Kevin Paffrath, financial analyst and YouTube “Meet Kevin” host, joins Yahoo Finance Live to discuss how Tesla’s shareholder meeting, Tesla advertising, and Tesla’s AI integration will impact the company’s profitability , and discuss the Tesla Cybertruck.
video transcript
– Now, Tesla is changing course, CEO Elon Musk told investors on Tuesday that he plans to start paying advertising fees for EV makers to sell cars. This represents a shift in direction for the company, which has long resisted traditional marketing. This is one of many headlines he made at Tesla’s annual shareholder meeting in Austin. If you’d like to learn more about what we’ve learned from Tesla, we invite financial analyst and his Youtuber, Kevin Paffrath. Let him see Kevin.
Kevin, it was great talking to you today. It’s interesting how Elon Musk framed this by saying that I wasn’t interested in advertising until I bought a company that relied heavily on advertising. But does the fact that Tesla is revisiting this now indicate some of the challenges they are seeing in the market as it becomes more crowded and we start to see further price cuts?
Kevin Pufflas: absolutely. And first of all, thank you so much for having me.
Tesla is my largest position in the ETF, so when I attended the shareholder meeting yesterday, I thought, “Come on, Elon!” I grabbed his shoulder and tried to shake him. We can’t just keep the price down. Because even if you lower the price of a vehicle, mainstream people don’t necessarily know about the new price. So it should be advertised. And this analogy I made at a shareholder meeting is, if they lowered the price of a car by $7,000, instead they would probably lower the price by $6,500 and take $500 off the price of every car they make. If you put it in an ad, that’s what it would look like. That’s almost half of Netflix’s roughly $1 billion annual advertising budget. If you just take $1,000 and run an ad without cutting the price, Netflix will be able to tell you the features for the money it spent on the ad.
So, simply put, you can spend billions of dollars on advertising while keeping a fraction of the price of your vehicle. And now we can talk about how Elon is giving a five-year-old car a software update to make the airbags, restraint system, and braking system safer. These cars will appreciate in value over time instead of depreciating like most cars, but who knows. No one knows the prices, updates or features of these cars. And when people don’t realize that he can buy a model 3 right now for $36,000 after tax credits and get all these features it’s a luxury car or a very expensive car I think.
So spending a little money on advertising would be a game-changer for Tesla.
– Kevin, what do you think of the demand situation right now? Obviously you’re a big shareholder, but in terms of what Musk said yesterday, Tesla isn’t immune to the global environment right now. , That’s what it means. What do you think will happen then, at least in the short term?
Kevin Pufflas: I think Elon did a good job predicting some volatility in stock prices over the next 6-12 months. Of course, if the Fed slowly starts to signal that it will start cutting rates, perhaps in the summer or September, I think the stock market will start to gradually price it in and move higher.
So, I don’t know if it’s ready for new lows, but I also don’t know if it’s ready for any new highs any time soon. So Elon’s warning is probably correct, wait for the next 12 months.
But the great thing about Tesla, in my opinion, is that it has opened up more opportunities for exposure to Tesla. And I think this is the best and most overlooked AI play that actually exists. Everyone is looking for AI stocks and looking to companies like Google. And Google is putting 69% of its total advertising revenue at risk by developing or integrating AI. So while AI integration might make some money, it’s losing money elsewhere. If you look at Tesla, the more you integrate AI, the more profit you make.
This is a company that could really make a lot of pure profit from artificial intelligence. Elon himself suggests that cars could have zero margins and 100% artificial intelligence. We don’t even need to consider robo-taxis or Optimus robots in the future. The full self-driving capability itself, even just a person sitting in the car, could make the company a much more profitable company than it is today, with that margin. And now people are rushing to think, “Since you mention AI, let’s invest in Microsoft or Google or Facebook.” It’s ridiculous. Tesla will be the best AI player in the next decade, followed by semiconductor companies. The danger, of course, is that semiconductor companies will become commoditized while Tesla retains real pricing power.
– You know a lot of investors are listening, right? When we hear “AI,” we think, “Where can we invest?” You say Tesla is the biggest investor.
I would love to hear your opinion on Cybertruck. Elon Musk says he hopes to start production by the end of the year. However, the 250,000 to 500,000 a year number he puts out, which he thinks Tesla can achieve, seems a bit more conservative. do you think that is realistic?
Kevin Pufflas: Perhaps still a little optimistic. I know I sound like a genuine Tesla optimist, but when they say they’re having a Cybertruck delivery event this year, I honestly think they’re going all out for delivery. So I call myself a patient Tesla optimist. At least that promise will be fulfilled, with one car delivered by December 31st.
And I think the ramp on this vehicle will be very extended. That’s because we build our vehicles in a completely different way. We are building it from the outside in rather than from the inside out. In other words, there is no conventional steel frame inside the car. The outside of the car is the frame. It’s a completely different manufacturing method.
Therefore, I think Cybertruck should have many patients in mind. And it will probably be 2025 before we actually start modeling the Cybertruck as such an ambitious goal. Roadster until 2030 and beyond.
So I think patience will be very important for Tesla, but as an AI effort, I think people who realize the potential of AI and ultimately these new products will be very rewarding.
– So Kevin and Musk named Twitter’s new CEO, and also said he’s not going anywhere as CEO of Tesla. I have a feeling what you will say to this, but how big of a win do you think this is for Tesla at this point?
Kevin Pufflas: it’s huge. For the car companies themselves, it probably wouldn’t be too big of a deal, much like Tim Cook replacing Steve Jobs. The roadmap was set for the next four to five years. No disrespect for Tim Cook. I think he’s great.
I think Elon can walk away and keep the auto sector alive. But what Eren helps is really the next level: an AI that integrates Optimus and gets to the next level of his AI with full autonomy. That’s where he is key. I think he will connect this vision and guide engineers to the right place to ensure that they can achieve something that, in his words, is both practical and functional “for humanity.”
So I think he’s a very important person for that. If you just think about car companies, he could get away with it, and I think Tesla would be fine. However, hearing that he will remain, this is also an absolute victory for him to play AI.
All you have to do is advertise it. And I think they should hire Ryan Reynolds. His ad for Mint Mobile, it’s this guy we need to pitch. Deadpool, bring him!
– Want to sell Tesla to Ryan Reynolds? Is that your point?
Kevin Pufflas: absolutely. He is—I love Ryan Reynolds. Who doesn’t love Ryan Reynolds? I think –
– He is a likable man.
Kevin Pufflas: –The way he conveys information– More than that, Elon wants valuable, informative advertising. Ryan Reynolds can do it. “Hey, it’s Ryan Reynolds. Did you know about lifetime ownership of a Tesla? Does it cost less than a Corolla? Oh my God—” may come up with some. comedy. It will work amazingly.
– I feel like you’ve already planned all this. Kevin Pufflas, it’s nice to talk to you today. Thank you for your time.
Kevin Pufflas: Thank you for inviting me.
