And two fairly uneventful president ial debates, uneventful on social media, that is. Twitter is out with a new label that flags tweets that break the rules. The move might even make President Donald Trump walk a fine line on the social site. Tesla, it set a new record for quarterly vehicle deliveries. On tuesday, tesla handed over 95,000 vehicles to customers in the second quarter, beating the average analyst estimate of 88,000 units. This all due to accelerated shipments to europe and china and u. S. Consumers rushing to buy model 3 sedans before a federal tax credit shrank in half. C. E. O. Elon musk told employees in an internal memo last week that the company was close to setting an alltime record, urging them to go all out in the last few days of june. We caught up with morningstar analyst David Winston and greg trudell on tuesday. On the model 3 side, you have to separate the lineup. On the model 3 side, this quarter was just a blowout quarter and, i think, exceeds everybodys expectations. I do think you sort have this up and down quarter where we hit a trough of everybody getting really concerned about demand for the model 3, and toward the end of the quarter, you started to see some of the analyst commentary pick up where people were a lot less concerned about that. But on the model s and model x front, they still have a problem there. So 95,200 was the total for deliveries. Less than 20 of that, about 17,650 of those, were model s and model x. And those are the higher margin, higher priced vehicles in the lineup. And so you know, thats sort of what remains to be seen here is just how much this big jump in deliveries was at the expense of profitability. Max, give me your take over there in san francisco. You heard craig say its good news, but you wonder about the profitability. Is this a clear win for elon musk, or do we still face some clear headwinds on the horizon . I mean, any time you kind of blow the estimates out of the water this way, you have to look at it as a win. You know, coming into the end of this quarter you had sort of two concerns. One was demand, as craig said. The other piece was logistics. Could tesla literally get these cars to people in a timely and costeffective manner . And so i say on the logistics piece, theyre performing well, despite, you know, some acknowledged difficulties. On the demand side, as craig says, the real question is here like, what happens in the long run . So you obviously have consumers in the u. S. Kind of rushing to get to buy these model 3s now and take advantage of this tax incentive which is going to shrink. And you also have people not buying the more expensive cars. And again, we just dont know how this will shake out. Tesla is still a relatively new brand. It will be interesting to see what happens when you know, if and when they refresh these luxury lines. You know, that could be just the thing that causes, you know, people who are model 3 buyers to want to trade up. Craig, that tax credit, as it shrinks in half, how much of a headwind was that this quarter and then i should say tailwind, excuse me, and then Going Forward with that tailwind removed, how much do car sales slow . Thats going to be the big question on the Conference Call for earnings in a few weeks, right . Because this tax credit is going to go from 3570 to 1875. And what we saw at the end of 2018 was the Fourth Quarter was the previous record for deliveries. And a lot of that ended up being in hindsight, you know, a lot of consumers going out to buy the model 3 and the s and the x before the tax credit at that time was 7,500 before it was cut in half. I think people sort of underappreciated how much of that was demand being pulled ahead into the Fourth Quarter of last year. And that was part of what fueled this big dropoff in the First Quarter of this year. So that is the big question for the third quarter, can they sustain this momentum with the model 3, even with this smaller amount of support from the federal government . I now want to bring in david wiston, a morningstar analyst joining me from chicago. David, weve been having a discussion here where it seems to be like were in the all clear. Model 3 is coming in better than expected. From your fundamental analysis, fold in here for me the demand and profitability mix of the s and the x, which are key given theyre higher margin cars to get elon that profitability to where he needs to be . Right. For all this controversy around the demand problem, i never believed there was a model 3 demand problem, but the s and x is getting old to consumers, so to speak. They do have a new operated range of 370 miles. Blame is one thing. But also about profits and cash flow, where you wont know until we get the q2 results how much a shift to 3 over the s and x matters. S examine x year over year and they were good numbers s and x was still down 21 . David, what does your analysis say in terms of the path to profitability for tesla . Weve heard elon musk talk about this a lot. When do we get there . Well, they did it for a couple of quarters last year. And its hard to say exactly what is the tipping point, though, because theyre still growing internationally. You got the china factory online , you will have a european factory, and you still have more new models coming out. So the trick is, how do they balance profitable growth . Thats very hard for any startup business to do. And theyre a pretty big startup now, so to speak. Craig, is the chinese demand where it needs to be . I think the demand we dont really know at this point, in part because they arent set up with that factory that was just mentioned thats going up near shanghai. So once they do that, they will avoid these import tariffs that affect any car that is built outside of china. And so we dont really have a true sense of demand for teslas in china because they are so priced out of the market. I think there is a buzz within china of this brand and this aura around elon musk that we see around the world. But we dont really know yet just how much sort of Untapped Potential there is for china as david was saying, you know, we also that isnt something thats going to come for free. It costs money to build up a plant. They are doing a lot of borrowing with local banks there, so theres a possibility that it wont have a huge drag on the earnings of the company. But that is something thats going to be more of a 2020 story as we see local production start of the model 3 there. David, as we look forward of course to the end of 2019 and 2020, what do you see as the biggest left side tail risk downside . Is it elon musks tweets . Is it profitability . Is it the fact that they need to go out and raise more cash . Is it demand headwinds . What do you see as the biggest leftside tail risk event . Probably two things. One is just general economic risk, and that applies to any company, really, in any industry, just the business cycle. We are late cycle for auto sales, for example. But thats a new product. But the other point would be a bigger, longer term happening of what happened in late may and early june when the sentiment and the fear started to get into this name. This is a name thats always traded more on option value and what is it going to look like in 2025 and 2030 . And elon is awesome and all that and a brilliant guy. But when all of a sudden people start to freak out and say oh, they actually have a lot of debt and they have about 3 billion in debt due between now and 2022, some of it is convertible so it could get paid off, but if all of a sudden the street looks at more of the downside reasons to fear tesla rather than be optimistic about tesla, the stock will get pounded pretty hard. Caroline coming up, half of the year is already in the bag, and weve seen 22 Tech Companies hit the public market. Will the momentum continue . We discuss. This is bloomberg. Caroline now, 2019 has been quite the year for tech i. P. O. s as lyft, uber, and pinterest go public, but a significant shadow or two going over these newly traded companies. Google and amazon have a significant hold on a number of the Tech Companies that have hit the public market. On monday we spoke with mark mahaney of r. B. C. Capital and garrett de vynck, who wrote the interesting story. Lyft, for example, spent 90 million on google ads in a single year last year. Those people went to an apple app store, downloaded the lyft app when they opened it. Google maps was powering the maps behind it, Something Else that lyft had to pay google for. All of this was hosted on amazon servers. Lyft has a 300 Million Contract with Amazon Web Services and google has 5 of lyft and a board seat itself. So its obvious that google and amazon are very deep within the digital economy, but when you look through these files you really see how concretely they are kind of that the infrastructure behind how many of these companies work. And in some ways, this is a blessing and some ways its a curse. Mark, you focus on both amazon and google. And from the blessing side of the equation, do you see it as a good element that they that these companies have so much riding on, whether it be financial or from that future revenue stream from these recent i. P. O. s . I dont know, caroline. Theres good and bad to that. The benefits of Cloud Computing is that it allows startup companies, companies that have eventually want to go public, or are going public to avoid a lot of infrastructure costs. You can treat all of your i. T. Needs as variable costs rather than big fixed costs you dont need to buy and build up a very large i. T. Department to scale up a business. Thats been the magic behind a. W. S. , Amazon Web Services, also behind microsoft and google cloud. So in many ways what theyre offering is a real benefit to these companies, but theres no doubt that in order to scale up on the internet, you probably are going to need to pay one of those three cloud providers. And if youre a consumer Oriented Service and you need to get consumers to use your service, to use your app, to get to know you, youre probably going to be spending money with google, facebook, and probably just those two. Thats how you get Brand Awareness on the internet these days. So i dont know if theyre toll keepers. Thats probably too strong of a word, but theyre clearly the biggest channels out there and you are going to be dependent on them. Hopefully companies that are really successful and that investors like to look at are Companies Like an uber and lyft long term that can create brands that are Strong Enough that they can avoid having to get traffic only through those paid channels. And garrett, your piece also shows how many of these i. P. O. s, 17 of the recent 22, that are in some ways mentioning google, amazon in their statement. Is this something regulators are looking at . Are they worried that, perhaps, they clamp down too hard or try and push for breakups and the like and this could actually impact those downstream . Yeah. On the one hand you could say look how powerful these companies are and we need to break them up, and on the other hand theyre not interested in disrupting the Smaller Companies because theyre their customers and they want them to keep growing. Google wants lyft to keep growing and still use google maps and pay more and more for it every year. So you can kind of look at it from both directions as the argument goes forward. Im sure youll be seeing the arguments from both sides. I want to say i dont necessarily think by breaking up these companies you would necessarily disrupt that web you know, in a really deep way. You could still buy google maps from google maps limited and buy Google Cloud Services from Google Cloud Services limited. So, you know, well see how it plays out, but im sure this will be a topic of conversation when it comes to antitrust. Before we go, the equation for the behemoth, mark, i want to talk about the fact that you cover lyft. You cover pinterest as well. When you saw that their filings show this competitive exposure and general exposure in terms of supply side needs from amazon and google, did you see that as much of a risk factor . Does that worry you . Would you like them to invest in their own independent service, for example . I think the answer to that question is no. I didnt see this as a risk factor. I hadnt really thought about the way you set up the question. So if they didnt if they were going to have a Cloud Services provider, it is going to be one of three names. Either a. W. S. Azure or google cloud. And chances are it was going to be a. W. S. Thats usually the lead cloud provider. They have almost 50 market share. So if they didnt do that, then the p l they would have gone public with and they would be going public with would look a lot different. And you would have a lot more capex spending. So it probably would be, frankly, a less attractive business model. And you would also raise the question of why are you trying to vertically integrate and build out all that infrastructure and manage all those data centers and those server stacks and i. T. Departments when there are three companies that are doing a phenomenal job of allowing you to outsource it . So ill just twist that question back at you, caroline. Its a great question. I hadnt thought about it before. I dont see that as a competitive issue. I dont think thats a dependence risk. And there is the option, by the way, of switching. And we have seen companies snapchat went public and switched and started switching over migrating over from google to amazon. So as long as you can migrate, i dont think theres risk. And mark, what about the risk from a competitive perspective from the regulatory viewpoint that were starting to see coming from capitol hill upon amazon and google . Is there a risk that they are seemingly so intertwined with the rest of the tech ecosystem . Possibly. I just on regulatory risk, its something thats clearly become a major investor issue across technology. We actually just hosted a call earlier today with an antitrust expert to talk about the risk that these large platforms face, particularly google, but also apple, amazon, and facebook. I think the chances of these companies having to be forced to divest assets, i think thats actually extremely unlikely. I generally think they View Companies that they hold assets for multiple years, i think government regulators would be very loathe to unwind that and it would also be very hard to do that. Youre already looking at the margin changes in business practices. I would make one quick comment. We just listened to a weekend of president ial democratic debates, and big tech really didnt come up at all. The one time it did was in concerns whether amazon is paying its fair share of taxes. The issue of googles strong market position or facebooks or anybody elses actually didnt come up, and thats probably the best political barometer. If it doesnt come up in a president ial debate, it means it probably doesnt matter. Caroline still ahead, bloombergs scoop of a potential deal with broadcom and Security Firm symantec. Analysts are divided over strategy ahead. Youll hear from one next. This is bloomberg. Caroline at t is considering whether to sell its Regional Sports networks as a plan to reduce debt. Bloomberg learned this week the four networks could fetch up to 1 billion and the sale would include tv rights to teams such as the nhls Pittsburgh Penguins and the nbas houston rockets. And another bloomberg scoop, broadcom in advanced talks to buy the cyber Security Firm symantec. For broadcom, a deal would mean a further expansion into more Profitable Software businesses. We spoke with Piper Jaffray analyst harsh kumar on wednesday for the details. I think symantec at the initial stage passes a smell test for broadcom. Broadcom has 52 operating margins. For them to consider an acquisition, it has to be immensely profitable. There arent a lot of companies that can reach or have the potential to reach 60 plus. I would say that would be the threshold or hurdle to look at an acquisition. The last deal they did, which was computer associates, c. A. , actually is performing extremely well. And when we look at Something Like symantec, it has shares that are similar to c. A. In terms of the two businesses. One already at 50 operating margin and with a little tweaking could potentially get to 60 . And the other that they could just drop into the platform and strip it of costs, mostly marketing and sales costs, to drive operating margins. So from that angle it would be an immensely profitable deal, and it would be an extension of the portfolio that they have with c. A. Yeah. Interesting, because weve been waiting for years really to work out what they would go after c. A. And after the qualcomm deal fell away. What makes symantec sort of all the more vulnerable, so to speak, to being bought out at the moment . Theres been a lot of drama at symantec. As weve been following, their c. E. O. Greg clark had been ousted a few months ago. There have been an acting investigation. And then starboard value, an activist investor, came on the scene and was pressuring the company and they got a few board seats. So it really is a vulnerable time for symantec for a takeover. We were just talking about the tmobilesprint deal and the regulatory issues at that. Are there going to be cfius or regulatory issues with this deal, considering broadcom in the past wasnt able to get through the qualcomm deal . Before broadcom went after qualcomm, they had a singapore headquarters. They have now moved totally to the u. S. , so they are trying to alleviate that issue. Cyber security is a National Security issue and symantec does work for the u. S. Government. So the cfius review is something investors will be watching to see how it goes. There could also be an e. U. Review. So no slam dunk for any large deal where there is this National Security element. Harsh, putting regulatory c