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Tesla surges nearly 1000% in a year

Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, joins Yahoo Finance’s Zack Guzman to break down the latest on Tesla and Apple, as Bloomberg reports that Apple is asking suppliers to produce 75M 5G iPhones.

Video Transcript

ZACK GUZMAN: And Ross, I mean, maybe this is a point that this stock isn't crazy right now, because it's in the red after another share offering here. What's your take on how investors should be looking at Tesla? Obviously, this is one of the companies you've held for quite some time here. What's your take?

ROSS GERBER: Well, obviously, Tesla is finally realizing the value that I think investors now see clearly-- not only the opportunity, but their dominance in the EV market as well as in energy and battery storage. So there is now a complete perception shift of Tesla from a year ago from probably one of the most hated companies I've ever owned to now one of the most loved companies I've ever owned. I mean, I literally had a discussion with a Tesla shareholder who has $10 million in Tesla, and that's 100% of his net worth. And I couldn't get him to sell one share. And he's like I'm not selling anything, no matter what you say. And I'm like dude, you got $10 million.

So that's the amount of passion that's behind Tesla. So they've executed perfectly. And the stock has moved to, I think, a full valuation. And now Tesla is doing the smart thing-- raising money, putting basically free money on their books at a very high price. And this solidifies Tesla's position forever as a leader in EV and batteries.

So it's sort of a great day for Tesla shareholders. And I expect a great future for Tesla. But I do think the stock is very stretched.

ZACK GUZMAN: Yeah, when we talk about how stretched that is, let's not forget that it wasn't too long ago that even CEO Elon Musk was tweeting about how he thought that Tesla's price was too high.

ROSS GERBER: We have the same--

ZACK GUZMAN: That was around, what, $781 pre-split.

ROSS GERBER: Yeah. Yeah, you know, we had the same price target, actually. When Elon tweeted that, I thought that was where the stock should be. It was like back then, it was $750. So let's say it's $175. And I thought that was a reasonable tweet.

And boy, investors are obviously seeing what we've seen the whole time. And they're seeing it in the rose-colored glasses that-- and we appreciate that, actually. It shows--

ZACK GUZMAN: Yeah, right. I guess just to push back and really double down on the questioning here, I mean, would you say that if Tesla itself is coming out with a share offering now, at this level, would you say it's safe to call a top here in Tesla.

ROSS GERBER: No, I don't like to make those kind of predictions, because they're usually wrong. So I would say this-- a client just called me and was like should we buy more Tesla? And I was like look, I love Tesla. But my job isn't to buy stocks at the highest price ever.

My job is to find value in these opportunities. And there is lots of opportunity in the stock market right now. But it's not in technology. And so technology is valued incredibly rich, and maybe deservingly so.

But as an investor, you're supposed to be doing-- finding value in the market, even if it's in technology. So you've got to put a pause here. That's why Tesla is selling stock. If Elon's selling stock, there's a reason.

ZACK GUZMAN: Yep, yeah. No, I mean, and we talk about even finding value in tech. That becomes the challenge, since some of these stocks have run so high. Just one button on it-- RBC reiterated its underperform rating on the stock yesterday, calling it fundamentally overvalued. But it did raise its price target from $170 a share to $290 a share. So that's something to keep in mind there.

But I want to shift the conversation over to one of those other tech stocks. We were talking about Apple just a second ago. What's your take on maybe the valuation there and what we have planned ahead? Obviously, the next roll out of its iPhones-- not just iPhones going to be coming out, but also a HomePod speaker. You've got the watches roll out as well. What should investors be watching there in terms of what they have planned coming in the next launch?

ROSS GERBER: So with Apple, that's actually our second biggest holding. And I've written Apple for my whole life. And I love the company. But it's the same thing.

There has been very little real innovation at Apple recently. And they've really benefited greatly from the pandemic, because we all need our devices like life support now. And I've actually ordered more Apple products in the last couple months than I've ever ordered, just because of the need and the usage of my family. So I think they're in great shape.

But I've been an Apple shareholder my whole life. And to pay 40 times earnings for a company that was trading at 15 times earnings for most of the last five, ten years-- it seems like, once again, it's just like Tesla. You're paying the highest price ever for this company. And yeah, maybe Apple will go higher over time.

But once again, the job of an investor is to find value, not just get on the fastest riding horse and hope you don't get bucked off, because eventually-- eventually, you will. And so diversification is super important. We own these names. And we're not sell-- we've sold some of these names, but not a ton.

But we're diversified in our portfolios and in a very conservative position. So that's where I want to juxtapose. It's super important for investors to be cautious right now because there's so much risk in the market.

ZACK GUZMAN: Well, let's talk a little bit more about that too, because I just-- we're talking about Apple. We'll see what happens. Bloomberg has reported they asked suppliers to build at least 75 million 5G iPhones for that product launch. That would be about the same that we saw last year's launch. So we'll see what happens, because that would seem to indicate demand is still there.

But you talk about the risks in some of these tech stocks. I just want to highlight Zoom as well, since that's one of the ones that's been most talked about in terms of the video conferencing service there. Shares were up almost as much as 50% today. They gave back a little bit of that in the session.

But when we think about why these companies are getting so much attention, it's because they're showing growth. They made as much money in the last three months in the quarter as they did in all of last year. So, I mean, it is proving they can run this business and run it well in a pandemic. So maybe that's why we're seeing so much attention given here. But given the upside move, I mean, is that another name here where you would say there's not enough value anymore?

ROSS GERBER: Well, I didn't have a chance to buy enough Zoom when it-- because I thought it was expensive before, right, before this move. So fortunately, we own a little bit of Zoom. But Zoom, I would argue, maybe isn't expensive, because Zoom, in my mind, is like Google now. So people talk about Zooming like Google or Amazon.

And so it's kept my business run-- without Zoom, my company would be in a completely different position than we are today. I am grateful and thankful for Zoom. And we're customers of Zoom. And we signed up everybody in my firm, and the amount of innovation.

So the real thing about Zoom that's so impressive is their execution. To grow four times as big in a year and execute pretty seamlessly is amazing. So great job to the Zoom team.

So I would argue if Zoom does $1 a share per quarter, $4 in a year, and it's growing like it is and 100 times earnings, so you're going to add $400. So Zoom isn't as crazy as maybe Tesla and Apple are right now, because I think Zoom can grow to the sky when you look at their education business and their corporate business. So Zoom's here to stay.

ZACK GUZMAN: Well, real quick, before we let you go-- I mean, you're talking about diversification. Last time we chatted, you talked about some of these other names out there that might have a longer run recovery here, MGM being an example, some of those other casino stocks we've seen. I mean, what would you tell investors, and again, real quick, about that diversification and the opportunity that might be there in some of these other value names?

ROSS GERBER: Yeah, and I think that's the rotation out of the digital names into physical names that have the best opportunities moving forward. So we're aggressively buying MGM, especially after the IAC investment. We think this is a great play on the recovery for a lot of reasons. A lot of people can drive to Vegas, so they're not 100% dependent on airlines.

We think that the demand is there. Actually, half the country doesn't believe in COVID, so they're still out gambling and doing stuff. So we're perfectly happy to make money off people who are willing to get sick.

So it's an interesting opportunity, because I don't like airlines and I don't like cruise ships. But I like Disney in here. And I like MGM. So those are our two physical plays right now. We've added a lot to MGM. We haven't added to Disney yet.