Closing Bell - Closing Bell Overtime: Tesla’s Earnings Turbulence 10/19/22

Episode Date: October 19, 2022

Tesla, IBM, Las Vegas Sands… Requisite Capital’s Bryn Talkington and Ritholtz Wealth Management’s Josh Brown unpack the afternoon’s most critical earnings hot off the reports alongside star Wedbush analyst Dan Ives. Plus, why Fundstrat’s Mark Newton says the next few days mark a “moment of truth” for the market. And, Tesla shareholder and former board member Steve Westly’s reaction to the automaker’s quarter.

All right, sir, and thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells were just getting started, as always, from Post 9 here at the New York Stock Exchange. And we do have a big show ahead. Tesla earnings, they are seconds away. We're going to have the numbers, the stock reaction, the moment that report hits, and debate what lies ahead for another marquee name in this market. IBM and Las Vegas Sands are also breaking momentarily. Our reporters are standing by for those results as well. And as we wait for all of those to hit, we begin with our talk of the tape. No doubt the biggest story in the market today, that is the rapid rise in rates, whether it means the rally is already on thin ice. Let's ask CNBC contributors Bryn Talkington of Requisite Capital and Josh Brown. He's the CEO of Ritholtz Wealth Management. It's good to have both of you with us. That is right.

We're waiting for these numbers. Those numbers are the ones that probably matter more than anything to stocks. Those being the two year and the 10 year yield both moved up. Stocks moved down. Tell me where the two year starts in the day and tell me where the two year or 10 year ends in the day and I'll tell you what the market's going to do. And so we're in this we're in this position where the Fed is in control. The two year leads the Fed. And as long as the two year continues to go higher, we will not make a bottom in stocks and the equity rally will not continue. Well, it's just that simple,

that simple. Josh Brown, you agree with that? I mean, what are we talking about? Almost 260 today on the two year. And you really could track it one for one rates up, stocks down. Yeah, I think it has been that simple for almost the entire year. I would add a little wrinkle. I think as we approach what the Fed has told us its targets are, the actual level itself matters less and the volatility of the bond market starts to matter more. We don't really have a VIX following interest rates per se. There are various indices, but they're really only accessible via Bloomberg terminal. Your typical investor is not following the day-to-day bond market volatility other than in what we quote

them at the beginning and end of each day. But I do believe that that is the thing that we are more singularly focused on than anything else on days where we're not getting inflation data itself. Yeah, it's a good point that he makes, right? And Bullard is giving an interview right now in which he says they're watching liquidity in key markets, including treasuries. You've really seen a huge pickup in volatility in bond markets. That's making people pretty nervous. So there's always going to be a buyer for a treasuries. It's just at what yield they will be buying. I think going back to the two-year for a second, forget the last 15 years we had QE1, QE2, QE3, 3, and 4. Go back to when we had a real rate and

real rate hikes the past 30, 40 years. When the two-year peaks and comes down about 50 basis points, that has signaled the end of the Fed tightening. We're still going higher. And so I think you're going to continue to see Bullard. We heard Kashkari talk about it, I think, just earlier today. They still want to have a tighter policy. Market's going to be choppy until that it finishes. So, Josh, we think we're about a couple minutes away now from Tesla earnings. Do you want to put into perspective how important you think those are to keep this streak, if you want to put it that way, alive of better than expected reports? If nothing else, certainly way better than feared.

You know, Tesla, Tesla is become an important stock to the market, both mathematically and spiritually over the last three years. And a lot of people don't like that that's the case, but it is very much the case. And so I think that this will be closely watched even by people that have nothing at stake here, myself included. But Tesla right now is in its fourth worst drawdown ever since it came public in 2010. It is 46 percent off of a tie. It's only been in a worse drawdown three times other than that. You remember 2016, 2019 and then during the original COVID panic in 2020. So this is quite a hole the stock is in.

I think when you look at the low for the year being hit last week, I mean, this is a stock that really has not participated in the recent rally. I think since mid-October, when they told us deliveries would be down, which is understandable, and some of that is more due to supply chain stuff than demand. I think it's important to bring that part of it out. This stock is down 18%. Meanwhile, the S&P is, I think, down 1% or up 3%, and the NASDAQ is down 1%. So there has just been substantial underperformance here.

And I think it's a sore spot. I think it matters. And we're going to find out if we're going to get any relief from that very soon. Yeah, very soon is an understatement because I think it is out, obviously. And the stock is representing what must be a pretty good report that we're currently going through. And we'll have the exact details for you and everything you need to know in just a moment. But the stock, as I see it, is about two and a half percent higher. It's all about the deliveries, not only for the current quarter, but can they meet that 50 percent projection they have for the full year? What's so interesting, too, is, oh, let's call it within the last two hours, Elon Musk

himself tweeting, which, you know, look, it's noteworthy when the CEO, now he doesn't use the word Tesla in it, but he says, quote, I will not let you down no matter what it takes. You can take that for whatever you want to take it for on a day where they are reporting earnings. That is Tesla. And you can see the stock is one and a quarter percent higher. But again, we're going through it and we'll be on in just a moment with the exact details. The importance, though, do you agree with Josh, right? It's important because of what it is. The size spiritually, I think, is a good word of Josh's.

Sure. Well, I think also what's important is that over the last 30 days, Tesla has lost almost $300 billion in market cap. I think that's a very under-discussed story. It's like the last company I remember that lost that much market cap was Facebook. And so it's interesting that I'm a little bit surprised the numbers were so good because I couldn't imagine that a company would lose so much in market cap over Twitter. We don't even know if they're so good. I mean, look, this is one of those stocks where, you know, the initial move is not necessarily indicative of what the story itself is. We need to get to the bottom, obviously, of what the specific metrics are as it's crossing as we speak. But, Josh, you just can't have a stock like this. The way I see it now, it looks like on an adjusted basis, they beat on earnings,

and they missed slightly on revenues. It looks like four cents ahead on earnings. I didn't see the revenue number, but the estimate was 22.13. Hang on, Josh. Phil's got it. Phil LeBeau. What do you got, Phil? In terms of revenue, you have a slight miss on revenue. Not by a lot, but a slight miss. The estimate was for $21.96 billion. Came in at $21.45 billion.

They did beat on the bottom line, earning $1.05 a share. The estimate was for $0.99 a share. What we're trying to hunt down right now is the automotive gross margins X zero emission credits. We have it with zero emission credits of just over 30%. And the estimate is for it to be at 28.5%. If it's around there, it's not going to be a huge move one way or the other. But then you have operating cash flow at $3.3 billion. We're just kind of diving into the numbers right now, Scott.

But the bottom line is this. You have a slight miss on revenue, but you do have a miss or you do, I'm sorry, have a beat in terms of earnings with Tesla earning a buck five in the third quarter. The estimate was for ninety nine cents a share. Scott, back to you. We're all in the same car. I was going to say we're in the same boat, but we might as well use the car analogy, Phil, because it's all trickling out very slow. So I feel your pain as you're trying to get to the bottom of the numbers as much as we are. So that's why you can't go anywhere, really, because we'll get you more details on why the stock initially looked to pop and why it had seemed to turn around. But it's moving, as we speak, down about 7%.

Dan Ives, of course, the star analyst of Wedbush, who covers this company. Hang on, Josh, real quick. Do you want to give me an initial reaction to at least the top and the bottom line while we get to the bottom of deliveries and the things that matter most? Look, I think ultimately, if you look at margins, I think generally in line with where the street was hoping, a little bit of an EPS beat. I do think bulls are maybe hoping for more just in terms of maintaining margins. But the big thing is you talk about, Scott, it's about Q4, the 50 percent, especially with China. That's why this is a moment of truth for Tesla, at least in the near term,

to sort of navigate some of the logistical and other issues they've had. And that's why this is going to be, in my opinion, probably the biggest conference call for Musk in the last two years. And you expect him fully to be on it? Oh, yeah. We expect him to be on it. And really, I think the key variable is about the China growth, the 50 percent for the year. And is this a logistical issue or a demand issue? And can they maintain margins through it? That's really going to be the focus for investors. Someone brought up within the last hour the possibility of a buyback, right? As you have Musk trying to pull some levers that he still has at his disposal, and they've already done a split, obviously, so that's not coming again.

But what about that idea? I think more and more pressure for them to do a buyback, given the cash situation raised a lot of capital, profitable. You're seeing more and more frustration of investors in terms of wanting to use that for at least some sort of capital allocation profitable. You're seeing more and more frustration of investors in terms of wanting to use that for at least some sort of capital allocation program. But of course, the albatross here continues to be the Twitter situation. Will Musk ultimately have to sell more stock? And that's sort of right now, I think, the ghost that's really an overhang on the stock. You think he's going to have to sell more? Is that a foregone conclusion at this time as we hear reports of private equity maybe bulking a little bit at the financing part of that deal?

Well, I think that's the worry. I mean, some of that could crack in terms of him needing to step up. It was in an incremental $5 billion, $10 billion. And I think that's really going to be the focus the rest of the week going into next week. Remember, by next Friday, ideally that's when Twitter closes. Does he do form fours? Does he sell more stock? And right now, if you look at this report, it was clearly a delivery miss, but it's all about margins and that Q4 number. Yeah, okay.

Hold your thought there, everybody. Josh, I'm going to come to you in a second, but IBM's out too. Let me go to Frank Holland, who has that for us. Frank? Hey there, Scott. Shares of IBM up more than 5% right now after a beat on revenue and a beat on EPS profit, about 4 cents above estimates. Also, the company raised its full-year revenue guidance and maintained its full-year free cash flow guidance. Sorry for that stumble there.

When you look across at all the segments, it's a broad-based beat. You look at software. Revenue is $5.8 billion compared to an estimate of just over five and a half billion. Look at consulting revenues of four point seven billion versus an estimate of just over four and a half billion infrastructure. A similar story. One thing to note here, the company did flag a stronger dollar as a headwind, but still EMEA and APAC both up 16 percent when it comes to revenue. Also important to note that this beat on profit came on lower expectations. Just about two months ago, the EPS estimate was 191 a share. But again, IBM beating current EPS estimates by four cents a share. You see right now shares of IBM up just about 5 percent.

Back over to you. You make a good point, Frank, when you suggest that they maintained their free cash flow guidance, which they did lower last quarter to the bottom end of the range. So that helps us keep the whole thing in perspective as we're watching what's taking place in the software business, with enterprise, just the whole thing, rising labor costs, you name it, right there in the soup of dealing with it. Yeah, absolutely. I mean, I think a win for them here is they had double digit growth when it comes to their Red Hat business, their hybrid cloud business. In general, IBM believes that we're not just going to see one hyperscaler win. There's going to be a

multi-cloud strategy with on-prem still a part of the plan for many companies. So overall, a very positive quarter, especially when you count the fact they get more than 50 percent of their revenues overseas, the stronger dollar, the dollar up, I believe, more than 15 percent year to date. So in general, a very optimistic outlook going forward. Yeah. Thank you, Frank. We'll talk to you again if we need to in a moment. Josh Brown, let me come to you now. I mean, no disrespect to IBM, but given the stock performance relative to the market and relative to some other tech companies. Is Boring Tech better right now? Well, this is the type of stock that appears in all of the low volatility screens. So it's going to be in those ETFs where people are prioritizing, quote unquote, quality and low

vol or low beta, et cetera. So this stock is down 8% year to date, substantially better than almost any technology company you could think of, even the other high quality ones. I think a lot of that has to do with the fact that it is a boring business. I also think that the 5% yield gives it a little bit of a bid on days where there's no bid elsewhere for low profitability tech. So it benefits from that. But let's keep in mind, this stock is still in a drawdown from like 30 years ago or 25 years ago. I mean, it is trading at the same price it was at in 1998. All right. I appreciate that.

So, Dan Ives, you actually have some numbers that we need to know about. The 50%? Do they get it or not? I mean, ultimately, they're sticking to the 50%. And that's, look, that's right now, they're going to be the bull bear debate. Strong Q4, they need to have a 475k type number to hit that. But ultimately, they didn't rip the bandaid off and basically said they're not going to hit that number. That's going to be the debate. And that's going to be key on the conference call today. We look at like, what, 54 percent. I see Q3 total production increased 54 percent year on year. Production rate in Shanghai surpassed the previous quarterly record. China is is critical. Right. And that's where the biggest problem has been because of the lockdowns.

And then you have supply chain issues there too right the hearts and lungs of the Tasso story is China and that's really right now that's front and center above anything else not just spot gym just is it demand driven or logistics we believe logistics but it's important in terms of you know ultimately must sticking to this 50% number we still got Phil do we still feel how Philipau with us? I'm assuming that we do, and if we don't, yell at me in my ear about it, but we do, we got him.

Phil, this production increase, as we said, of the 50% number. Phil, I mean, stuff's going on, you know, in overtime with these numbers, so I didn't know if we still had you or not, but I'm glad you raised your hand and said we do. So you want to know about the production increase of over 50 look that's a reiteration of the guidance that they've had there for

well they've got that guidance that's been there for some time that they expect annual deliveries over time to average 50 a year i i think 50 growth for 2022 they would have to deliver something like i don't know, Dan's there, he probably would know, 450, 460,000 this quarter, which is a hefty number for deliveries in the fourth quarter. Not impossible, but it will be a hefty lift for them. By the way, the automotive gross margins, excluding zero emission credits, came in at 26.8%. So that's light of what a lot of people were expecting. Many people were expecting that to be up closer to the 28.5%. Speaks to the pressure that they're facing in terms of higher costs all around

that are really squeezing the margins. Phil, stay with me because I'm going to get Ives' reaction to that. So GM's gross margins are a little bit light. So you want to opine on that and whether you think that, as Phil put it into perspective, it's a pretty lofty number they need to do in Q4. I've seen even higher numbers like $495,000 in terms of some of the estimates to get to the lofty levels that they suggest they can get to. Exactly. So exactly to Phil's point, on the call, does he step back and give some caveat with the 50% this year? If not, like you're looking at 475

to 500K type number. And in terms of the margins, look, that's important because the whole key here is can they keep margins stable to increasing throughout some of this turbulence that they're seeing? And clearly that was a little bit of a crack in the armor on margins these are going to be the big focus on the conference call today okay so tell me this then as bullish as you are right why should i expect in this current environment with competition in the space only dramatically increasing and seemingly by the month that they are going to be able to at minimum maintain what is a little bit light margin number. And why shouldn't I expect that to continue to go down?

Because it's a great question. I just believe ultimately in terms of what's happened in China, that's a natural uplift because of more and more efficiency that they're seeing in giga China. And from a demand perspective, we believe going into next year, the demand, even if you cut it, is still over 2 million units for Tesla. And that is really the crux of the bull thesis. Josh Brown, what would get you interested in this stock? I just I just I'm not I'm not good at gauging market sentiment on something as volatile as Tesla in a sector that normally

isn't quite so volatile. But one thing about Tesla post earnings that's interesting, we always think about this as being a high beta stock and having big swings, but actually it's a pretty boring earnings reaction for the most part. And what we're seeing right now is right in line with the history. You go back through 2020 to today, and what you see is that the median move for Tesla after an earnings report is minus 2%. The worst move has been negative 12%, and the best move has been plus 11. So it's not as though this is a quote-unquote

earnings-driven type of trading environment with this name. It tends to move on other things like pre-announcements or new products, not really the post-earnings call. Yeah. Hey, Phil, I'm going to come back to you in just a minute because I got another question for you. But Las Vegas Sands are out as well. Contessa Brewer with that. Hey. Hey there, Scott. We have a revenue beat at a billion bucks versus 986 million dollars expected and an earnings miss at a loss of 27 cents per share versus the anticipated loss of 24 cents. This is a story of increasing revenue and shrinking losses really now powered by a rebound at Marina Bay Sands. Before the pandemic, it was the world's most profitable casino resort.

In Singapore, Sands tripled its net revenues from the third quarter last year because now the destination has lifted its pandemic visitation restrictions. And adjusted EBITDA, that's a key earnings metric in the gaming industry, came in at $343 million for the quarter, beating consensus expectations. In Macau, Sands lost less than expected. On the call, I'm going to be listening for more about how Sands is navigating this rising rate environment. It has a lot of debt, and it's still spending on capital investments and expenditures there. Right now, the stock is bouncing around a bit, but you can see off by less than a percent at this point, Scott. Yeah, Contessa, thank you.

Let us know if you hear anything we need to know about there on what has been, of late, one of the poorer performing stocks, as most of you may know, in the market at this point because of Macau-related issues, despite the fact that Las Vegas business remains for everybody out there off the charts. So, Phil, give me your idea, your thought back to Tesla on whether you think we'll get something around a buyback. And just this general idea, Josh makes a good point. When you see that the stock's not doing all that much, right? Clearly, investors are trying to figure out where this story is going from here. And what used to be a benefit of the doubt sort of narrative around this that Musk and company could reach the projection targets that they had put forward? Maybe we're not so sure at this point, just given all of the macro issues that exist. Well, we're not so sure because of what we saw with deliveries in the third quarter, especially with what we saw out of China. It has raised the question whether or not there is a real slowdown in demand in China.

And Scott, that's a bit of a black box. When you ask people, especially those who cover Tesla analysts on Wall Street, and you ask them about China, they're not 100 percent sure about all the data that they're getting out of there. They've got to read the tea leaves, so to speak, in terms of what they think is happening. So I think that's where the doubt creeps in here. And to Josh's point about this stock not moving after an earnings report, maybe he knows for sure. But if you go back historically, you tend to see this stock move higher, let's say four to six weeks ahead of an earnings report. And sometimes it is a pre-announcement, but a lot of times it's this whisper. Hey, I think it's going to be a strong number. Hey, I think that they're going to do something special here thing. And that stokes the excitement so that the stock is coasting into the earnings report on an updraft. And that's classic Musk.

Do you want to respond to that, Ives, real quick? And then I got something for you, too. I would just say it's been a Cinderella story since second half of 2018. And for the first time, they're hitting hitting legit speed bumps they need to navigate it but see so if i'm not in this name like i asked you know josh what would it take to get you interested and for those who are out there entertaining the same questions in their own minds i've got you know delivery questions i've got competition i've got china i've got potential stock sales from musk you making the case in the the face of all of that that I should buy that stock today?

How? Because in my opinion, it's one of the most transformational, disruptive tech names for the next three to five years, just in my view of Apple in terms of those two. And so when I look at Tesla, granted, some speed bumps that were hidden. But when I look out— But those are like potholes, not speed bumps. And again, but they're ones. We've had potholes before, and ultimately Tesla's been able to navigate them. So when I look at the valuation, when I look at the 23 and 24, and what I believe is ultimately the demand story,

then I believe we look back at this, and this is an opportunity, not the time to throw in the towel. All right, we'll see what happens. Bryn, last word to you on that. Yeah, I think it's interesting here. I think it's lost $300 billion in market cap in the towel. All right, we'll see what happens. Bryn, last word to you on that. Yeah, I think it's interesting here. I think it's lost $300 billion in market cap in 30 days. I'd be looking to be buying this after this call. All right, you listen to the call. Let us know if you make a move.

Will do. We always like that. Mr. Ives, thank you. Thank you. That's Dan Ives here. Josh and Bryn are sticking around. We'll see them a little bit later. Phil, thank you, as always.

You let us know what else you have that our viewers need to know about. Let's get to our Twitter question of the day. It's about Tesla shares down nearly 40 percent this year. We want to know quite simply, are you a buyer at these levels? Bryn might be. Are you? Head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results coming up a little bit later on in the show in which we are just getting started here in overtime. Up next, a moment of truth for the market. That's what one top technician is calling the next three to five trading days. Fundstrat's Mark Newton tells us what he is seeing in the charts that you need to know about. And later, much more on those Tesla results.

We have a former Tesla board member standing by with their instant reaction to the quarter. Stick around. We're live from the New York Stock Exchange. And we're not going anywhere. We'll be right back. All right, welcome back to Overtime. Stocks pulling back following a two-day rally. My next guest says calling this a near-term moment of truth for the market. Joining me now, Mark Newton. He's Fundstrat's head of technical strategy.

Moment of truth. Why? Well, Scott, if you look at where S&P has rallied over the last four days, we've moved up about 200 points. We're right up to close to 3,800. So that is very close to not only early October highs, but also a very meaningful downtrend line near extending down from August. So that's a really key level for the S&P. Other indices are looking the same. So I think we really have to get over there. And also, we need to see rates start to peak out before we can really think that any sort of rally has some longevity. Well, see, that's exactly where we started the show, right? I mean, as much respect as I have for you and respect that people have for the technicals, whatever the charts say, just tell me what the chart of the

10 and 2 year say, and then I'll tell you where stocks are going. It's become that simple, it appears. That is a little bit of the way to look at it. I would also suggest, though, that markets are actually acting a little bit better in the last couple of weeks. We've seen almost a 5% move in financials. Industrials are up 4%. Technology has started to actually come back slowly but surely in the last week. So, you know, S&P seems like it's going down every day, but there's actually some internal sector strength that really bodes well for the prospect of markets to bottom out by the beginning of November. Why do you suggest that the next three to five days are critically important? Are you thinking about big cap tech that's right in front of us as a reason why, or is there something in addition to

that? So some of this is cycle-based, and we are entering a time the next one or two weeks where we are, we do have the potential for exacerbated volatility. And, you know, I personally am hopeful that we get past this. I think that my own work suggests rates are very close to peaking out in the dollar. You know, for you non-technical folk, you could say, OK, CPI is coming up November 9th. We have a Fed meeting. We also have an election. So there are some reasons why one would be a little skittish. But, you know, everything starts to turn back higher in the early part of November. So I'm thinking really any pullback would still be a great buying opportunity. And I am expecting markets push higher November into mid-December. So, you know, a lot of this is just short-term noise in the near term. But, you know, anything above

$3,600, we're fine. We could go up to $3,800 by Friday, $3,830, and then maybe a minor pullback. As long as we're above $3,600, we're in good shape. If we get under that, then we have to introduce an alternate scenario where we have a potential for downside volatility. For now, I'm not really willing to discuss that until we see evidence. I got you. Lastly, before I let you run, the oil services ETF. Why do you have your eye on that specifically today in your note? Well, what's interesting is that that actually broke out against the XLE and also against the XOP ahead of today's announcement about oil. And so, you know, energy continues to act fantastic. We've seen WTI crude decline about 10 percent in 10 days. But energy has been, you know, outperforming the S&P. It's

actually been a great sector to be in and has suffered very little weakness whatsoever. So, you know, my own cycle suggests crude is bottoming. I think that energy is still a great place to be. You know, the services stocks look a little more interesting now. The drilling companies and, you know, companies like Halliburton and Schlumberger. So I like OIH. I think energy is still a good bet. And Mark, I appreciate it as always. That's Mark Newton of Fundstrat. We'll talk to you soon. It's time for a CNBC News update now with Shepard Smith. Hi, Shep. Hey, Scott. From the news on CNBC, here's what's happening.

The parents of a 15-year-old accused of killing five people in Raleigh last week released their first statement today. They say they're overcome with grief and saw no warning signs before the killings. They also confirmed that one of the victims was the shooter's older brother. The suspect's still listed in critical condition. What's being called a temporary tent city in New York City, now accepting migrants bused in from southern border states. The site on Randall's Island meant to house up to 500 men at a time as they figure out the next steps in the asylum seeking process. The tents also include laundry facilities, a dining hall and phones for people

to make international calls. And a brand new image today from the Webb Space Telescope. It's called Pillars of Creation, a nebula thousands of light years from Earth where stars are formed in dense clouds of gas and dust. And it's a beaut. Tonight, a bombshell report on the early pandemic trading practices of senior U.S. government officials, plus the TikTok trend turning a diabetes drug into a weight loss medicine. On the news right after Jim Cramer, 7 Eastern CNBC. Scott, back to you. All right, I appreciate that. Thank you. That's Shepard Smith. Up next, more reaction to Tesla's quarter from former board member and current shareholder Steve Wesley. We'll get his key takeaways from that report, sending the stock a touch lower.

We're back after this. All right, we're back. Let's get another check on Tesla. That stock is falling after reporting earnings just moments ago. The company's call kicks off in under an hour. We've got former board member and current shareholder Steve Wesley. He joins us now with his reaction to what just happened. Steve, it's good to have you in overtime. What is your reaction to what you know to this point?

Well, we'll see. But to me, it looks like an awfully good quarter. Record number of units, 340,000 units sold. Looking to me like a $22 billion quarter. Another record, 62% year-over-year growth, and their 13th consecutive quarter of profitability. What's not to like about that story? We'll see. But Tesla appears to be at the top of their game. Yeah, what about this idea of being able to hit that target of 50% on production?

Do you think they'll be able to do that? That seems to be the most critical issue at the current moment. I think they will. And when you're talking about 50% growth, that's in terms of units. I think revenues may be the bigger issue, but I think they will hit 50% for the year. What most people don't understand is most EV makers are struggling now with supply chain issues. They might have one factory, possibly two, in place. Tesla has four factories fully operational and hitting maximum capability. Q3 could have delivered more units, but Austin and Berlin weren't at full production scope. They will be in Q4. I think Tesla is going to post a huge number of q4 possibly in the 450 500 000

unit range i think they'll be at over 50 percent unit growth against 62 percent revenue growth nobody else in the auto world is growing anywhere near that rate except for the chinese and that's where the big battleground appears to be so put that into perspective then, not only the competition issues coming out of China, you've got U.S. automakers obviously ramping up their own EV production. You have the prospects of lockdowns at any moment through the winter or thereafter in China. That has to have some impact to the projections that the company lays out, doesn't it? Well, there's lots of things to worry about, including a recession. But you have to ask yourself, who's best positioned to win in each scenario? Again, Tesla has auto factories in Shanghai, in the United States, in Europe. No one else has that. Again, it's also important to note

the profitability factor. Industry auto average, 4.3% Ness net margins. Tesla's sitting here at 13 to 14%. So you've got one of the fastest growing auto companies in the world, highest profitability, best brand name. It's going to be awfully hard to displace them. But as you point out, for the first time, I think they have a real challenger. That challenger's named BYD. BYD will likely hit 1 million EV units produced and sold this year. So that's something to keep your eye on. In contrast, and it's just good to compare, Ford probably hits 60,000 units and GM struggling to hit 50,000. They're barely at 4% or 5% of Tesla. So right now now it looks like a tesla chinese battle

volkswagen's in a solid third place we'll see what they can do uh globally but in terms of the speed it's tesla and the chinese what do you make of the the fact that gross margins closely watched in any business these days we're a little bit soft so again it's better than it has been but still better than all the others i'm not bothered by that in the least. And the reason is Tesla invested hugely in the new facility in Austin and Berlin. Those are now up to nearly full capacity. So that's looking good. They're also quietly putting down new lines for the semi-truck, which they're going to start shipping in Q4,

and then the much-awaited Cybertruck that has over a million orders. So Tesla, to most any standards, has been investing wisely for the future. Another point that a lot of investors miss is they've already manufactured but not delivered 22,000 vehicles. So literally on day one of the quarter, they're going to start out with a pretty big jump toward what I think is going to be historic Q4. What about the overhang of potential stock sales to fund the Twitter deal? I can't imagine you're not concerned as a fellow shareholder about the prospects of that. Well, look, all things being equal, I would love it if Tesla and Elon would stay focused on making great cars. But look,

he's the wealthiest person in the world. He can afford to sell a few shares. I don't think it'll have a long-term impact on the share price. What people are really looking at are three things. Have you solved the supply chain issues? Do you have the manufacturing capability to continue to grow, as you said, 50% a year in units and 60% in revenues? Tesla's way out front on manufacturing capability, way out front on putting supply chains in place, already has agreements with the major lithium producers, the best brand in the world, and a global selling network. So by the way, they just became the number one seller in Germany ahead of Gulf, not EVs, of all cars. So there's international appeal. They seem to be well

positioned for the next year, at least. They're going to be tough to beat. I know, but I'm not sure, you know, with all due respect that you're fairly characterizing the stock sales, right? A few shares. He's already sold. Those were your words. I mean, he's already sold a lot more than a few shares. And there are plenty of people who think to finance the Twitter deal that he's going to have to sell a hell of a lot more than just a few more shares, too. Yeah, look, I agree with you. It looks like there are a lot of sell offs. I think it's highly likely that's related to the Twitter acquisition. But if you're asking long term, who's best positioned? I don't think anybody's close to Tesla today. If you ask who's coming, it's going to be the Chinese. But again, if you look at the basics of the company, long-term

as an investor, nobody has gross margins like Tesla does. The reason there, again, they were the first to take battery production in-house. They have a real cost advantage. They're also the leader in what's called OTA or over-the-air software. So every vehicle that goes out the door is simply put more profitable than the competitions. It's a good place to be. But short term, there could be some ups and downs. No one ever said Elon would be boring. Yeah, no, that's for sure. Steve, I appreciate it very much. We'll talk to you again soon. Great to be on. Thanks. All right. Take care. Yep. All right. Still ahead, the red hot cyber trade.

Those stocks have been on fire this week. We'll find out how you can play that recent breakout in today's halftime overtime. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. We're back in overtime after this. In today's halftime overtime, Secure returns the cybersecurity stocks trying for their best week in seven. But despite nearly every component in the sector being negative for the year, Virtus' Joe Terranova still looking for outperformance from one name in particular, this CrowdStrike. If you believe that cybersecurity is an area of technology that is going to see considerable corporate spending, which I do, then you want to invest towards that hyper growth.

And without question, when you're talking about 58 percent to 60, 62 percent revenue growth for this company, that's the right company to be in. Bryn Talkington back. She owns the Bug cybersecurity ETF. As I said, back with us. Why the ETF and not individual names in particular? So the space in general is projected to double by 2028. So the cybersecurity space is around 180, 170 billion, supposed to go about 380. And I think there's going to be multiple winners. I don't think this is a moment where you have Facebook is the dominant one or Google. And I think there's more space for multiple players here. And so what I bought is Bug, which only owns 25 names, and CrowdStrike, Palo Alto, Fortinet, Zscaler. There's five names

that make up 40%. So if I want to own something long-term, I can actually take a larger position because I'm not so just biased on one name, making up my whole exposure to a secular grower in a secular category that's growing. CrowdStrike is one of the top holdings. We mentioned, you know, obviously you heard Joe talking about it there. Baird initiated on these stocks today. It's one of their top picks too. CrowdStStrike outperform. They have on it as well. It's a Josh Brown stock. Others own it. But yet, look, there's a lot of hype around these names year to date.

They haven't done great. CrowdStrike is the market really down 23 and a half percent. Palo Alto's done a little bit better, but all these stocks are still down. But if you think about it, these are companies growing and they're not, they don't have earnings yet, right? These are high growth companies. So being down 13 and 25 percent respectively for a high growth name to me is actually exceptional when you have the Nasdaq's down 30 and most names in the tech space are down 40 to 70. Speaking of high growth names, you still own the ARK funds? I do. We have a small position. OK. How do you feel about those today since you mentioned that? It's just a good checkup on that. So, you know, we bought the name. We bought ARK March of 2020. So we kind of caught

lightning in a bottle there wanting to have exposure to disruptive technology. And like a bug, we didn't want to have to say, do we pick Tesla or Zoom? And so we started to reduce the position in December of 2020, then again, twice in 2021. But we kept a 5% position, right? In hindsight. That's not insignificant at all, right? Sure. Every dollar counts, right? When you're allocating capital for clients, you want every single dollar to sweat for those clients. So do they. Right. And so, I mean, in hindsight, if we have perfect vision, should we have perfect vision, should we have just sold the whole position from a performance perspective? Sure.

But we still want to have a small position in that disruptive technology. And I believe that if you're going to own a basket of names, I like her basket better than the other baskets I find out there. Okay. I appreciate you sticking around.

That's Bryn Talkington back with us again here in Overtime. Up next, Tesla, IBM, Las Vegas, Sands, not the only big movers in Overtime today. So says Christina Partzenevelis, who is tracking the action for us as always. Christina. And of course, I have more earnings coming your way. We've got industrial giant Alcoa that's seeing its shares plummet right now after its latest earnings report. And one chip equipment maker blew past expectations. And that stock, of course, is up. I'll explain next.

Tracking the biggest movers in overtime. Christina Partsenevelos is back with that. Let's start with wafer fab equipment maker LAM posting a solid beat in its latest earnings report and sees its Q2 revenue higher than estimates at 5.1 billion bucks. That's why the share price is almost 2.5% higher in the OT. And this even though the company warned they expect weaker equipment spending next year. Keep in mind, though, that Lam has at least 30% of its revenue coming specifically from China, so we're going to wait to hear from management on how the U.S. export curbs could impact future business. Shares of Alcoa right now. I last checked, plummeting about 8%.

Revenue came in with a loss of $0.33 a share when the street was expecting a gain of $0.08. So there's a big discrepancy there. You can see shares now coming off those lows of down 7.76. Alcoa decreasing, though. It's 2022 projections for shipments. Management saying it was a challenging quarter because of lower prices and higher energy and raw material costs. Lastly, Kinder Morgan shares moving lower despite posting a 16% increase in quarterly profit. Cash flow came in light. EPS came in light. Earnings from natural gas, though, were up on increased volumes, and the company did transport more jet fuel. There you have it. Scott.

Christina, thank you very much. That's Christina Parts and Nevel. It's up next, Santoli's last word on stocks struggling to absorb those higher bond yields today. He'll join us with his thoughts. And coming up at the top of the hour, the conference calls for IBM and Tesla kicking off. Of course, the Fast Money team dialed into that, ready to bring you all the headlines, everything you need to know. Overtime back after this. Do not miss tomorrow's virtual CNBC Disruptor 50 Summit featuring companies that will disrupt Wall Street for the next 10 years and beyond. You can scan the QR code on your screen right now to register. We hope you will.

It's the last call to vote in today's Twitter poll. Tesla shares down nearly 40 percent this year. We want to know, are you a buyer at these levels? Head to at CNBC Overtime on Twitter to weigh in. We're going to bring you those results momentarily, along with Santoli's last word. All right, welcome back to Overtime. To the results now of our Twitter question, we asked if you're a buyer of Tesla with the stock down nearly 40 percent this year. More than half of you saying no, I am not. All right. Santoli's here with his last word now. Right. Tesla's earnings and we're really focused on earnings. Can we suggest that at least one brick, if you will, in the wall of worry is removed and that's going to be earnings are going to be better than we feared they might

be? I would say it's removed. I think it's been set aside, but not too far away. Not smashed to pieces, just set aside. Right. Because there is this sense out there that we did kind of hammer expectations low enough that so far in this first front edge of earnings reports that they're beating them pretty easily. Maybe we don't have a reckoning. Maybe it's not going to be all at once. But it seems like this slow ratcheting down of earnings expectations. I mean, the big one clearly remains the bond market, just not really letting equity investors escape the pressure there. What is interesting is I don't think I keep trying to make this point. There's no magic level where it's like the break point, the one that we can't come to terms with. The S&P is at 3700. It was a 3700 third week of September.

It was a 3700 middle of June. The 10 year Treasury yield on those dates were 3.6 at 3,700. It was at 3,700 third week of September. It was at 3,700 middle of June. The 10-year Treasury yield on those dates were 3.6 and 3.3. So same level of stocks at lower yields. So we have higher yields now and the stock market is not much lower. Now, we haven't been able to make any progress. You have had lower highs as well on the way up. But it's just, I think it's more of a digestion and it's a let's try to figure out if it's just going to get messy on the upside, as opposed to just tacking toward what the Fed is going to do. Ultimately, part of the point here, too, is that regardless of how good earnings end up being, they're not going to be enough necessarily to overcome a March higher in rates. No, because obviously that impacts valuations on some level. And really all it's doing is it's encapsulating the fear that the Fed is going to go even farther.

And, you know, oil prices have been in this nasty correction since July. That usually would help yields come down, right? That usually should help inflation expectations, you know, cool off a little bit. It's not happening. So that's why I think people are saying it's almost taken on kind of a life of its own. People think the Fed's heading to 5%. Got snap tomorrow in overtime. It's important to first mover in terms of the ad tech plays Google, Facebook. We'll see how it's received. All right. We'll see you then. You too. Fast as now.