi bulls would make and again, where we are certainly not one, but the argument they would make is that the pie grows massively. I think the argument we would make and we're seeing this in China already is pricing comes down massively and most of that excess profit and excess margin gets competed away. I mean, right now in China, Apollo, which is owned by Baidu, to be clear, is offering rides for just over 10 cents a mile. I think most robo-taxi bulls would view

that as a very blue sky pricing scenario for robo-taxi models. So I think what we struggle with with robo-taxi isn't that Tesla can't get there at any point in time. It is the timeline, but it's also what steady state unit economics look like, because even if Tesla has a $10,000 cost advantage in robo-taxi, that's a massive cost advantage. Over a million miles useful light for a vehicle, that's a penny a mile. It's not that meaningful. So, Tasha, do people want to be driven around in really nice Tesla robo-taxis that are so high quality that they're going to pay that much for the ride? Why would robo taxi be worth more than selling a whole lot of Teslas?

Well, you know, you compare Tesla to Uber. I'd say that Uber has proven that the ride hailing market should exist and there is demand for it. But robo taxis will greatly expand the current ride-hill opportunity. I mean, I think it could be 10x or more expansion. How? Unless people stop buying cars altogether. I mean, there aren't that many more people or that many more places to go, are there? So it's not about selling individual cars. It's about the utilization of the vehicle. It's about the miles traveled on the car, and you're paying per mile here, right? So today, you know, we were just talking about China. Yes, ride hail is priced significantly lower than the U.S. in China. But in the U.S., you know, Uber is charging $2 or more

per mile. Tesla can undercut that price because it already has a lower operating cost thanks to its electric vehicle platform. Add autonomy on top of that, that really leverages that cost structure. And once you're able to lower price, you bring more people into the market. You start having, by the way, which is already happening in certain cities, young people will forego buying vehicles because they'll say, hey, I'm going to take an autonomous ride hailing network because it's actually not that expensive. And in fact, it's cheaper than me driving my personal car if I account for the all in costs. So I think that's what's really exciting here. And again, I do think that the U.S. is where we'll first see this rolling out. I do think China will be a much more competitive market.

You know, in fact, in our valuation for Tesla, we have reduced economics for that reason, because we also believe that there's a chance they might have to share with other local players in terms of the take that they get. Okay. But make no mistake, I mean, this is a market that you should not ignore here. All right. Got your bull, got your bear. Tasha Keeney, Ron Yosakov, thank you. Well, Enphase earnings are out too. And Pippa Stevens has those numbers. Pippa. Hey, John, it's a top and bottom line miss for Enphase in the second quarter. Adjusted earnings coming in at 43 cents per share. Pippa. Hey, John. It's a top and bottom line miss for Enphase in the second quarter. Adjusted earnings coming in at $0.43 per share. That was $0.05 short of estimates.

Revenue at $304 million, also short. But the reason why the stock is up is because margins were better than expected. And also, they gave guidance for Q3. They see revenue between $370 and $410 million compared to the estimate of $404 million. And for a market that's been so challenged, seeing that revenue growth for Q3 seems to be what's lifting the stock here. Shares up nearly 5%. Morgan?

All right. Pippa Stevens, thank you. After the break, is a soft landing becoming a hard fact? Well, Mike Santoli looks at what commodity prices and corporate debt levels are signaling about the state of this economy. And later, much more on Tesla's results when we're joined by former board member Steve Wesley. Overtime, we'll be right back. Welcome back. It's time to bring in Mike Santoli for a check on soft landing expectations.

Do we still have them, Mike? We do, Morgan. In fact, you can see them to some degree embedded into various market prices. Take a look at the Goldman Sachs Commodity Index. This is a three-year chart here. It's really starting to roll over. Of course, oil is by far the largest component of this. But it shows you sort of the pre-Ukraine invasion and post-Ukraine invasion. And, you know, on a little more of a short-term basis, this little downturn.

So no real goods-based push inflation working through the system incrementally at this point. That's probably a good thing. Also, why Treasury yields have managed to come off the boil. Now, if you look at corporate credit, this is something to be correlated with general macroeconomic conditions and the expectations for corporate cash flows. Here you see triple B-rated corporate debt spreads. This goes back 10 years. You see, we're pretty much near record levels. I mean, obviously, you've been a little bit lower at times and it's curled higher barely, but really showing not a lot of stress in terms of corporate credit. This is triple B, basically, where

investment grade and speculative grade debt, that's the frontier of those two. So a lot of folks use it as a benchmark. So right now, it feels like the market is positioned for both legs of that soft landing scenario, which means resilient growth as well as a benchmark. So right now, it feels like the market is positioned for both legs of that soft landing scenario, which means resilient growth as well as declining inflation to come to pass. We'll see if they are justified in those expectations. Yeah, I want to go back to the commodity piece of this, especially since we've gotten earnings from some of the big steelmakers. You had Freeport, MacMoran, which is one of the biggest copper miners this morning, too. I realize we've seen some softness in those markets and in aspects of those results. But to your point, we're also

coming off of some very strong quarters of all that fiscal spending has pushed out into things like infrastructure. So so how much is that a piece of the pie here or is it waning? No, I think that is probably a piece of the pie. And I wouldn't say that the absolute levels of commodity prices are conveying something really worrisome about growth or about the industries even. It's much more about, you know, just the fact that they're not making new highs. They're in this sort of neutral zone. They've spent a lot of time in over the last couple of years. And so if you're just looking at where the source of inflation or disinflation might be coming from as we look forward, it's probably not really working through the pipeline in this manner. All right. Mike Santoli, thank you. Now, up next, former Tesla board member Steve Wesley is going to react to that company's earnings.

And check out another look at Alphabet higher after beating on both lines. Strong numbers for Google Cloud revenue. Shares are now about 2%. Overtime. We'll be right back. Welcome back to Overtime. Let's get a check on Tesla. Down more than 3.5% right now.

And joining us now is Steve Wesley, founder and managing partner of the Wesley Group, a former Tesla board member, chaired the audit committee. Steve, welcome. So I want to talk about margins and demand to start. How much of a concern is it that you had to stop down some factory production, got some oversupply out there, and the margins seem to reflect that? Well, here's what we're seeing. There's a small uptick in auto sales. But the big question is, or the big point is, there's an enormous jump

in energy sales. So they delivered 444,000 vehicles this year, 25.5 billion in Q2. That's two, three percent up, essentially flat from last year. That's a worry. Earnings set to decline for the fourth straight quarter. The free cash flow is improving. So that says something good about profitability. But the big news, Tesla doubled its energy sales from 4.7 gigawatts in Q1 to 9.4 gigawatts in Q2. That is enormous. That translates to 15 as much as 20 percent of revenues in 2024. Tesla's working to become a global energy company. Most investors hadn't factored that in. And that is what I think may move the market. Investors do seem to be factoring in robo-taxing. I haven't found yet, gotten what I consider to be a satisfactory answer to help me

understand what the possible business model is that makes this like worth, you know, a trillion dollars. Tasha Keeney just told us she thinks 10 times more people are going to want to be driven by robo taxis than by Ubers. You think that too? I would just tell you flat out, autonomous vehicles are coming. The question is, how far out is it? Is it two years, three years, five years? If you're looking five to 10 years out, it's going to change everything. It's going to have all the benefits of Uber. It'll be half the cost and they will show up sooner. What's not to like about that? The big issue here for Tesla is they're caught between these two growth waves. If you go back in time a little bit, Tesla introduced the Model 3, the Model Y,

and posted the largest growth years in auto history, 71% 2021, 51% 2022. And now all of a sudden we're heading toward flat. And it looks like Tesla has kind of a bare cupboard with the cyber truck off to a slow start and recall. So there's a lot riding on this question of can Tesla prove it's an AI company with full self-driving and the humanoid robots, they got a lot to prove. And I should have said, Morgan, she said 10 times more usage, not 10 times more people. Ah, OK. You know what, Steve, you just went where I was going. And that is what comes first, robotaxis or humanoid robots, which perhaps a lot of folks don't fully appreciate how much AI is going to go into those capabilities as well. Let me explain both. The robo taxi will come first.

The reason for that is you've got over 2 million Tesla cars out there. Most all of us, including myself, have full self-driving capabilities in the car. It works pretty well. But there's a big jump from 99.9 percent, which is probably where Tesla is, give or take, today, to where Waymo is, which is 99.999%, which is what it takes to get regulatory approval. So Tesla's probably uploading more data points, over a billion pictures a day into the cloud. They're getting better all the time. But they need to get regulatory approval. They were scheduled for a big announcement on August 8th. That got postponed to October.

We'll see. Humanoid robots are a big deal. Everybody in the industrial world understands robots are here to stay, but they would do singular tasks or purposes, and you had to program each one for a specific thing. Today, because the technology has improved so quickly, there are now half a dozen companies, including one we're looking at investing in, that not only move like human beings, but instead of having to go through the laborious programming step, you can literally talk to them in AI. The machines understand instantly. BMW and others are putting real, I almost said live,

real humanoid robots on the assembly line now. So this is coming, but they just postponed a Tesla launch for another year. We're going to have to wait to see on that one. But I wouldn't bet against Tesla here. OK. I mean, all this is going to take investment, which we know Tesla is known for doing over the years. So how much hinges on us seeing the bread and butter EV market recover here and margins begin to grow instead of constrict as well? Well, look, they've got three shots on goal. They've got to get the robo taxi out. They're going to move ahead with humanoid robots. I'm hoping they bring a $25,000 car to market. I

think there's going to be a huge demand for that. By the way, it may be built on a similar chassis to the robo-taxi. So those may not be completely exclusive in terms of manufacturing. Don't forget, energy division, if it grows anything near 100% quarter over quarter growth, or even a half of that, that's going to be an increasing part of the Tesla revenue story. And the last thing, don't forget, virtually every EV maker in the world has thrown up the white flag and said, we're going to rely on Tesla's charging network in North America and Europe. So they've got a lot of pricing control there. So they've got a lot of revenue sources. They just need to build them out to get ready or to hide them over to the next wave. OK, Steve Wesley, thanks for joining us. Always great to have you on Tesla

Earnings Day as we do look to that conference call, which kicks off in about 40 minutes. Well, up next, more of the overtime earnings movers that need to be on your radars. More analyst calls get set to kick off at the top of the hour. And GE Aerospace, one of the big winners in the S&P 500 after beating earnings estimates thanks to better than expected profit margins. There's a better. The company also hiking its full year guidance. We'll be right back. Welcome back to what has been a very busy hour of earnings here on Overtime. Here's a recap. Alphabet beating on both lines. Google Cloud revenues above estimates, though YouTube revenues missed. You see it's up 2 percent%. Texas Instruments also higher by about 4% after matching revenue estimates, beating on EPS. And on the downside, a commercial real estate company, CoStar, they're in the data business,

falling despite beats on both lines, down about 4.5%. Third quarter guidance below expectations, Morgan. All right, well, we have some news on Netflix co-founder Reed Hastings, and Kate Rogers has those details for us. Kate. Hi, Morgan. All right. Well, we have some news on Netflix co-founder Reed Hastings, and Kate Rogers has those details for us. Kate. Hi, Morgan. The information is out with a report that Netflix co-founder Reed Hastings has given $7 million to a super PAC supporting Kamala Harris's run for president. He said it was his biggest donation ever in support of a single candidate, according to that article. Hastings, remember, was among the major Democratic donors that had been calling for President Biden to exit the race after his performance in the

debate. The report also says that Hastings donated to the PAC on the recommendation of billionaire venture capitalists and also fellow Democratic mega donor here, Reid Hoffman. So just another name to the list of donations and endorsements today for Kamala Harris as she takes on this bid to become president. Back over to you guys. All right, Kate Rogers, thank you. Up next, we will run through all the huge companies reporting earnings in overtime tomorrow and reveal which CEO will speak exclusively with us before their call with analysts. Welcome back to overtime. Tomorrow will be another huge day for earnings. AT&T, Boston Scientific, General Dynamics reporting before the bell. But in Overtime, the real action gets underway. We will have instant analysis and reaction to numbers from IBM, ServiceNow,

KLA, Chipotle, Ford, Wyndham, Las Vegas Sands, and Whirlpool. Plus, we will be speaking exclusively with the CEO of Chipotle before he dials in to the call with analysts. And of course, we know Chipotle has been holding up strongly, John, when it comes to an uncertain belt tightened consumer environment. The other one I would point out, though, that we didn't talk about in the show is UPS had its worst trading day on record today because arguably you're seeing some belt tightening among the shippers as well right now. A very full burrito of earnings tomorrow. But I got to point out ServiceNow and IBM on enterprise software, what they say, how to filter that through what we've gotten already going to be very important. And, of course, we'll have some exclusive insights here on Overtime.

Yeah, of course. Investors digesting Alphabet and Tesla as well. As we did fade the gains for all the major averages except the Russell 2000. That does it for us here at Overtime.