Watch Our Earnings Recap on Tesla, General Electric, Verizon, Lockheed Martin, and More

Thanks for joining me today, everybody. Glad that we are getting some more of these earnings watches going. It's been a very interesting week so far, a very, very interesting beginning of the earnings seasons. We've got people pulling guidance, we've got people with 2 different kinds of guidance. I think a lot of people are thinking that This might be the most important earnings season that we've had in a long time to get a sense of, of really what's going to happen for the overall market. Because we have a lot of different crosscurrents out there, and it is not easy to figure out what's going to happen when you've got so many different things happening at the same time, to say the least. If you got questions, get them in here as soon as you can. I'm going to be talking about earnings for a bunch of companies. We're We're going to focus a lot on Tesla because I think it's a poster child for a lot of what's happening in the capital markets today. But we'll even talk maybe a little bit about gold. But any questions you have, get them into the Q&A. And if you've got requests for tickers for me to cover, I'm going to try to cover them. But I am short on time today. I got to do a gig on Schwab here in just about 30 minutes. So I'm going to be moving pretty fast. Disclosures and disclaimers, as always, we are not advice givers. We're not advisors. Nothing is meant to be taken that way. We are providers of information, nothing more. So big headline last night: Tesla really drops a bomb on earnings. Mr. Musk comes on, things look better. He says a lot of the things he keeps saying that he's been saying for a long time. I don't know if he makes any significant promises. He's still going to be involved with the government. But I think those of you who saw our report on Tesla— and if you've not seen the report, let me know. We can get you a free copy. But if you saw this report, you saw this coming a long time ago. In fact, you've been reading our research. You've seen it coming for a long time. The bottom line is that Tesla's been losing market share and their sales are down, flat to down in the last— in the trailing 12 months. Significant drops in market share all across the board. In the United States, they still have leading market share, but it dropped from 80% to like 40%. The exact details are in our report, but you still got crazy perma bears out there. But one significant force you can't overlook here is the loss of the first mover advantage. It's undeniable whether it's BYD. If y'all saw the the the call we did a couple months ago on BYD and how they're surpassing not just sales but battery charging technology, range technology—that's a big deal. Tesla's really not the best at anything anymore. The other thing that I think is consistent through all this is that you do have these sort of perma bulls that are absolutely, well, I would say nutty sometimes. Let's take Adam Jonas at Morgan Stanley. Here's a picture I picked up of his report on Twitter. Right. So backing out the credits implies an underlying core auto operating margin of -1%. We've always said that those credits were ephemeral. They're not going to get that forever. Even so, the margin is still the lowest in the industry. This was not— this must be a high margin, super profitable business. And yet it's trading at a price that implies a ridiculous amount of profits, which if you haven't seen, you should check out my report because we do a great reverse DCF on that. The free cash flow. It's faked. They brought down receivables and extended payables. It's all from working capital. They also dramatically cut R&D. So how is a company that's falling behind going to catch up if its R&D spending is a fraction of its competitors and it's going down? The answer is it's not. The answer is it's not. Moving over to the Model Y to make things cheaper, to have a mass market vehicle. Yes, that's great. That's good. But legacy car companies do it all the time without major delays. It's part of what they do. They're putting out new models all the time. I've got a friend who's got a Model S. He leased one for years. And he finally said, well, I'm just going to buy one because they're promising upgrades. It's not happening. And when it comes to full self-driving, I got a bigger data point here. Data Trek. I don't know if you guys follow these guys. They're terrific. I used to work with Nick Coles back in the Credit Suisse days. He's a great friend, super smart guy. If you don't know about his research, DataTrack, you should check it out. They do great little daily notes, really good at kind of just tracking the overall market. It's much less deep than what we do. They're not doing deep fundamental analysis, just kind of basic market commentary. But Nick covered the car companies back in the day when covering GM and Chrysler was a big deal. He was an analyst on the big Chrysler deal. Credit Suisse was involved with this. So, this guy, he's the man. He's like car company, he's the man. And he was really bullish on Tesla for a long time. And he and I talked about it. You know, he told me his take, and I gave him my take. You know, whatever. We're still friends. We disagreed. It's okay to disagree with your friends. In fact, I like it when I disagree with my friends. We disagree all the time in New Constructs. We have meetings sometimes where we pick someone out and say, whatever we decide, you have to disagree with. We make people play devil's advocate. Groupthink is bad. I'm getting off track here. Nick recently put out a note. Summary of his note, saying that in a nutshell, full self-driving is a road to nowhere with profits. He flat out says it. Self-driving, fully self-driving cars are only useful, truly useful in densely populated urban areas, and that's less than 10% of the population. It's more of a sustaining than a disruptive innovation, at least in the United States. Automakers would be best served— whoops. Automakers would be best served by focusing on affordable autonomy features rather than devoting significant capital to full AV technologies. I mentioned this because I feel like the one straw that the Tesla bulls are hanging on is that this full self-driving robotaxi thing is going to revolutionize. Let's talk about the economics of that real fast. So, Full self-driving taxis out there, that's great. Now every Tesla gets upgraded with full, and everyone now can just let their car work at night. I guess they need it during the day, maybe they'll let it work during work. It just goes off and does stuff while you're at work, or maybe can charge itself too. So you got tons of these taxis out there, like what are people going to pay? Uber, Lyft, these companies don't make any real money. So how's the taxi gonna all of a sudden— and then how are you gonna schedule all these rides? You're gonna have to get an Uber, I guess, from your desk and let your car just, just do it. So now you're really just working for Uber, I guess. And, and with the flood of all these taxis, how are you gonna actually like make any margin? Because it's gonna immediately— when you have that much competition, margins go to zero. Like what we've seen with Tesla and the electric vehicle market. When they were the first mover and there was not a lot of competition, they had high margins. Now competition in the market, their margins have gone to zero. The robotaxi margin will probably be zero too. It's a robot, right? People maybe pay a premium to have a human drive them, but you're not paying a premium for a robot to drive you unless, you know, there are a few people that will. Don't get me wrong, they'll be happy to like be driven. Oh, hello, this is great. But isn't Waymo way better than that already? They've logged hundreds of thousands, if not millions of miles of actual real robotaxis already out there. So, and they, and they're in the densely populated areas, and they've clocked a lot of mileage under the true robo mentality, or the real fully automated driver. I have no idea. I just mentioned this because I think that's the last straw that Tesla has. And let me get into a couple other things real fast, then we're going to start breaking down some earnings here. But first, for those of you that are new, you need to understand why new constructs matters. First of all, we're not as bullish as the rest of everybody else on Wall Street. Wall Street, 50% of their ratings are buy. Less than 15% get a buy rating. Less than 4% get our very attractive stocks rating. And it's not just us, it's Morningstar, it's Wall Street firms. We're different from all of them. Why are we different? We do more diligence. We're doing the footnotes research. We're actually going through the filings. No one else is really doing this. And when we do this kind of work, we uncover legally sometimes, and sometimes illegally, buried insights. These insights have been proven to have idiosyncratic novel alpha by Harvard Business School, MIT Sloan, Ernst Young, and even the very prestigious peer-reviewed Journal of Financial Economics. So effectively, it's proven to be better. So you may be wondering, sure, they're better, the ratings are different, but how do we know they are better in terms of real-life stock picking? We've got that too. I've been number ranked, I've been ranked number 1 by SumZero for 45 straight months in multiple categories. So, and that's versus buy-side professionals. These are not just retail investors. This is like real investors. And then probably the best demonstration of our alpha is in the indices that are traded live and hosted by Bloomberg. Bloomberg has an index licensing group. They are an index provider. They create indexes and they license these indexes out to a lot of big firms— Invesco and Schwab and other firms. And so they got 3 of these they created for us based on our research because they saw it and they're like, this is special. We want to sell ETFs based on this Research. They have 3, and I would probably talk about at least 2 today. But the one I want to talk about first is the Very Attractive Stocks Index. This is the Very Attractive Stocks. So if you were in the Very Attractive Stocks in the first quarter, Very Attractive Stocks Index in the first quarter, you were up 3.5% while the S&P was down 4.5%. That was for the first quarter. That's pretty good. Yes, we outperform by a significant amount. My favorite is the Enhanced S&P 500 Index because the only difference between our version of the S&P 500 and the legacy version is that we weight the stocks based on core earnings as opposed to market cap. The only difference, and it still outperforms. And you can look these tickers up. You can take these tickers and look them up on the Bloomberg machine. And it will give you this live performance. You can validate it. So my takeaway is we've got better data and it manifests in alpha, real alpha traded right now, not to mention over the last 4 years. And if you go back through our other track record, Seeking Alpha, other places, the track record speaks for itself, whether it's our focus list, whether it's our most attractive stocks list. Proof is in performance, my friends. And we have that proof, not to mention papers from some of the most prestigious institutions in the world. So I just want to make sure you understand where we're coming from. The big takeaway is trusting Wall Street and the media. This is like trusting the tobacco companies when they said that cigarettes are okay, right? They're going to say it till they're blue in the face because it's making them money until you make them stop. I don't know if Wall Street will ever make them stop, but guess what? You can stop smoking anytime. You can stop taking Wall Street research anytime because we've got a better alternative. It's like you can still have all the benefits of smoking without all the tar. Trade tar for truth. That's what you get for new constructs. Also, I talked about the 3 stocks that we're going to give— that we're going to provide access to today. These are 3 tariff-proof stocks. You may have seen me on Schwab talking about these stocks or similar stocks. This is a new set, okay? A new set of stocks. The other 3 were all outperforming for the year, doing tremendous. We think they're going to continue to do well. We got 3 stocks very similar to those stocks that we talked about. That are, we believe, tariff-proof and they perform extremely well. It's a special bundle. We're not just going to give you 3 stock picks with our institutional or professional report that's an 8-page full model of one of these companies. We're not just giving you that. We're also going to give you free access to our Stock Tracker 50 membership. That's the ability to get ratings on 10,000 securities, stocks, ETFs, and mutual funds, track 50 companies, Get rating change alerts on all the companies you're tracking. You get access to our ratings. Those rate— like that Very Attractive Stocks Index, that's our top rating. You can go search for stocks that have that rating. Can't screen for them all. We're not going to give them all to you for $540 a year. That's higher-level memberships can get— look up the very attractive stocks at any given time. But here you can evaluate. Anybody says, hey, here's a good pick, type in a ticker, get an answer. We want this to be so inexpensive that you're like, why is it so cheap? How could you do that? The answer is because you deserve to see how good our research is before you pay full price. So we're going to give you 3 awesome stock picks, and then we're going to give you for free the Stock Tracker 50 membership. It's part of the bundle, so it's a free add-on. I will drop this into the chat as well. Let's talk about earnings. Let's go to the portfolio. And by the way, this is institutional interface. So let's go to the earnings watch. I created a portfolio for the stocks we're supposed to talk about today. We've already talked about Tesla a fair amount. Unattractive rating, economics in decline, and valuation is out, just out the wazoo. And let me, let me just take a minute to tell you what I say out the wazoo. So we got this report. It's free. Been up on Forbes, probably seen it there. And we show you, we go through all the, like, what I call pipe dreams, right? The first mover advantage will last forever pipe dream, right? Market share plummeting. And in the most mature markets, they're doing the worst. They can't regain the market share with, like, delivery misses. Like, how are they even going to, like, sell cars? They can't get deliveries right. We thought there were going to be great profits. That's, that's happening. The profits dropped in half and probably even farther when we get the 10-Q based on the earnings yesterday. These guys have been a huge free cash flow burner forever, folks. Like, whatever headline profits you've seen, they're not there. And I'm going to skip through this because you got the whole report. I want to go to the valuation section. So the current valuation, when we looked at this, so $250, I think it's probably back around there. What does that mean? That means that they're— that Tesla's going to go To a 15% margin. I think the margin now is— shoot, I don't have that in front of me. I think the 15% margin is— it's 1.5 times Toyota's margin. Oh, their margin is 5% now, or was. It's like zero now, right? It's even lower. But they're going to jump to 15% margin and then grow revenue at 28% compounded annually. That's what you have to put into a discounted cash flow model. To get to $250, my friends. This is math. This is simple math. And clients can recreate this on our site at whim. And I've done plenty of reverse discounted cash flow case studies that show you how to do this that are free and as part of our community. I'll give you a link to our community. You sign up for the community and, and just click on the reverse DCF. I'll show you. Sign up in our community. You go here, reverse DCF case studies. We show you how to do all this kind of modeling. So, well, then, like, let me— then, so let's break down a little bit more in terms of what this means for the business, like this 28% growth in revenue with a margin of 15% at the same time. So if we run this model out, we put this into discounted cash flow model. Right? If they're growing 28% for about 11 years, that would imply $1.4 trillion in revenue in 2035. By the way, that's 1.3 times the combined revenue of all the legacy guys. Big number. That's $1.4 trillion. Now, if we assume that the automotive revenues are just 79% of total revenue then as they are now, that's $1.1 trillion in automotive revenue. So if we divide that revenue by the average selling price of Teslas or the, you know, the whatever the average selling price is for the country, we can get the implied number, the implied amount of vehicles that have to be sold. And that's what we show here. And then we can look at what that is as a percentage of the expected entire electric vehicle market in 2035. And you can see these are the implied market shares. For Tesla, meanwhile, market share is headed down. It's in the teens. They're supposed to get into the 50s. Nutty. All right, we are really short on time, so I got to keep going here. So Tesla dropped a bomb. Stay away. Let's talk about GE. What happened to GE? I think they had a good report. Yep, they crushed the estimates. They did really, really well. And you know, for those that follow us, we were really early bears on GE back before it came down. In fact, we predicted the bottom. We literally called it almost within like 50 cents or so how much the stock could go down because it was overpriced relative to its return on invested capital. We did a great report on that. You should check it out on our blog. It's free. But right now, I think this cost— this stock is like, this is not a good business. It's really never recovered. A lot of legacy. Write-downs, but the valuation here not crazy as Tesla, but for an industrial company with virtually no growth. And by the way, Tesla is not a growth company either. But yeah, too expensive for sure. So whatever gains you might have gotten that we would say take those and run. Let's look at Verizon. We used to like this company. We used to like it a lot back when it was still into live entertainment. In fact, that was our thesis. And we're seeing that, like, that was a good strategy. Like, Amazon is moving into that hard because we were saying, look, with all this communication and streaming and whatever, like, there's a plethora of content out there. We don't need more content. We don't need more commodity content. What we need is unique content. Well, what is like unique? What's left? Live. Live events, live sports, live concerts, etc. Verizon used to have a big focus on that. And they sold it. Live events, they're doing a lot. So otherwise now it's just a, it's just a telecom company. Now compared to AT&T, cheaper. We could take a look at AT&T real fast. Let's go. T, I don't like AT&T as much as we like Verizon. So I like this, I like this company. It's got an attractive rating. I like the fact that it's priced for permanent profit decline. And it may be time for us to look back at this because, you know, with the, with the AT&T report You know, we got pretty solid numbers. And yeah, they're taking some customers currently from Verizon, but this just goes back and forth. They had a good— they beat expectations. Let's see, how's the stock done in the last 5 days? Yeah, not so great. Year to date, pretty good. Yeah, I would, I would consider this an opportunity to pick something up on the cheap. We like this business. We like the fact that it's so cheap. Let's talk about a defense company. All right, not looking good. Very unattractive. I don't know what else to say. I don't know how they did on earnings, but look, we know that there's been a huge run. Look at this. That's pretty good. Year to date was down 12. I'm sorry, that's 5 days. Year to date doing pretty well. Wow. Strong earnings, but the stock was stumbling. I guess it's not anymore. Well, everything's up today, so I don't know if we can look at that too much, but this is a company, you know, are they going to be losing market share to Europe? I don't know. I don't know that that that Europe is going to build a military industrial complex overnight. They're going to need a lot of help from I think their U.S. compatriots, and it will be conducive for these guys to probably sell a lot of technology supplies, etc., to help Europe get up and build their own stuff. But because I don't think they're going to be able to do it on their own overnight, not as fast as they want to do it. But this stock is bad economics, expensive valuation. I would avoid. Not the best, not the best market to go into. Why don't we skip over to Lockheed Martin? Because it's another defense stock. So if you really want to be in a defense stock, this is a better one, right? Attractive rating. Again, we're about to get a new 10-Q. That's why it's suspended. But we got good quality of earnings, good valuation. That's where you want to be. How do they do with earnings? Interesting. Not done as well. It's cheaper. All right, so they affirmed their outlook but doesn't include tariffs. So decent defense demand. You know, these guys have little mini oligopolies. But yeah, if you want to be a defense stock, this looks much more attractive than RTX. Let's take a look at Chubb. Everyone's got to have insurance, right? I mean, It's kind of tariff-resistant. This is not one of the stock— potential stock picks, but it's not dissimilar to some of the other things we like about tariff-proof stocks. Like, we wanted them to have an attractive rating, and we want them to be in businesses that are going to be resistant or tariff-proof because people are going to have to continue to buy insurance. So we like this one. I think these insurance companies look cheap. If you're raising your hand, I can't hear you, but what you can do is put a question into the Q&A. Or the chat. That's where I will be able to answer questions. So, Chubb, good company, good stock, attractive rating. Interesting how they do with earnings. Oh wow, a lot of losses with wildfire. A lot of losses. A couple questions. Is the insurance sector a good place to find quality stocks? Yes, it is. Yes, it is. I have used our screener. By the way, I told you our screeners are incredible. And like, they, you know, this with this Professional subscription. I mean, here's how easy it is to find the most attractive stocks. Click on one button, there they are, right? And if you can, you can screen by that for any sector if you want. So if you wanted to go financials and you wanted to go insurance, bam, there it is. Not a lot, not a lot, right? In fact, I kind of prefer to show you sort of this from the other end. I don't want to give away these because, look, this screener is incredibly Valuable. So can't give all that away for free, but you get the idea. New constructs, you can screen for this and then you can, you can do it across the entire market. And again, I'm doing very unattractive as opposed to very attractive, but you could obviously flip it. You could then say, look, I want return on capital to be greater than 10%. I want a free cash flow yield greater than 10% and then have it search for that. Bam. You want market cap, whatever. And you can do it again by any sector. You can do it by then subsector. Super powerful to get the answers. We'll go back to our earnings watch here. All right, where are we? Moody's. Let's talk about Moody's, one of my competitors, kind of. Hey, you know what? What's the credit rating on Moody's? Not bad. I would say our credit ratings are way better than the legacy credit rating providers because number one, they're based on better data. And if you look at my credit rating, I'll show you how my data is better. Here's a traditional versus adjusted version of all the metrics. So you can see pretty similar debt to total capital, whether you're using unscrubbed data or our special adjusted data. EBITDA to debt, pretty close. Free cash flow, it's close now, wasn't for a while. Data makes a difference, right? And we update these things every quarter. Anyone here been a customer of credit ratings from any of the legacy providers? You know how often they update their Models? Not very often. But we're talking about stocks today. So what do I think about Moody's? Good company, bad stock. So if I'm the executive of the company, like, this is a compliment, right? I've got great underlying economics, high return on capital, and the market is giving me credit for it. You kind of got a problem if you're green here and green here, like very attractive stocks. It's a problem. People aren't seeing The value. That's why there's opportunity. So if I'm an executive, you know, maybe I want to get out there and maybe speak to the quality of my— the economics of my business. And the market will know that not only is it not an exam— not a mistake that the economics of your business are good because you are paying attention to it and you're aware of it, but that you're more likely to keep it that way, which means that valuation is really cheap. So these guys are doing a good job in terms of the market understanding their story. What was this? What was the takeaway on the earnings? Ooh, cuts earnings outlook as company firm grapples with volatility. All right, still up 5% year to date, down a fair amount. So yeah, everybody's up today. They beat the number, but they warned. Neutral rated— whoops— neutral rated stock. So, you know, neutral, you know, nothing to get excited about there. 3M, didn't they have a big beat? Solid game plan for tariffs, earnings adjustments, and quantifies tariff headwind. They skyrocket, keeps guidance but adds tariff hazards. I think they had great results, good earnings result, and the stock is up, down a lot here, guess early in the month, like a lot of, lot of things bounce back some, back down, bounce back some. So year-to-date Pretty good year to date. Good for the last year. We give it a neutral rating. Good company getting expensive. Good company getting expensive. So we don't like it. And we don't like the fact that earnings distortion is not looking good here. So let's see. Yeah, you can see accounting— notice core earnings doesn't have these distortions. It's perfect. But then accounting earnings jumped up above Poor earnings. So not a good thing. Not a good thing. That and that's a big number. Earnings distortion is 17.8% of reported earnings, and then 1.86% of assets. That's a big number. So that could be concerning for next quarter. All right, North of Gumman. Ah, another defense stock. Neutral suspended. We're getting you know all these guys were supposed to get a 10Q shortly after. They report their regular earnings. Neutral rating, defense sector. You know, I don't even really care about how their earnings did. It's neutral. So, okay, economics, getting expensive valuation, neutral. Don't touch it. Don't play with it. You know, look, the market is a semi-efficient market. I'm not here to say the market's completely inefficient. It's got pockets of inefficiency where things are undervalued, pockets of inefficiency where things are overvalued. It's a semi-efficient market. Perfectly efficient market is impossible. So what does that mean? A lot of stocks are reasonably priced. That's neutral. Neutral rated. They're basically in the middle of the bear curve, the bell curve. So yeah, neutral rating. Not much to see here. Yes, we do have plans to cover Europe and cover the world. That's a big part of our strategic vision is to expand our coverage. Steel Dynamics. Ding, ding, ding, ding, ding. Focus list. We like this one. We like this one a lot. We like where it's headed. I know this has probably been difficult. It's held up pretty well this year, up 7% while the market's down about 10%. The last 5 days doing well too. Still outpaced estimates, doing great. What can I say? It's on the focus list for a reason. Green across the board here, still looking very cheap. Beat the number. I think ultimately that Steel is a strategic imperative for us in the United States. Like, the UK just closed their last and only steel plant, and it hasn't actually been able to make high-quality steel for a while. They've sort of ruined themselves because they've effectively disallowed efficient production of energy. And so the cost of energy is so high that it costs too much to run the steel mill, and they can't be competitive. And now they have zero, pretty much almost no industry in the UK. Why? Because people have been making all these other things too cheap. They haven't needed it. And they've been able to kind of run, run down these bad paths based on bad policy that have effectively left them with, with zero industry. And, and that's maybe where the United States goes if we don't start bringing some of this stuff back. You know, the rest of the world wants us to believe that debt and stocks and food and clothes are super cheap. And we just buy them all we want, not need to make them until we don't make them ourselves anymore. And then we depend on someone else and they can raise the prices all they want. Things are cheap for a reason, not usually not high quality. And for a while, interest rates have been too low. Debt's been too cheap. Why do you think our government overspends, has been able to overspend as much? Why do we think our economy is debt-laden? We overspend. Too much money. Too, you know, too many problems. More money, more problems. Great song. All right, last one here, Zion. These guys had a bad quarter. I think the stock up a bunch today. Yeah, down, down year to date quite a bit. And I think this is a miss too. This has got some of the better underwriting of all banks out there. It's still cheap. The economics of the business are struggling a little bit. We're not worried about that. I do, you know, I don't like to see negative economic earnings versus positive earnings, but I think that these numbers are going to get better. That's part of why I put a focusless stock on here. You guys are getting some nice picks here. But yeah, 0.9 price-to-economic book value means profits are expected to permanently decline. We think that makes it cheap. Okay. All right. Well, that's all the stocks we're going to cover today. Thank you for being with me. Oh, we did have one request. Let's take this request. JBL. Whoops, that's because I— JBL. There we go. Sorry about that. Good company, not good stock. This was actually a focus list a long time ago and it went way up and we loved it and then we closed it because it got too expensive. So that's where we are on, on JBL. So let me close with Our tariff-proof stocks to buy now. Look, this is what we think you ought to be in. These are the stocks, 3 stocks in this special bundle. I think it's only $500, $599 to get this and Stock Tracker 50. So you're getting 3 amazing picks and Stock Tracker 50, all for the price of just a little bit more than Stock Tracker 50. Again, amazing deal. We highly recommend. Here's our very attractive stocks index. Outperform in the first quarter by 9%. It's the first quarter, folks. We think it's going to go even better. But thank you very much. I will sign off here. Thanks for being with me today, and we will be back to you with more of these earnings calls in the future. Please fill out the survey at the end. I'd like to know what you think. Have a great day.