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Colin Rusch, Oppenheimer Sr. Research Analyst joins the Yahoo Finance Live panel to discuss what to watch with Tesla earnings.
ZACK GUZMAN: Welcome back to Yahoo Finance Live. We are going to get to a big earnings report after the bell. It's the main EV player Kristin and I keep our eyes on here, Tesla. And the expectations are quite high. And for more on what we should be digging into when we get that report, happy to bring on here with us, Colin Rusch, Oppenheimer Senior Research Analyst joining us again.
And Colin, thanks for the time, first off. But what are you going to be looking for when we get this report? Obviously, Tesla has kind of been all over the place as of late, but a potential opportunity here to top their Q3 operating profit record from last year. What are you watching?
COLIN RUSCH: So from an operational perspective, we're not super concerned about results this quarter. I think the big question for the stock really is about continuing to progress on their factories and moving that forward, and importantly, what the customer uptake is on the whole self-driving. As we look at multiples and what's going on from a technology perspective, the progress on autonomy is really the heart of the matter if you're making a bullish bet here. And then a second piece of that is how the business model begins to take shape.
And so when we look at kind of $200 a month for customers and scaling up fairly quickly, looking at the potential for 10 to 20 million customers in the back half of this decade signing up that service, you get to some pretty heavy numbers from a cash flow perspective. And I think that's what's going to be at stake here for the next couple of years, is progress on that. And so that's-- we're going to get the first data point tonight from the company on what the uptake is with that service and how they see it [INAUDIBLE] out over the course of the next couple of years.
KRISTIN MYERS: You know, we really saw the Tesla, the stock, soaring over the pandemic and last year. And we've since seen them, just looking right now at it, we've seen the stock really pulling back. Curious to know what you think might be the catalyst to help Tesla really break through to the upside.
COLIN RUSCH: Yeah, I think it really is just execution on this full self-driving. They rolled out some additional functionality. And I think at core that the real challenge is, it's moving through urban environments as they're able to roll out more geographies and more functionality in terms of their driving with those vehicles in a reliable way. And as we see the regulatory environment really mature, that's something that I think is going to give folks a lot of confidence in that business model and that recurring revenue, as well as their ability to continue to take share [INAUDIBLE] market as they roll out some of that autonomous technology.
And at the end of the day, when we look at total cost of ownership models, 100-mile basis, about 2/3 of the value is really the driver's time. If you're able to start monetizing that in a real way, the market has multiple trillions of dollars, just North America, let alone layering in Europe, as well as Asia into that as well.
ZACK GUZMAN: Yeah, and I guess, you know, obviously, delivery numbers always important in Q2. We saw them across that 200,000 vehicle number. But when we talk about the general landscape for competitors here, you saw the issues GM has had with their bolt, with those models. A few of them catching fire there and new warnings for drivers. I mean, where do you see maybe the market in this constant back and forth between traditional automakers doing their share and newcomers? We were just chatting about Lucid Motors. How much pressure is now on Tesla to show that they're still the ones to take down?
COLIN RUSCH: You know, I think it's, you know, it's a real challenge to change technology [INAUDIBLE]. And if you're moving from the channel combustion engines into hybrids and EVs at the same time, there's an awful lot of engineering and a lot of expertise and manufacturing, as well as just a core technology perspective. And so what we're seeing from Tesla is that they really are continuing to evolve the platform, and the narrow focus on EVs is really beneficial to them.
But I think at this point, a lot of folks are remembering-- or forgetting how difficult it was for them to actually ramp up the Model S and Model X. And then particularly, the Model 3, that there were some real major challenges in terms of the automation, moving those vehicles through and getting all the specs to a place where we're much more comfortable.
And I think we're seeing that right now from all the other OEMs, is that they're going through the learning curve. And it's a real challenge. As they come through that, I think that's when the real test it's going to be for consumers and where Tesla ends up from a performance, cost, and evolution and functionality perspective. And one thing that we're really watching on that is the software. We're seeing VW start to roll out over-the-air updates. Just the future proofing the vehicles is really critical to us.
The second thing is just really what these battery platforms look like and what the battery structure looks like. I think what Tesla's doing with the 4680 is important as they go in the form factor and the cost structure that it really enables for the company, is going to end up a critical benchmark that we're looking for an update now, but we're not necessarily expecting a huge amount of information. We just want to know that they're continuing to make progress.
KRISTIN MYERS: Right, well, we'll definitely be watching. We'll have to see if Tesla is actually able to beat some of those expectations when they report after the bell today. Colin Rusch, Oppenheimer Senior Research Analyst, thanks so much for joining us.