Tesla's Q3 Miss, Netflix Shares Surge, Powell and Yields Watch 10/19/23

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Jim Cramer (0:31)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

Carl Quintanilla (0:39)

Good Thursday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Sara Eisen at Post 9 of the New York Stock Exchange. Cramer has the morning off. Pre-market has erased some early morning losses, even as the 10-year got awfully close to five.

A big day for FedSpeaks. Seven speakers, including Powell at noon Eastern, and tons of earnings movers. Our roadmap begins with Powell, of course. US government bonds gaining for a fourth day. The 10-year nearing five as investors await some tea leaves from the Fed share today.

David Faber (1:06)

Plus, we do have that earnings parade. Netflix surges on sub gains. Tesla, that stock is down. Musk didn't sound so good on that conference call. AT&T, Blackstone, American Airlines, they are all names that we will be telling you all about.

And the Ozempic effect, Nestle is looking offset any future sales impact. Now developing products to accompany weight loss drugs.

Carl Quintanilla (1:30)

Let's begin with Tesla, among the biggest S&P laggards in the pre-market. The company did post a quarterly miss, including weaker than expected profit margins due to some of these price cuts we've been watching. Cybertruck was in focus. This is Elon Musk talking about it on last night's earnings call.

Elon Musk (1:45)

I just want to temper expectations for Cybertruck. It's a great product, but financially, it will take, I don't know, a year to 18 months before it is a significant price of cash flow contributor.

Carl Quintanilla (2:03)

Of course, Musk did comment on all kinds of things beyond the company itself. Rates, of course, macro, work from home, sort of echoing themes he's had before, David.

David Faber (2:13)

Yeah, in fact, I remember during our interview in May, he went on quite a bit about work from home, really criticizing those who were doing it. But I think obviously for the stock itself and for investors here, it's the margins, it's the impact of the price cuts, it's concern that this will continue for quite some time. And frankly, it's also the tone that Musk adopted on the call itself. We know with Musk, there can be ups and downs.

And I would also just add that, unlike so many other companies where there are armies of PR people and the CFO and the head of IR and on and on who try to craft a narrative around a call, Musk has none of that. I mean, he's got a CFO, don't get me wrong, but they've got none of that. It's just Musk.

And you're gonna get what you get, Sara. And in this case, he did seem very focused as he has been on the past on higher rates and what that's doing to affordability.

Sara Eisen (3:09)

It's worked for him in the past, not having the narrative teams structuring the communications. Look, I think that you mentioned the automotive gross margins. It's worth repeating the number, 16.3, it was a surprise.

The analysts were expecting 17.7, and even that is lower. So those price cuts are weighing, and I think a lot of people were looking for him on the call to talk about the fact that they bottomed or troughed or there's some visibility, and we just didn't get that. I think the most expensive Model X has seen price cuts up to 30%, so that's going to weigh on margins. The operating margin down to in the 7% range. I mean, we're getting closer to normal automakers. It's not being valued like a normal automaker, but the margins, which was the edge for Tesla for so long, clearly in focus. I thought it was interesting also in his colorful way. We dug our own grave on the Cybertruck, because there's been a lot of excitement on that too, and it sounds like there are a ton of orders still. Well, they've got a million orders, but it's going to take a while to get there.

David Faber (4:07)

The complexity of production, and Musk will own this, in part because of what he wanted, is so complex that getting from, as he says, a prototype to volume production is just a very difficult thing.