Introducing our 7th Lead Advisor!
The secret is (almost) out! Join 7investing's founder and CEO Simon Erickson on Wednesday, January 19th at 11 ET as he announces this extremely exciting addition to our team...
It has been a busy few days for the United States as the pandemic-related news has been fast and furious. Pfizer reported better-than-expected profits and a lot of its revenue has come from the COVID-19 vaccine. Maxx Chatsko joins Dan Kline to talk about that, President Joe Biden’s plan to have 70% of American adults get at least one vaccine shot by July, the changing landscape for retail and restaurants, and T-Mobile earnings.
May 4, 2021
It has been a busy few days for the United States as the pandemic-related news has been fast and furious. Pfizer reported better-than-expected profits and a lot of its revenue has come from the COVID-19 vaccine. Maxx Chatsko joins Dan Kline to talk about that, President Joe Biden’s plan to have 70% of American adults get at least one vaccine shot by July, the changing landscape for retail and restaurants, and T-Mobile earnings.
Dan Kline 0:01
We are live you missed the introduction we have a whole giant fireworks introduction song dance routine. It was amazing. But you missed it. We are working with our backup producer JT Street today sitting in for Sam Bailey. So I am happy that we are here at all. Welcome 7 investors to the Wednesday edition of 7investing Now. My name of course is Daniel Brooks Klein, Maxx Chatsko. Get off your Peloton treadmill Be careful Maxx, welcome to the program.
Maxx Chatsko 0:29
Thanks Dan. I don’t have a Peloton treadmill but why don’t you lead with that? Geez.
Dan Kline 0:33
So we start putting the show together almost the second the previous show ends and of course wherever you’re watching this, we would like your questions and comments feel free to weigh in. About an hour before the show. I’m flipping around news channels. And I see Peloton has recalled its treadmill so if you remember a few weeks ago, Peloton ran into some trouble a child died on its treadmill and Maxx is it fair to say Peloton maybe underplayed the severity of what happened?
Maxx Chatsko 1:04
Yeah, I think they were a little too defensive too you know when I came out.
Dan Kline 1:09
And here’s the problem. Treadmills and little kids have not had a great track record, there is an absolute risk. If you have a child under say the age of 10. It’s probably younger than that. But let’s say the age of 10, your treadmill should probably be in a locked place, you should probably take some safeguards, and Peloton more or less came out and said that more or less said, hey, it’s not our fault. We told kids to not use it. We told parents to be careful. And that did not go over well, when you have a division of the US government telling you to recall your treadmill and a kid died and you go I’m not gonna do that. So today they came out and not only did they recall all their treadmills they actually aren’t fixing it. They’re offering you a full refund so that isn’t to say they’re not going to come up with a fix that they’re not going to come up with some method to resell you a treadmill and Maxx the market has not like this. Have you been following what’s happened to Peloton stock today?
Maxx Chatsko 2:03
Yeah, it’s down 15% around in that range. That’s the lowest price since about August or September 2020.
Dan Kline 2:10
So I don’t want to call this an overreaction but I looked up what percentage of Peloton total sales were made up by the treadmill. Maxx you want to take a guess at that number it’s in the document but I’m gonna assume you didn’t read the document. What’s what take a little guess?
Maxx Chatsko 2:24
I had no idea but I saw it on slack it is abysmally low 2% right?
Dan Kline 2:29
It is 2.2%. So they’ve sold about 1.6 million bikes. I’m gonna guess that means they’ve sold you know, in the 1000s of the treadmills. It’s a very expensive treadmill. It’s it’s you know, it’s about $4,000 were a comparable treadmill might be like 15, 1600. This is a pretty big difference because you could argue that you can buy a pretty good exercise bike and put a Kindle Fire on it for like four or 500 bucks and have a Peloton like experience. But the comparable cheaper prices to the Peloton bike tend to be the 1000, 1200 dollar range that’s not that big a divide. This is a massive divide.
So I don’t think the treadmill was a massive opportunity. I don’t think Peloton thought the treadmill was a massive opportunity. I think this was a customer service issue where they were doing this because some of their customers wanted it and there was gonna be some ability to serve gyms and other places by having a full suite of products. I fully expect a Peloton, rower maybe maybe some other Peloton machine, but Maxx, this is the market overreacting. We’ve seen this a lot. Do you remember what happened with Chipotle a few years ago?
Maxx Chatsko 3:35
Yeah, when they had all the norovirus, right or ecoli or both of those really take took a few years for them to recover. But, you know, they also had like, wasn’t their whole marketing pitch like food with integrity. So that didn’t really do them any favors either.
Dan Kline 3:47
Yeah, they were sort of hoisted by their own hubris. And with Peloton when you’re a luxury product and you take kind of an arrogant approach to life and death. That’s not necessarily going to go over particularly well. I do expect this to maybe be a prolonged downturn, but I don’t actually think it changes anything about Peloton’s business.
We will probably revisit this on future shows that we would appreciate your questions and comments. I see a great one there. We’re going to take that one a little bit later in the show because for our top story today, I called it a bit of biotech and a bit of retail. We’re also going to talk a bit of T Mobile but I couldn’t fit in what that was going to be. Maxx, we’re in your space here. President Vice President Joe Biden has said that he wants 70% of all Americans to have at least the first shot of one of the vaccines or in the case of the by the Johnson & Johnson vaccine, that would be their only shot 70%. By July. Is that number attainable? We’re at about 42% have had I think the full vaccine right now.
Maxx Chatsko 4:52
Yeah, so the amount of people who’ve had at least one shot is about 56% in terms of adults, right pointed point That out, be precise there. So, you know, hitting 70% by July 1 isn’t out of the question. But you know, you could doubt it, I guess, right, a lot of it now comes down to getting shots out to people who live in more in the suburbs and rural areas even more difficult to reach places, we really need to ramp up distribution of the Johnson and Johnson vaccine. Because you know, it can be stored at lower temperatures, you only need one dose, it’s a lot easier to convince people to get one dose than two doses. So we really need that to ramp up before we if we can get that 70% goal.
Dan Kline 5:34
So part of the problem now is vaccine hesitancy here in South Florida, you can essentially make a same day appointment, there are places doing walkins like so maybe the CVS at a Target right near me, that’s a very busy place with limited capacity to do shots because there’s not a lot of waiting area in the pharmacy. Maybe you can’t get an appointment there. But you could probably get one of the full CVS two miles down the road literally on your phone while you’re shopping make an appointment. Maxx, do you think it’s vaccine hesitancy? And do you think that Pfizer applying for a formal approval instead of just emergency approval, which they’ve hinted at doing, do you think that will change it for some people?
Maxx Chatsko 6:12
Vaccine hesitancy is an issue and that’s also the issue too, like, it’s not just the Johnson and Johnson vaccine, right? If you look, you know, just that demographics and those geographies. You know, in suburban and rural communities, there is more vaccine hesitancy. So we might be, we might perfect the rollout of the Johnson and Johnson vaccine and ramp that up fine. And then nobody wants to get it or a too high of a number of people don’t want to get it. So that is a real issue.
Dan Kline 6:36
There’s also a real problem of people getting their first shot, and then just not going to their second shot appointment. That might get better as second shot appointment, stop becoming a fixed thing. And it just becomes, hey, I’ve had my first shot more than 21 days out with Pfizer on more than 28 days out with with Moderna. I’m in CVS, I’m just going to get my second shot. There’s obviously some concerns because of side effects. Oh my god, I don’t want to take the second shot today because I will work meeting tomorrow I don’t want to miss and that’s become very tricky with people. When I didn’t have particularly bad side effects. My wife about 24 hours later, I was wiped out. Maxx, you had some not so great side effects, right?
Maxx Chatsko 7:13
Yeah, I got the Pfizer vaccine. And like, right after that, I mean, I slept for like most of the day. But you know, I have I’m a scientist. So I knew like, Okay, this is an immune response. So this is good. This means my immune system is working, right? That’s what it’s designed to do. So definitely, you know, if you can get a vaccine, not trying to scare anybody.
Dan Kline 7:31
Yeah, and I will say I actually was a little nervous in that after my first shot, I had arm pain. And after my second shot, I really just had a little bit of chills, and there was a part of me going, you know, does this not work and Maxx, I won’t share who but there’s someone in my life that that’s under leukemia treatment, and the treatments he gets for leukemia, he had the vaccine, but what the what what’s knocking out his leukemia stopped the vaccine from creating antibodies. So he’s going to have to wait until he’s a few months shy of his treatment, and then either take a third dose or take a different vaccine. So obviously, people with special health situations, make sure you’re consulting with your doctors.
We’re going to get back to Pfizer. We’re going to talk about Pfizer’s earnings, because I was a little bit surprised. We’re not going to do that next. And then after we finished the show today, we’re going to play a video, I interviewed Anirban Mahanti. About Tesla earnings were a couple weeks out from Tesla earnings. But a lot of people asked us for this, we’ve been trying to fit it into a show. So we’re gonna close the show and then immediately start that video. We of course, would love your questions and comments. It doesn’t have to be about what we’re talking about. We got sort of a hodgepodge of topics, we’re going to go through. Maxx, next we’re going to talk about sort of the impact of where we work on retail and restaurants. Have your hand we both work at home. But have your habits changed since the pandemic in term. Obviously, you’re not going to restaurants as much. You’re not going to retail as much, but it has anything massively changed it has in my life. And I’ll talk about that after you talk.
Maxx Chatsko 8:58
Yeah, I mean, I’m younger, right. So I definitely enjoyed going out more often. I think I’ve talked about before, I mean, I like to play darts and haven’t been will do that for over a year. So that’s kind of frustrating. But I’m very much looking forward to getting back out there and to do that.
Dan Kline 9:13
So for me, besides that we don’t go out, you know, we order in two or three nights a week rather than going out. It’s not that I never go out. But you know, it’s a little bit no rules here in South Florida. So I pick and choose where I go. I did go out to eat at the Cheesecake Factory of all places this weekend because they had outdoor seating and they had plexiglass in it. And it felt safe in an environment where people aren’t necessarily being safe and everyone on our table was fully vaccinated. So I was probably being too cautious.
But that being said, What to follow as investors for retail and restaurants? You are going to see a pretty seismic shift in locational flexibility. So what does that mean? Maxx, both of us used to work at a company that has a headquarters in Alexandria, Virginia, and I would stay at the Westin Hotel and at that Weston, there is a bar restaurant a lovely place called the trade when called the trademark that that had a great happy hour, great place to have a business lunch, easy walking distance, easy to stay up until very recently for a lease reason they had a Starbucks right there, there’s one pretty close by.
Now with nobody coming into that office for the past 10 months or 12 months or whatever it is, and plans for less people to come into that office. I don’t know the full plans. But I would assume all the office buildings around there are likely to have less people coming in, that is going to cause less sales for that restaurant, less sales for the nearby Starbucks, the Dunkin Donuts, the Panera Bread, some of those locations may not survive. Now that’s a heavily trafficked area. There’s also plenty of tourists staying in that hotel. So it may not impact it. But you’re going to see companies like Starbucks have three or 400 closures over the next couple of years. And that won’t necessarily be because Starbucks isn’t doing well, it might be because in New York City, that Starbucks was located at the base of an office building, and the company in that office building might decide, hey, we’re not going to require people to come in five days a week, and the critical mass on that Starbucks might not be necessary.
So as an investor, where would I be worried? I would be worried about smaller companies. Companies that only have a couple of 100 locations. This could be a, you know, seismically bad for the company that owns Ihop and Applebee’s because we’re seeing breakfast and happy hour changes. So if you and I used to go say on Thursdays after work and go to a happy hour with our colleagues, and that’s certainly something that happened with my former colleagues, that happy hour may not happen, because maybe half of us aren’t in the office. We might go meet at a bar in the suburbs where we all live. I get Starbucks coffee, still, but not on the same schedule I used to it kind of is like whenever in my day, I feel like going to get a coffee, I go get it. And there might be a line at like two in the afternoon, there might be a line in the morning, it can be really, really tricky.
So I would just think of this as a watch and see trend, because we don’t know if New York City is going to go to you know, most companies, they’re gonna go to a three day workweek, we have to come in the office. And maybe that doesn’t change things that much, maybe the lines will be shorter, but the sales will still be good, because we’re willing to spend more if we’re not doing it five days a week, but you’re absolutely going to see some businesses find that they’re in the wrong location for where the population is. You’re also going to see some businesses to say, you know what, we now value outdoor space, like there are three restaurants spaces near me that were built with outdoor patios. And they, it could be a coincidence that at least two of them have been leased during the pandemic, and now have restaurants either end or going in. But I do think you’re going to see changes in what retail looks like, changes in what restaurants look like. Now, is that going to be giant? No.
And I’ll give you another example. There was a Macy’s walking distance to where I lived up until a few months ago. And it was a smaller Macy’s and it was kind of a slight profitable break in proposition, make a Macy’s because you weren’t gonna buy big things. It was more like, you know, people in the neighborhood buying a T shirt because you know, they needed one. And Macy’s closed that store, based on the demographics. It’s a very wealthy area, but it just wasn’t ever going to be a big store. People made a lot of purchases, and simply because they were walking there, so you’re not going to buy big bags of stuff and then and then walk home. So you’re going to see very smart businesses change their locations, you know, that might not hit the McDonald’s of the world. But you might see locations that are just were business driven, have a Dunkin Donuts, have a Starbucks have a whatever it is that either switch to more delivery.
So who’s going to win? The bigger businesses that have done well during the pandemic like a Starbucks, that, like a McDonald’s that have shown the ability to really embrace optionality, they are going to do really well. We totally appreciate all of you watching. SoFly Marketing, shouts out to our own Sam Bailey and JT you could put that up if you want. Hey, Sam, we missed you. Yeah, we miss Sam too. But we appreciate JT being behind the glass. Sam misses us as well as she has shared a comment too. We will see her on Friday. A great show as always, not not as always we started a little rocky here. We missed you too. We will see you Friday.
We will deal with some of your questions and comments later on. But Maxx, Pfizer had a great quarter. Why don’t you give some of the numbers and then I’m going to ask the question that I think all of the viewers would want to ask.
Maxx Chatsko 14:29
Yeah, so I mean, the company was expecting to start off with the Coronavirus vaccine, right. So of course it’s working with BioNTech, a German company. So it’s we call it the Pfizer vaccine. Technically, it’s the BioNTech vaccine, right, just to be precise, but they were expecting 2021 to have Coronavirus vaccine sales of about $15 billion dollars. Now they’ve raised that to $26 billion, Dan. So to put that in perspective, that would be the most revenue any single drug product has ever generated in a single year ever. So That is a quite a haul from one one product.
Dan Kline 15:04
So I have an issue with this. When they first started talking about the vaccine, they talked about that they weren’t going to make money on the vaccine, or at least they implied that and they’re actually running a 20% profit margin. I have no issue with that. But it does sort of seemed like it was a bit of a bait and switch. Does that trouble you both as a, as a scientist and sort of just as a human being?
Maxx Chatsko 15:25
Yeah, I mean, look like the optics and the ethics of all this, right? It’s a slippery slope. One thing to point out is the US government agreed to pay a certain price per dose, it was $19.50 per dose of the Pfizer vaccine. That was a supply deal that the federal government, you know, agreed to. So that’s not really Pfizer’s fault, necessarily, right. I mean, the government could have been more like stricter in terms of getting a better price or something, but they were focused on getting over the pandemic. So maybe some of the nuance there. Additionally, Pfizer and BioNTech didn’t actually partake in operation warp speed. So taxpayers and the federal government didn’t actually give Pfizer or BioNTech money for research and development to make this vaccine. The only deal they have with the government is for the supply of the vaccine. So that is a little bit different than say Moderna, or, you know, Johnson and Johnson or some of these other vaccine developers. So again, maybe some of the nuance, I don’t know if that changes. But yeah, making a profit during a pandemic, it always doesn’t sound a good feeling, right?
Dan Kline 16:27
It feels a little unsightly. Now, that said, if they agreed to the price beforehand, and then Pfizer figured out how to make it cheaper than they originally projected, I don’t begrudge the profit, again, $19.50 per shot seems relatively a low price to pay for something that’s likely to present prevent hundreds of 1000s, if not millions of deaths globally. So again, I’m not ethically too concerned about it. But I actually would like to see Pfizer, like right now come out and donate like, I don’t know, half a billion dollars to, you know, to getting vaccines to parts of the world that don’t have it. And I’m not saying they’re not doing that. But I’d like to see them publicly, sort of support those efforts, because we are seeing massive gaps in where there are vaccines and who’s ordered them and who’s paying for them. We’re starting to export AstraZeneca vaccine, which apparently isn’t good enough for Americans, but we’d like it for the rest of the world. I’m teasing a little bit. It’s it’s, it doesn’t actually make sense for us to set up operations to administer a fourth vaccine when we have ample supply of three vaccines.
So Pfizer is saying that you’re likely to need a booster shot a third shot, I’m one of the first people not in a trial to get vaccinated, because I volunteered. And it was it was 70. Plus when I got vaccinated, so it was really early in the game. Maxx, you don’t actually think I’m going to need a third shot is that correct?
Maxx Chatsko 17:46
I think it’s possible, we will not need booster shots, or at least we won’t need them every year. So there’s this narrative that we’re gonna it’s gonna be like the flu, and we’re gonna need a shot every year, and you have to get boosted up. And I don’t think that’s necessarily true. Right. So there’s a difference we talk about right now. Right? antibodies, right? Yeah, I mean, you mentioned at the beginning of the show, I think it’s all over the media. So I think a lot of the population knows about antibodies now, right? Because of the pandemic.
So let’s look at it this way. Let’s see I got a shot. And then 12 months later, after my vaccination, I go and get a blood test. And they say, Hey, you know, Maxx, your antibody levels are 10% of what they were right after you got vaccinated. Does that mean I need a booster shot? Probably maybe not. Right. So the thing to know is that when we get vaccinated or you get infected, that triggers certain processes in your adaptive immune system. So the end result is that we generate antibodies. However, before antibodies, we actually generate T cells, and that’s what retains your memory to the vaccine or the infection. After 12 months, your body might be like, Hey, man, we made all these antibodies for this Coronavirus thing and we haven’t seen it yet. Let’s ramp down how much antibodies were making. We still might have T cell memories in our bloodstream.
And we do now have tests to detect some of these T cells. There’s actually a company that’s publicly traded it’s called Adaptive Biotechnologies. The ticker is ADPT they developed a test called T detect with Microsoft actually. And they can detect T cells in your bloodstream. It’s way more accurate than just detecting antibodies. And I think we’re gonna probably be using this in the future as we start to answer these questions. We don’t know how long antibodies to Coronavirus will last Is it a year? Is it five years? Do we need a booster every 12 months or every 18 months or every 10 years? Maybe some people never need boosters. So I think it’s gonna vary quite a bit. So that’s something that’s why there’s kind of more nuance involved, right?
Dan Kline 19:39
I really hope that when you take your microscope and zoom in on a T cell that it actually looks like the old marshmallow T’s for Mr. T cereal. I’m guessing that is probably not the case.
I’m only seeing myself in the screen. I don’t know if that means we’ve lost Max cesco or we’re just playing around in the directors room. Nope. We’re just playing around in the directors room. It is a wild day today. If you want to put up the next to last comment JT thanking us for this month’s recommendations, I’m going to sit. So yes, we really appreciate it. I apologize, I can’t see your name from from where I am I have, I have sort of a weird mix of good vision and bad vision from my laser eye surgery. So I could see like an eagle while I’m driving but not so well up close.
But I reason I bring this one up, because we have one, we appreciate it. We’re really excited about our recommendations this month. But Maxx, if somebody asks me, should I subscribe to a service that gives you stock recommendations in exchange for money? I would say Why yes, you should, because us at 7Investing do a great job were very, very diverse, very, incredibly experienced teams. And no matter what type of investor you are, you’re going to get some benefit from our picks. But of course, if you’re looking for an impartial source on whether you should pay for investing advice, I am not that.
So why would I trust Pfizer, which has made billions of dollars we’ve just learned from the vaccine, when they say, hey, you’re going to need a third vaccine. This would be like me and my family ladder and scaffolding days, if I slapped a sticker on every aluminum ladder that says it’s only good for 12 months, and then you have to throw it away and come buy a new one. What’s the process for this? Does Pfizer make this decision? Or is this some sort of outside body that makes this decision?
Maxx Chatsko 21:19
Right? So this is like vaccine manufacturer says we might need more vaccines? So that does sound kind of funny, or like why would you trust that? I think there’s Johnson and Johnson for you know, has actually said we might need boosters as well as Moderna as well.
So here’s a way to think about right, there’s two reasons we might need boosters. First, you might need a booster of the same shot you’ve already received. So basically just a third dose. And that might be if there’s waning immunity, right we for mRNA. And even this new vaccine from Johnson and Johnson uses a different technology, it’s never been used before. We don’t know how long and how durable our immune response is going to be. So maybe we do need boosters, or at least a third dose some time in the future. The second reason we might need a booster is because there’s mutations in the strains. And you know, that’s reducing the efficacy of the vaccines you’ve already received. So we made it a third dose of a slightly different vaccine. So all of these companies are actually preparing for this potential outcome. They’re doing the work now, or you know, securing the manufacturing capacity, just in case we do need boosters or slightly different vaccines. They’re all working on that. I just think we should leave room for doubt that maybe we don’t need it or quite the volumes or maybe we need it a little less frequently than the companies are thinking right now but better to be prepared and you don’t have to go into lockdowns again because we were caught off guard,
Dan Kline 22:39
Give me all the boosters I’ll take all three vaccines. This starts a saw this trip to Key West I’m heading to Key West after the show today, Friday show will be live from I don’t know maybe a Starbucks parking lot in Key West, depending on the internet situation. But I will be speaking at Money Show in June live at the Omni Hotel in Orlando, Florida. I’m gonna be on a cruise ship. We’re gonna do a show from there in July. I don’t even know how that’s gonna work with the internet, but we’re gonna figure something out. I’m going to be on a different cruise ship in August, I have worked out where I’m going to do live shows from so I want all the immunity as many vaccines as you give me I’ll carry six of those cards around I do not care.
We have one more topic here at the top of the show and we’re gonna push your questions to after what we’re watching. So I’ve got one more topic I’m gonna go very quickly on this one because it is a company people tend to overlook. Maxx, who is your cell phone carrier.
Maxx Chatsko 23:32
I use Google Fi like a true millennial.
Dan Kline 23:35
Wow, I use T Mobile. Why do I use T Mobile because there’s no nonsense from T Mobile. If T Mobile advertises it $65 a line that includes taxes that includes up charges that includes they don’t even have overages anymore. So it used to be I mean, nobody has overage charges. But everybody had this sort of rule that if you use too much data, they could slow you down for its talk to your program. T Mobile has gotten rid of that they relentlessly have done what they call their uncarrier moves. And that’s basically what sucks about AT&T and Verizon that we could change and they look at things and they every quarter pretty much come out with some little thing and sometimes big things.
You know, they’re like, Alright, we’re gonna do this because it makes it better for our customers, you know, massive one was they got rid of contracts, then they got rid of overages, then they got rid of having to pay extra for all sorts of stuff. Like when I land in the Bahamas, I’ll get a text from them saying, Hey, 2g is free, texting is free. If you’d like 3g, it’s $5. And you can get you know X amount of data and you can pay it on your bill and it’s really simple. Whereas if you have AT&T, you might show up in a place where you’re roaming and get out come back for your trip and I’m like a $600 charge that happened to my mom on the first cruise we went on a few years ago. She got back in like she didn’t even know her phone was roaming. And you know had a massive bill for just things that happen in the background.
What what happens with T Mobile? they add at least a million customers every quarter, so they added 1.4 million net additions by Half of those were phones. So many of those are iPads and other type devices. This is a company that after their merger with Sprint has gotten a lot more profitable. They have about 5 billion in free cash flow projected for the year. And their 5g network, the numbers are a little squishy, because they have different names for it. But some form of 5g is covering 1.6 million square miles. That’s four times the size of Verizon and two times bigger than AT&T. Now, is that real 5g? It isn’t it just kind of better 4g, but they are putting the money in, they are ahead of the pace of their competitors.
So do I own shares of T Mobile, I don’t, why not? Because the investment is endless. Because the second they finished with 5g, they’re gonna have to start working on six G, and then it’ll be seven G, and then it’ll be space holograms, or whatever it is. So there is kind of a cash negative. But if you are looking to be in this space, this is the place they don’t have a lot of encumbrances. They’re not sitting on, you know, Verizon, which just had to sell, you know, AOL and Yahoo for, you know, some tiny percentage of what they paid for them. You don’t have AT&T, which is saddled with its legacy media businesses that it does not do a great job of, of running that, you know, it’s saddled with that DirecTV and other things that are that are really tricky. This is a pure play more or less in the space, they own some banking products and some other things that are convenient for their customers. But if you want a well run company that makes moves that has loyalty in a space where nobody has loyalty, I would go with T Mobile.
That being said, we’re gonna get to what we’re watching in a second, we’re going to talk RNAI, and how it’s setting a high bar for Crispr Genetics, we’re gonna get there in a second. But before we do that, Maxx, it’s it’s cinco demayo. That’s four days after the first of the month. And I know for cinco demayo, I think while you break out your Corona, or whatever you break out, maybe you’re going to go for Mexican food tonight, I don’t know what you’re going to do. You should also consider subscribing to 7investing, what do people get if they subscribe to 7investing?
Maxx Chatsko 27:04
So each month on the first of the month, each lead advisor will make a recommendation. Simon asks, What’s our best pick? Why am I the only one on the screen? It’s a little weird. I like talking to myself. There we go, Dan, your back. Each lead advisor makes their recommendation we write a research report, we do a team call with all the other lead advisors and we get grilled, we get asked questions, you get critiqued on our pitch, you know, so you get access to the report, the research report, you get access to the team calls, you get access to company updates on all of the recommendations we’ve ever made. You get all kinds of subscriber only calls. Once a month, it’s on the third Friday of every month, we sit down, we talked to all of our customers, and we answer their questions directly. There’s so much we do it’s hard to even name it all, Dan.
Dan Kline 27:48
So let’s pull up the comment from Jordan G from earlier today. Cuz I think this is really relevant to why you should been a subscriber I’ve been a happy subscribers since launch, but interested to hear your take on the benefit to investors picking individual stocks, versus just investing in index funds. If you look at the 7Investing scorecard, overall, we outperform index stocks. And what happens when you buy an index stock is not only do you get the leaders, the ones that do well, you also get the ones that don’t do well. So instead of say just buy a category leader, you know, I’m gonna buy retail leaders, I’m gonna buy Amazon or Walmart, I’m gonna buy Target. Well, you might also own some JC Penney and some Dillards.
Now, obviously, there are better picked ETFs than others. And an ETF in a space you don’t understand and don’t have access to people making individual picks might be a good investment. But look at say the cannabis ETFs there’s there’s two popular ones, I’m not even gonna name them because I don’t invest in them. And the reality is they’re winners are saddled by their losers, and there’s a lot of losers in that space. But if you were working with someone that truly understood that market, you know, they might pick three winners and two losers, but they’re not going to pick two winners and 12 losers, and that’s what can happen in an ETF.
And I know I’m oversimplifying it, because absolutely, you know, Maxx, I think I told you my new license plate is QQQ and QQQ is a NASDAQ index one that is not something I picked, that is just something that showed up in the mail. And if you’re a passive investor, you don’t want to read an investing service. It’s not the end of the world to just invest in the NASDAQ. That being said, if you look at our track record as a company, we aren’t making short term predictions. But in the long term, we will outplay those ETFs. You know, Maxx is telling you by this not that and there’s a reason for that he has that expertise, the people picking ETFs are sometimes not subject matter expertise. They’re often stock market, you know, advisors, I know that’s not always true. There’s their subject matter expertise at certain places.
But we don’t recommend not doing your homework and going out there and picking individual stocks based on a gut. We recommend going to 7investing.com/subscribe and using our research to inform your stock picks. Now, if you’re also researching and what we’re doing is sort of nailing your conviction. That’s awesome. But if you aren’t doing the research and are just looking for ideas, you might look and say, okay, Dan’s 47, he’s a little more conservative. My pick this month was not conservative, but my picks are usually pretty conservative. I want to invest like Dan, but I’ll throw 10% of my money into Maxx’s stocks, or Dana’s stocks because I want a little bit more risk there. So if you want to join us, it is 7investing.com/Subscribe $49 a month, or $399 a year and Maxx, that’s two months free. So that is the best bargain there is in investing. I won’t even say any more there. So RNAi. First of all, Maxx, why is the AI not capitalized when everything else is capitalized?
Maxx Chatsko 30:48
Yeah, so RNAi is RNA interference. So that is shorten it to RNAi. Now, in the last three weeks, there have been three different RNAi drugs or drug candidates that have shown the ability to reverse hallmarks of three different diseases. So it’s been a really great month for the field of RNAi And you know, RNAi is a form of gene silencing JT, if you can throw the first graphic, there we go, how did you assign some work. So there’s a couple different ways to do it. RNAi works by chopping up mRNA. So we signed the gene expression that way by acting directly on RNA. CRISPR, gene editing with knockouts, silence genes expression by acting directly on DNA. So the outcomes the same, we reduce the production of disease causing proteins. So that’s what gene silencing is. That’s the goal of gene silencing.
If you can throw up the second graphic there, JT, boom, there it is. So these in the last three weeks are the three different drug candidates or even Oxlumo here just this week, it’s actually on the market today. So three different rare diseases, and they’ve shown the ability to reverse different diseases. So this is one of the things that, you know, CRISPR, gene editing, and some of those companies have come out and said, Hey, you know, we’re gonna go after these diseases, and they don’t have any treatments. And it’s so inconvenient. And, you know, we can maybe possibly reverse diseases. And then here’s RNAi, in late stage trials are even on the market today, doing exactly that. And oh, by the way, each of those is dosed once every three months, they’re actually exploring dosing them once every six months. So meaning you would go into your doctor’s office when you have to go in anyway, and get a shot. It’s not an intravenous infusion, which can take a few hours. You know, this is a very convenient dosing regime. So it’s safe, it’s effective, it’s convenient, it really kind of nuke some of the arguments for in vivo CRISPR gene editing that uses knockouts.
Dan Kline 32:36
So Maxx, does this affect all CRISPR tools or just select ones?
Maxx Chatsko 32:40
Right, so that’s a good point. You know, RNAi is about gene silencing. And it’s pretty much all I can do. CRISPR gene editing is a little bit more diverse. So we can use it for knockouts, which is gene silencing, we can use it for inserting genes. So it’s kind of like a second generation version of gene therapy. And then we can use it for maybe combinations of those two. So this would only affect RNAi would only kind of steal the thunder from CRISPR. gene editing uses knockouts.
But it does have implications. You know, there’s a couple of different companies that are publicly traded right now using in vivo CRISPR, gene editing, possibly looking at knockouts. The leading one is Intellia Therapeutics, its first two drug candidates, ones in clinical trials already are using knockout. So this is a has big implications for that pipeline, and this approach overall for the whole industry. Because, again, there are safe and convenient and effective treatment options now for these rare diseases. So in the future, if the FDA is like, Hey, we have some safety concerns here. Or we want you as the CRISPR, gene editing companies to monitor patients for several years. Before we even think about approving these things. It really does kind of limit the commercial potential for this approach when using CRISPR gene editing.
So some of the safety concerns are using knockouts. A lot of people in the media and investors and analysts, they talk about off target effects, right. So that’s like we’re not directing the CRISPR payload to the right part of the genome. And that’s actually not that big of a concern. The major concern for CRISPR gene editing and this is true for any approach. knockouts or insertions is the on target effects. So that’s actually, there’s the way that CRISPR gene editing works, we cut both strands of DNA. And then we say, Oh, you know, the cells have natural DNA repair mechanisms, they’ll repair it. And that’s one of the most traumatic events in all of biology.
So we’re kind of taunting Mother Nature a little bit. And if we look at some of the studies that have come out in recent years, we’ve seen some kind of worrisome thing, there’s large sections of genomes that just get deleted randomly, or random. genetic material gets inserted. We’ve even seen chromosomal rearrangement. So that’s basically one of the major hallmarks of cancer cells. So it’s one thing to have successful clinical trial results for CRISPR gene editing even over the next five years. But what happens in the next five years if there’s a very high rate of cancer incidents higher than background from those tools. I mean, this is one and done and you can’t reverse it. There’s no Undo button, right? We can’t stop giving people CRISPR. So this could be a major concern for regulators. And now the existence of RNAi and some of these really, really great data results might really limit the potential for CRISPR gene editing.
Dan Kline 35:18
So Maxx are you saying I can’t hit Command Z if my sister doesn’t go well?
Maxx Chatsko 35:23
Dan Kline 35:24
So let’s talk let’s tie this up with a nice little bow here that will take a couple of questions and comments. What does this mean for investors? I mean, investors are crazy for CRISPR. I mean, that, you know, basically, you could have like a retail store and call it CRISPR. And it would probably do pretty well as a stock.
Maxx Chatsko 35:40
Yeah, I mean, some of the valuations here are crazy. And the Wall Street’s not taking any of this into account yet. And this is still kind of like hot off the presses data. So I think the takeaway for investors is to focus on outcomes, not just technologies, right? You don’t want to be a cheerleader for any specific technology. And for CRISPR, we really don’t have any data in humans yet for the in vivo approaches. So there at these valuations, there’s a lot of risk that this stuff doesn’t work out. So take a technology agnostic approach focus on outcomes, at least when it comes to gene silencing RNAi is crushing it right now. So that might limit gene editing knockout potential.
Dan Kline 36:15
We’re gonna do our finisher in a second here, we’re gonna take a few questions and comments. After we do the finisher. I’m going to say goodbye, close out the show. And then we’re going to play a video a lot of you been asking to see with our very own Anirban Mahanti eight talking about Tesla earnings. It’s really good. Anirban is unbelievably brilliant. So is everyone in our team, but he has a lot of experience doing on camera stuff. So it is always a joy to get to tape something with him and it’s always like 530 in the morning, it’s way before I’d be willing to tape.
My friend Joey Klein, no relation says that his his license plate is actually a cannabis penny stock. And that was not intentional. Yeah, it’s funny because my license plate and my wife is has actually said not to share a picture of it. I guess she doesn’t want stalkers. But my license plate sits in a 7Investing frame. And then it has the big QQQ in the middle. And I’ve noticed this must be something about the order they go in because I’ve seen other new cars with with the same thing. So I do think this is just bad luck, but it is kind of unfortunate because it does look like endorsing something.
There was a question earlier on JT asking us from Debabrata Mishra? Yep, that one. Can we wait for some pullback and then enter. If we plan to add to some of the recommendations, I already own some of those stocks. So this is talking about our picks this month. So Maxx, you can give your opinion, I’ll go first quickly. I don’t wait for a price point. Now that said, If I was going to buy, say, Peloton just to pick a stock we talked about earlier in the show, and I happen to notice that Peloton is down 15%. And I don’t think the reason fundamentally changes my thesis, well, I might transfer some money in and buy it a week earlier than when my automatic transfer would happen in my investing account. So there’s no reason not to capitalize on price dips, but don’t wait for them because there is no guarantee. And we’ve all heard the stories of Oh, I’ll buy Amazon when it gets down to 1000. And now it’s trading, you know, whatever it is 3200 and you never bought it. The best time to buy a stock is generally now. Maxx, how do you approach it? Yeah,
Maxx Chatsko 38:17
We get this every once in a while. I think there’s some confusion, right? So the mechanics of just how we represent our scorecards that we’re thinking on the long term, right? So we announced our picks on the first of every month. And sure in the short term measured in months, there might be like a stock goes up, a stock goes down and people will write in it should I buy this now. And that’s missing the point, right? We do this because we know that five years from now, it doesn’t matter if we release these pics on the first of the month or three weeks later on the 17th of the month, that’s not going to matter at all in the long run. So what I do as an investor’s not kind of accumulate into positions over time. So I might say, oh, here’s a stock I want to buy. And I’ll buy some this month and sell next month. And I’ll do that for many months in a row. My largest holding I’ve actually bought for almost 18 months in a row now, right? So it doesn’t matter what the stock price was, I know I’m buying every month. So you may want to do that. And then it doesn’t matter. You’re not so focused and obsessed with what is the price today, what is the price tomorrow, over time is all going to average out.
Dan Kline 39:13
So I do the same thing as what you do max. The only thing that bothers me is I use TD Ameritrade. I’m sure this is true on every platform. But when you add to a position, it changes your percent gain for that stock. So I might have a stock that my original position might be up to 200% and then I buy some new shares and all of a sudden my overall position is only up 40% because I paid more for those new chips. I’d love to be able to click a button and see like how right I was or how wrong I was from those original dates.
Now as a 7Investing subscriber, you can do that we track our performance on our scorecard. Our scorecard can be daunting. We’ve been doing this, you know, seven picks a month for going on 14 months now. So there’s a lot of pics there but you can use that scorecard you could say I just wanna see Dan’s pics. I just want to see Maxx’s pics. You can all I can just want to see this time. We also every month give you our best buys, we give members a lot of tools to know sort of what they should be buying, how they should be getting in. And we are working on one where if they just want to put a few bucks into every stock, they’ll be able to do that on sort of a really easy basis. So we can’t announce that yet. But I’ll tease it a little bit because it’s a it’s something we’re talking about.
So if you’d like to join, that is 7investing.com/subscribe. Let’s hit our finisher JT Street. Thank you for manning behind the glass. I know it is a scary thing. But if you want to pull up that graphic, if you don’t have that guy, there we go. So Maxx, let me know that I frame this question terribly wrong, that my timetable was totally off. It was actually normally I would have asked Maxx beforehand, but he had let me know that he had some personal stuff to deal with yesterday, so I wasn’t going to bother him. So but let’s not even talk about the answers so much is Maxx, what is the timetable you expect for cures? And I asked about this, I grew up with someone that has cystic fibrosis, and I would think she’s at the age where that’s not great. You know, obviously, I’m 47 years old, so I’m not quite thinking Alzheimer’s, but I hope they get to that in the next 20 years. And I feel like HIV AIDS hasn’t been cured, but it’s already been managed. So Maxx, take that however you like and JT, you’re welcome to take the graphic down.
Maxx Chatsko 41:14
Yeah, I think with cures, it’s like kind of a dirty word. Right? Well, look, now they’re really small. So you know, like even doctors and the scientists, don’t they don’t they don’t want to use the C word right here. Because it’s all about durable responses, you know, so like with gene therapy, for instance, right? We can kind of cure diseases, initially. But what does that mean, five or 10 years from now? Do patients lose that benefit? So is it really a cure for the whole life? Or is it not? And a lot of times, even though we just talked about this with RNAi, some of the damage that’s been done by some of these diseases is difficult to reverse. So we might actually relieve all their symptoms going forward, but there’s still been damage to organs or other systems in the body. So is that really a cure? Like they’re not really returning to necessarily like normal function? So the C word, always kind of a dirty word. Now, in terms of like, you go ahead, do you have anything
Dan Kline 42:04
I was gonna say in terms of like cystic fibrosis, cancer, Alzheimer’s, HIV AIDS not being a death sentence, or even being something manageable? Or that we could stave off for 20 or 30 years? Is that conceivable? And what would the timetable be?
Maxx Chatsko 42:20
Yeah, so we are seeing more complete responses for cancers, like with different tools and new tools, we’re getting more precise. So that means more patients can put their cancers into remission. And again, we use remission instead of cure for cancer, right? Because it can come back, you know, maybe it doesn’t, maybe it does. But we are getting better there. And actually, I looked into this after I kind of chastise you on our personal Slack. For cystic fibrosis, like we actually have some pretty good treatments, there’s triple combinations now from Vertex Pharmaceuticals. And we might actually be able to cure that or have some pretty durable treatments here. Maybe even in the next 10 years. HIV AIDS, we’ve actually seen, some patients actually have cures as far as we can attack, it seems to be the result of getting a bone marrow transplant, not related to their HIV or AIDS, but due to maybe they have a blood cancer. And then later on, we observed that they don’t actually have HIV or AIDS anymore. I’m not sure if that’s workable for most patients, but a potentially hint said some things we can do or develop down the road. But yeah, we I’m incredibly optimistic, Dan, I just think we need to be careful and limit our expectations, right?
Dan Kline 43:21
Doing this show has made me incredibly optimistic. It’s also made me more careful. So I’ve talked a lot about exercising. And you know, I see a trainer three times a week, I make sure at least three other days a week, I close all the bands on my watch, that usually means taking a two mile walk or hitting the treadmill for half an hour. I’ve done things like I’m trying to only eat red meat once a week, you know, eat more fish, you know, make the changes that are easier to. Maxx doesn’t like fish.
Maxx Chatsko 43:49
Eat all the red meat you want. What are you doing?
Dan Kline 43:52
I’m a little bit older than you I’m trying to be a little bit more heart conscious, a little bit bit conscious of things, you can control that look, it’s not that hard to go take a half hour walk and I live someplace that I’m right now it’s really hot. So I’m more likely to go to the treadmill. But I live someplace where I have a lake I could walk around there’s bunnies, it’s very nice to take a walk when it’s not 110 degrees out. So we highly recommend you do that because we want you sticking around to watch 7nvesting Now.
We will be back on Friday, live from somewhere in Key West. Internet service, not great in queue. So it literally could be a Starbucks parking lot or outside at a Starbucks. But but if you’d like to get in touch with us and remember, we’re gonna play an interview after this without Anirban about Tesla earnings. But if you’d like to get in touch with us, you can email us at email@example.com. That’s questions about your membership, questions about our schedule questions about maybe you’re thinking about being a member. Generally don’t ask us to sort of you know your our opinion on a specific stock, ask those on this show. And if it’s one we want to talk about, we’re happy to take it ask us on Twitter. You know if it’s again, if it’s a company, we’re comfortable.
If you are a member, please don’t share any of the pics on social media. We appreciate you not doing that. On Twitter, we are @7Investing. That’s where we put the polls up for this show. That’s where we reshare discount code. Sometimes if you’re not a member and would like to join, we might share that out. And of course, hit us at 7investing.com/subscribe. What are you waiting for? Why are you watching this entire show, and you are not a member, we appreciate you doing that. But we really think you should join.
And with that, Maxx, thank you for this, we’re not going to do our usual post show wrap up but JT Street. Thank you, if you want to hit that video on Anirban Mahanti on Tesla. That did not appear to work. We’re gonna stick around for a few seconds. And here we go.
Anirban Mahanti, welcome back to 7nvesting Now. So Steve Symington and I talked about Tesla, and you would be shocked by how many people in the comments asked why you weren’t on the show, though most of them accepted the answer that it was something like two in the morning, most people were okay with that one.
Anirban Mahanti 45:58
I was very keen to get out. But you know, like getting up at two o’clock basically means that the remainder of the day, it’s gonna be ruined, but I can I will write an article, which is what I did. So. And it’s a free article, so anybody can access it actually stuck. It’s not a subscription article itself.
Dan Kline 46:15
So this is one of those things where we’re taping this at 730 at night, I turn into a pumpkin after six o’clock, I am not a big fan. pretty early, I work straight through the day, by this time of not getting my energy up to host a show is really, really difficult. I don’t think I would have done well in overnight radio. But let’s talk you call it you named it nerdy points about Tesla’s. Let’s get to the nitty gritty here. Because I talked about this with Steve, is Tesla making money? It’s not as obvious as it would see.
Anirban Mahanti 46:49
Tesla’s as making a lot of money, right? So approximately, if you think about it, it made about $4 billion of free cash flow, trailing 12 months, right $4 billion of free cash flow, that’s a lot of money for relatively early stage business, we think about it right? The producer didn’t get it, they’re probably at a run rate of 720,000 vehicles, if you take the Q4 production, multiply that by four. So for a relatively niche vehicle manufacturer, they’re making a lot of cash flow, or free cash flow. In terms of like, you know, then, you know, people like to say, Well, okay, that made that much money, but there’s always a but, right. And the but really, is that there’s a lot of regulatory credits in the mix there. But you know, like, the way I think about it is that if you are in a lucky position to have regulatory credits, which is 100% margin, you would use that to grow your market share, by cutting costs a way to keep competors that at bay, right? That’s what people that scale, like Walmart and Amazon do all the time. That’s what you should be doing. And I think that’s what they’re doing. So I think that’s fine.
Dan Kline 47:54
I’m actually more concerned about the 101 million dollars, they sold in Bitcoin. And it’s not the money they sold. It’s and I know this is kind of a trivial number, where for where Tesla is, but they’re still sitting on $2.5 billion in Bitcoin. And if you told me a year from now, that’s worth seven and a half billion, I believe you if you told me it was worth $100, I believe you as well. So I feel like I get the troll game Elon Musk is trying to play there. But that does seem to be a bit like he’s got some of the company’s money on, you know, half the numbers on the roulette table.
Anirban Mahanti 48:29
Yeah, I mean, I’m not that concerned as Yeah, I think it is a gamble. That’s exactly as as you’re saying. It looks like a gamble. I think he believes and Kirk, Zack, the CFO, I think they believe that it’s going to go up. Or at least it’s a better store of value than cash. They can, they’re going to get better returns than they would get on cash by investing the cash in cash like instruments. The 100 million dollars of sale that they made. I mean, I think they just did that to a test. You know, what they can get out of it and be, I think to this to here’s another way to think about this is they have this Bitcoin investment, which they could use anytime could use to juice their numbers the way they like it. Now, you could say that Tesla is turning into an investment company, but they don’t that’s that’s if you can trade your way on Bitcoin and make some money. And if that is Tesla doing that, as a shareholder, I have no issues with that. Be my guest.
Dan Kline 49:24
As a Tesla owl, that is someone who’s watching but is neither bearish or bullish. I’m trying to get this one to catch on. The financial shenanigans to me – I don’t love it. If it was a CEO, who you knew was always above the board, and he was using every tool available. But all the SEC goating. And I don’t know it just feels to me like there is some risk there. But let’s talk about margins. In theory, cars should be a pretty good margin. How is Tesla coming in on them.
Anirban Mahanti 49:55
I mean, no car. Cars are not that great. I mean luxury cars are right. I mean, it’s So Tesla, margins are improving substantially. So there was I think about 130 basis points or 1.3 percentage point increase between Q4 and Q1 just report. And I think key to note here is that the margin improved. While S and X, which is their high margin product sales disappeared, right? And that disappeared because they were, they’re, you know, they’re upgrading that line for the plate and the new plate sees, which apparently has strong demand. But at the same time, they also talk about a $200 million cost, which showed up in the COGS line for the retooling.
So, if you put all of that together, margins have improved, while that cost base went up, which I think is one time, many, many of these things at one time, at the same time, they had no sales of the higher margin vehicle. So I think the margin is actually trending in the right direction, as far as I’m concerned. And I think this is just a little bit of a scale game coming into play, combined with the fact that I think the Fremont factory is not ideal, because it’s a, you know, Toyota GM factory that has been repurposed. Whereas I think this Shanghai factory is giving them good margin as it is scaling up. I think the same thing you’d see probably play out with, you know, maybe at the Texas, Austin one, and the one at Berlin. So I think that’s traveling the right direction,
Dan Kline 51:24
At least they’re not still building in tents in a parking lot. I have a lot of questions I want to ask. I’m just gonna keep it to one. Do you think selling Autodrive as Software as a Service, instead of as an upfront cost is going to drive their margins higher going forward?
Anirban Mahanti 51:42
I think so. So the full self driving suite is a $10,000. In Australia, for example, it’s $10,000. upfront. Not everyone is going to be paying $10,000. It also has weird ways in which you know, for example, in Australia, the impact how much luxury car tax you pay. Tesla is a luxury car here, and you pay actually luxury car tax on it, which is unlike maybe in America, so I think $10,000 to tack up on a $35,000 car, or 7800 wherever it is in the America, it’s a pretty substantial amount. So I think providing it as a subscription makes a difference. And in my view doesn’t even have to be what has been promised as full self driving, it just has to be an advanced driver assistance system, and people will fork up 100 bucks like the forecast for music subscription, right?
Dan Kline 52:28
I know that my entire car, my admittedly my used my 2014 Toyota Prius, cost $10,000. So all the bells and whistles, it doesn’t drive itself. But it’s a nice looking car that gets really great mileage, I’d have a hard time spending an extra 10 grand, I’d probably spend $100 a month I think that is a more palette to deal with it.
Anirban Mahanti 52:54
I was gonna quickly add, right so my car wasn’t and the body shop had a different car to drive. And like getting my my Tesla back was like a relief because you know, I am so dependent actually actually may be saying this on air because you know that my license might be taken away. I feel so dependent on the autopilot. Because, you know, it does a lot of the driving for me. And it just makes me a more relaxed driver. So I think you know, if that option was available, I would also take the subscription option, although I think in the long run, it costs you more.
Dan Kline 53:24
I would love that I do not enjoy driving, if I could, like sit with my laptop and get work done. while I’m driving between West Palm Beach and Orlando, that would be a major victory. And that’s pretty much a straight road. When your talk auto driving. Like the Florida Turnpike, which connects those two places, is a relatively low traffic. It’s the kind of place where auto driving is going to work first. And we’ve talked about this. The first place it’s going to happen. It’s like close communities like Disney World and college campuses and places it could be the Microsoft campus places it can be really, really controlled. I only mentioned Microsoft because they have a shuttle network because they’re so spread out between Redmond and Bellevue. But um, we’re going to talk about this quickly because we’re kind of running out of time. What about the energy segment? It’s not a meaningful business at the moment right now. Right?
Anirban Mahanti 54:08
Yeah, so the energy segment is roughly about, you know, it hovers around 10 to 20% of the auto revenues that’s been generated. I think the problem with the energy business is as follows. I think the solar side is losing money. That’s again, based on my assessment from the call. The power the mega pack, which Tesla actually sells to utilities, which is actually supremely important for the stability of the grid. I think it’s actually losing money on that because it doesn’t have scale yet. It has gross margin similar to auto for power wall, which again, is backlogged.
I think a couple of things are happening here. I am not so sure what’s happening with the solar and solar tiles business. I think that’s a little bit of a question mark, in my mind. I think the battery pack business is actually a great business and there’s a lot of ancillary revenue there, you know, that they can make from you know, the the autograder for example, With a bid and and and make money on the grid for just supply instantaneous demand. So I think that can scale and then the main key thing here is just the battery supply where I think they’re working on this 468 whatever they call it, the new battery packs in the vertical integration scale. More batteries coming online from LG and Panasonic. All of that should help. Yeah, solar, I’m not sure. That’s a question mark, in my mind.
Dan Kline 55:26
I’m looking forward to their next battery day where they announced plans for 2045 that have zero possibility of happening. It’s always an interesting company. I’m gonna throw out one last question. I assume living in Australia, you still are familiar with Saturday Night Live like it’s been an institution. It’s been around for 40 years, Elon Musk is hosting. I think this is a terrible idea. Because this is an actual live television show. And Elon Musk is unpredictable. He could come out and say that vaccines, you know, cause your face to fall off. Who knows what he could say? As a Tesla shareholder? Are you excited about this? Are you nervous about it?
Anirban Mahanti 56:02
I think this is going to be the the best Saturday Night Live Show with the highest TRP ratings in television ratings that you can expect. You know, I am not that worried about Elon Musk. Like I mean, you know, I take the good and the bad of Elon Musk. I mean, I think he’s the greatest entrepreneur, not just just generation for the past 30, 40, 50 years, right? With that comes a lot of quirks. There would be no one else who would be sending people to moon Mars space station, other than Elon Musk. You know, he’s basically not like the NASA Now.
So, you know, you get the good and the bad. I think he’s a very long term thinker, which I like as a as a shareholder. And I think all the other pesky little things, I don’t really worry too much about them. Like, I mean, you’re getting the fight with Elon. He’s a rule breaker. So he breaks rules. But I think I look at it like, you know, he’s he’s doing things with the right intent. He wants to build this company, which is gonna actually fundamentally change how we, we really try to transport energy. Sustainability is a big goal. There’s a lot of roadblocks on his way. So, you know, he doesn’t like those roadblocks, which, so I’m okay with it. I don’t know what he’s gonna say. But yeah, I think it’s gonna have very high ratings.
Dan Kline 57:20
Anirban, we are not very good at being quick or concise. We were supposed to do five minutes. I think we’re roughly at 14 minutes. So I’m gonna say thank you for this. And we will see you next week again on the program.
The secret is (almost) out! Join 7investing's founder and CEO Simon Erickson on Wednesday, January 19th at 11 ET as he announces this extremely exciting addition to our team...
Join 7investing's founder and CEO Simon Erickson this Wednesday, June 22 at 11 AM ET as he introduces our newest Lead Advisor!
There was a time not all that long ago when the valuation of stocks, tech stocks included, could be calculated based on a discounted cash flow analysis. Sure, there was lots...