You could have picked any number of days to make this kind of call. Why was today the day you did it the stocks had a tremendous run, as you just we wanted to get through earnings to make sure our thesis didnt change. Our price target was 900 coming out of earnings and our perspective is the stock seems to be trading in the 1500 range which we find very difficult to justify unless we really make huge assumptions at this point were not comfortable making those assumptions. You admit today that trying to call the direction of the stock could be a fools game tesla shares are positive. Why bother trying to make call like this in this kind of a market its really not a call that the stock will go down in the next month or two. As anna agnalyst we set ratings. Objectively when we look at various scenarios for the stock and say what do we think is realistic price target based on those assumptions its 900. Its just a disconnect we move to an underperformer equivalent of a sell rating. Look, its very difficult to know when valuation may matter more i livered through, i think you lived through the tech bubble in 9899. Many thought the nasdaq was expensive at 2500. A few called it then and said its expensive were not making a call that sentiment will change on this stock any time we havent defined catalyst. What were saying is we really struggle with the valuation. If we have a rotation to value in the market, we have more consideration around valuation and tesla slips up in any of its objectives theres quite a long way to fall. Stocks can remain over valued for some period of time, if you believe others have. Amazon, for example, people have said the valuation doesnt fit those stocks have had tremendous performances its hard to make this kind of call especially with a following around a stock like tesla which is unlike any p and perhaps any other that we have ever seen agreed. I think our sentiment a week ago is we wouldnt buy this stock and we think its dangerous i think in the near tomorrow its probably dangerous to short. We wouldnt encourage people to run out and buy it. The sam our belief is were more comfortable the stocks next move would be closer to 1,000 versus closer to 2,000 of course we could be wrong. We have an increase of robinhood and other day traders. We know december la tesla is a trafficked stock our price target is what we think the stock is worth it goes back to my question of why bother. You are essentially putting yourself in the wake of a lot of boats. Some big and a will the of little ones that got into the water as well. Well, scott, to be honest, theres almost like a regulatory requirement which is your price target and rating have to be consistent we basically had to say can we get comfortable with something close to 1500 a share to justify our current rating of market perform the answer was no. If we cant get comfortable with the price target then we have to adjust our grading to be consistent with that thats just thats a regulatory requirement that we need to adhere to. We thought very hard about this. We spent a lot of time looking at scenarios and trying to ascribe probabilities to those scenarios about what the stock is worth when we came out with that, we had a disconnect with our rating and we had to change that. Im wondering how you view the short case here or maybe the impact of the shorts lets say, the Short Interest is still high we know that maybe its not what it once was. Maybe some shorts have disappeared now. Are you factoring in any part of your change here in the way you view the price target as maybe some of the Short Covering possibilities are diminishing. Thats been a catalyst for the stock. How do you view that whole issue of taking that perhaps out of the market to some degree . I think the converse is true which is we have had Short Coverings and we had have a market rotation thats been generational we havent had it in more than 20 years to growth oriented stocks we also had the rise of robinhood. I think correllectively they hae contributed to the surge in tesla stocks were not making any rational case that the impact of shorting is going to diminish and the stock is going to fall down. I think our perspective is we try and root our analysis in valuation and there are things that we worry about. Expectations are getting higher when you have a stock go up this High Expectations are getting higher. Tesla has to produce 75 more cars in the second half of the year relative to the first half of the year. Its a very uncertain economic environment. Is that slam dunk especially since expect tagtations are hig . Absolutely not could the market, if it sees a recovery next year move away from Growth Stocks towards value oriented stocks . Sure those are some of things that we worry about that could be cause for tesla. Its not a call on, theres diminished opportunity for Short Covering and therefore we think the stock will go down what do you make as we look at shares trade here, they are down half a percent. As we said as i brought you on the air stock was positive you have a sell call on a name like this and you present what you think is a credible case for why over the longer term the stock should be trading much lower and its hardly moving if anything, its a talk to the hand kind of a call today that is being presented to you. I think two things. We were clear in our note that really our view on tesla had not changed. It was just our rating it was reconciling our rating with our price target. I think the second is, look, when theres momentum in something, its very difficult for that to change the stock is powered through cell rating changes. We think at some point, longer term, valuation matters. The analogy is what we saw in 98 and 99. It was only a year later when valuations became much more grounded i wasnt really expecting the stock to move. A, we didnt say we found a new piece of information and we think differently about tesla. B, we have seen this stock steam roller lower price targets in ratings before yeah. Matter of fact, you do say near term expectations are in your words, achievable slash beatable i hear you on all that i appreciate you coming on today to talk about this call that has a lot of people talking. Thanks thanks for having me. I got a lot of them and im short 1500 and 1600 in size. I think one of the bits of news out there today just in the last few day, scott, is rivian. Makes a beautiful truck in whatever normal illinois they bought out that mitsubishi factory. They had to push their production out a full year its not going to be out now until next summer. Thats right when the tesla cyber trucks are due in. That might be a bit of the cushion that you see when influential analysts like tony makes the call he made today all of a sudden some of the other competitors are being pushed out further into time before they come to market with a product. Tony see teed it up that valuation matters. Maybe he will be laughed out of the room when he says Something Like that, but is he right hes wrong. Valuation never matters. Its sentiment were doing a tv show with tony and still talking about how expensive it is. The company has a ton of momentum the stock has been over valued for a decade it hasnt mattered once in ten years. Tesla is unique. I dont think you can compare it to other auto makers i understand they will all launch evs and that will become a bigger part of the industry. What happens is you get so many Public Offerings of new electric vehicle plays. New Hydrogen Fuel cell plays nay will take fisker public structure. You have the fuel cell which is a 12 billion enterprise value what ends up happening is they choke the market with competie ing versions of tesla. That is what happened with the dot coms its not that tesla will stumble fundamentally. They clearly have momentum in what they are doing. If those three are successful then youll have six then youll have 12. Then youll have 25 publicly traded equities that investors can choose between they will do secondary offerings. Thats when you start to see share prices come down we clearly havent gotten there yet. Its very hard to know when that Tipping Point will be reached. Its hard to make Statement Like that that valuation never matters. Its only about sentiment. At some point sentiment may change historically its not that valuation doesnt matter to investors, but were talk about the share price. Historically over the last ten years theres never been one split second during which you could have looked at the valuation of tesla and said, its reasonable. Best of luck has never worked theres a similar case and he said, Automotive Company will be worth a trillion dollars thats the ceo of volvo. He said tesla is moving faster than every one else. He probably meant himself included it reminds me back a couple of years ago when we had a conversation about amazon and always a Value Investor tried and true i cant get behind the valuation. I cant get behind the valuation. I probably own like a handful. The rest are much more disciplined valuation, fundamental based companies. I looked at cloud and cloud being, could be a trillion dollar total Addressable Market by the end of this decade. When i looked at that and saw theres only three players and amazon was the leader, thats how i got my arms around it. You view it as a tech company and a momentum trade and its going to trade with growth versus value you believe in total Addressable Market thats how you can justify it. I cant justify it this was a 360 dollar stock back in march i get why its going up. I dont feel comfortable having that in my portfolio i have plenty other names with juice and totally Addressable Markets i can get back behind. Do we say that tesla was the stock that called into question where the market has been trading specifically from a nasdaq and tech and high growth standpoint no one knows when this ends i agree with what josh says. When you have company that comes along and changes the way things are done, there it attracts competitors and ultimately thats when you see valuation matter i think a lot of Value Investors have been confounded by growths leadership when you look at the market in total they have been confounded by ten year yield coming down and gold going up and the multiples were seeing on some of these Tech Companies. Theres a difference between now and late 90s. In the late 90, you didnt have the proven Business Models i think some have been proven in this environment are we still paying too much for those bid models when you look at the dot com bubble, were still way beneath those levels were the highest postdot com era. If im an owner and im an owner for people that pay tax, i may be a reducer i dont know that im necessarily a full seller because theres people that argue that tesla is in the software business. Theres people that argue that they are actually in the Energy Business when you look at those businesses in total, they are large Addressable Markets. Im not commenting on them specifically but theres some companies within this that in a zero rate world where theres no durability or visibility related to growth they will be willing to step up and buy those companies because they view them as the new defenses. Do we need to worry about some of these other names and question their own valuations even if you suggest they dont matter and they could still go higher relative or regardless of what their valuations are . Zoom is up 271 year to date docusign, 165, twilio or shopify or cloud fair or square or chegg or etsy. We know the stocks have gone up but that may not justify the magnitude they have. First is some of those questions you mentioned will hold onto their market capitalizations and some wont its hard to know. Many other Companies Look exactly like amazon did in a 90 draw down and did not come back. That part requires some skill if youre playing that game there arent a lot of other publicly traded pure plays that capture the imagination in that space. That Fund Managers feel compelled to have to be in and that index funds have included in their make up zoom is an interesting kpamp ii of that. I bought the stock at 70 like way before the pandemic. I took out my cost basis im playing with the houses money there. Theres really nothing that zoom does thats incredibly unique. Verizon just bought a start up called blue jeans which they will be pushing to corporate customers and individual households theres Nothing Specific that makes zoom so important. If you and i have a meeting tomorrow and i tell you were using google meet instead of zoom whats your response all right. I dont care theres no cost to you one way or the other zoom is being treated like, in terms of its valuation as like its this magical creature that theres nothing like it. Its not true. However, they were fast. They were early and a lot of these tech plays that when youre asking about valuation, a lot of them are in whats called a cumulative advantage game. It accrues to the players that come along first build a big audience i think were pricing that in for a lot of these stocks. Well find out that some of these cumulative advantages just didnt matter that much. Go ask myspace how much that matters over time. Well find out who has manager so unique that it deserves the scarcity value it wont be all of these companies. This is exactly the point of the conversation that i want to be having here it stems off of the tesla conversation of the zoom jon, you look at some of the runs in these stocks that i just mentioned and the appreciation in the share price not a single one of these concerns you zoom is great company. They have a great product. As josh said, is what they do so unique only to them . Are there others on the list that you need to ask yourself the very same question that josh just put out here. You should always ask that question lets ask it. Do any of them concern you at all . For instance, like joshs point with teams, with google and with zoom, youve got some people that have already adopted over to zoom youve got others that are part of teams and google meet and so forth. Theres a distrust of some of the Biggest Tech Companies out there like microsoft, like google to a certain extent several others fall into that category im not saying you justify the valuation based on that. Then you look at another one im lucky enough, like josh, to have owned zoom for a very long time i also own chegg the more we see people, colleges and high schools that want to operate remotely, this isnt a zoom for those this is for textbooks. This is for delivery of course load and so forth. The more you think we might be setting around rather than in classrooms doing things remotely, chegg and lrn, another stock i bought are two that will just continue to feast on that none of these stocks concern you . They concern me all of them concern me. Ill shut up but all of them concern me thats why you get these kinds of returns you dont get 300 or 70 or even 50 a meager 50. You dont get those kinds of returns from things with no risk you start taking profits in some of these names like you did with paypal another stock you mentioned on so many other o kaccasions as o of those had a massive run up. Its up 108 from the lows. It went from 31 times forward which is starts off being expensive, in my book. Its now at 50 times forward earnings did not move an inch. I know that u. S. Econ growth will be strong because of the work from home trends that we have seen. It went from 58 fwrogrowth to growth i bet june even accelerated further. I know the numbers will come in. I know the total Addressable Market is 5 billion dollar i feel like a lot of good news is priced in a lot of good news is priced in scott, can i comment on this . Can you hang on a second . Im going to come to you in a second youre going to tease relax i promise you. A lot of good news is priced in as a conversation i want to have leading into the big tech earnings coming up later in the week which well do that in a second rob, now, it is yours. I would say everything that josh said was absolutely right you have this huge tail wind that youve had with these businesses in form of the stay at home economy. You have a rising tide thats been lifting all ships you have people that used to do Sports Betting focusing on these companies and trading them on the daily. You have low barriers to entry for some of these Business Models and i very much worry that this could be the straw that breaks the camels back as it relates to some of these high valuation Tech Companies its not the paradigm changers like tesla that im nervous about. Its more these types of businesses were going to take quick break. Were going to talk about the big tech earnings coming up. You have the tech hearing on the hill tomorrow. We will be right back. Save hundreds on your wireless bill without even leaving your hou. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, you only have to pay for the data you need, starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. Welcome back lets get to headlines now here is whats happening. This years emmy nominations are out and hbos watchman leads all series with 26 nominations amazon, the marvelous mrs. Maisel with 20 nods. Netflix has 120 nominations versus 107 with hbo. You can see the entire list at cnbc. Com americans are smoking more during the pandemic as they spend less on travel and entertainment and have more time to spoke the fda has added even more hand sanitizers to its recall list it now has named more than 80 that should be avoided. The fda also issued a warning letter accusing a company of falsely claiming it sanitizers have fda approval. The fda has not approved any hand sanitizers. Full list on their website back to you. Growing by the day. It is lets have this conversation about and Deutsche Bank has