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00:00What could possibly derail this fifth consecutive quarterly profits . A step back. I don't think their earnings are as important as everybody's putting emphasis on. Think about this. If you look at the street estimate for Tesla it's around thirty five cents in earnings per share. Roughly 20 cents of that is going to be onetime credits that essentially go away next year. Everybody is making movies now so they don't need to buy these credits from Tesla. So essentially Tesla's going to do 15 cents roughly of earnings. If you street estimates this quarter annualized that's 60 cents. Right. If you apply that to their current stock price you're talking about a P E ratio of seven hundred times when typically an automaker trades at twelve times. So why is Tesla invited. Well let's take a step back. What's happening in the European Union where you have the most competition for even as sales in Europe are up 100 percent this year through the third quarter year over year Tesla sales in Europe are down 14 percent. So not only are they losing share but their sales are declining. Move to China their high growth market their sales in China this year have declined in each of the past three months. They've basically stabilized around 11000 cars per month. Ah I'm sorry. Per month of sales when they're supposed to be selling about sixteen point six thousand cars they sold ten thousand eight ten thousand eight hundred cars last quarter in fact. And keep in mind this is despite the company cutting prices on its cards twelve times this year. So the point is the company is massively overvalued compared to other automakers and they're not growing. Their sales are actually declining. The growth in their sales are declining . So we think that when people take a step back and look at this there's gonna be problems . So just give me your argument I know you've been a longtime watcher and reviewer of a renewable space. Why the staunch believers in Tesla here despite the fact as you note that the valuations aren't really yet backed up by the fundamentals . Right. So Tesla has effectively had a monopoly on the Eevee market the electric vehicle market for years and now we're seeing real competition. And the problem is the growth story we've said for a long time is busted. And I think that people are having to come to that realization again. Their sales in China are actually declining on a month over month basis despite the fact that the Model 3 in China at the beginning of this year versus now is down 30 percent in price. That's how much they've cut prices. They're still not able to sell all those cars . They've in fact said they're going to start shipping those cars made in China to Europe. Right. Those cars are supposed to be supplied from the US so that the growth story in China we believe is done. The growth story in Europe we believe is done . So the problem with Tesla is you don't even have all the competition. You have 46 new IV's coming next year. Right now they're being outsold by three other guys in Europe to include VW with the 83 which has outsold all of Tesla's cars this year . So I think the reason why people have got excited and are excited about Tesla is because you know there's always these pumps right. Battery. They was pumped for six months. They did battery day. There was no battery introduced. The cyber truck was pumped. That was that that rolled out that day. The stock got hit. So there's all this euphoria into these constant pumps by the company. But in fact behind the hood their sales are declining and they're getting crushed by competition in their core markets. We think this shows up tonight in earnings . We think it shows up even more in the fourth quarter and we think next year as those credit sales go away. Keep in mind 24 quarters the past 24 quarters and only four of those quarters had they've been profitable excluding credit sales other onetime in nature and they go away next year. So we think they go back into structural losses. And that's not what the street's modeling history is modeling. They're making a ton of money next year and significant growth in their units and already their units in Europe and China are declining. So reality versus perception is much different. All right Gordon what about China. The fact that we have an off shore you on that's strengthening all the time. Does that mean anything to sales numbers . I don't think so. Listen this wasn't even covered. The title numbers came out last week. We couldn't believe we didn't see it as front news headlines. When everybody who covers Cecil there had that the expectation was they're going to sell 15000 cars. They sold ten point eight thousand cars. Keep in mind GM sells hundreds of thousands of cars every month in China. The guy crushing Tesla in China is GM. It's a five thousand dollar tidy Eevee that wouldn't sell in the US but these cars sell overseas. How does DAX compete against that. They're not . They're now shipping. Made in China. Made in China. Model threes take to Europe because there's not demand for their cars in China. Keep in mind they haven't even fully ramped their Shanghai factory. So they're saying they're gonna build another factory in Germany despite the fact they can't sell their Shanghai capacity. So they're sending that to Europe and their sales in Europe are declining. Market share in Europe has fallen from 33 percent in the fourth quarter. That's 10 percent today. We think Tesla at a very simple in a very on a simple basis has big problems with distracted demand and they have bigger problems next year with respect to competition. We think the movie Ford versus Ferrari is you've got to watch out if you're looking at Tesla. We think everybody's coming for Tesla's neck. Tesla has a higher mark. You have been almost the entire auto industry combined . People want to take over .

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GLJ Research CEO Gordon Johnson on Tesla Earnings

Tesla bear, GLJ Research CEO Gordon Johnson gives his pessimistic take on Tesla. He speaks with Vonnie Quinn on "Bloomberg Markets." (Source: Bloomberg)

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