Why they like facebook and apple. Tech regulation, legal and legislative hurdles continue for technology, especially overseas apps. We hear from senator Marsha Blackburn and how much more needs to be done. We begin with tesla. Stock has been on a runaway rally. We saw shares of breach the ceos goal 420 of 420. An analyst joined meet to to discuss whether the turnaround is working. If you look back at the last six months, it has been massively impressive what musk has been able to do in terms of turning this around from a d perspective. 600. You could start to see the stock go much higher. Bull case, 580 to 600. A lot of that really rests on china. Taylor dan, ive spoken to a few neutral bearish analysts who really are concerned about demand in china. Do you have any sense of what could be a bear case if something were to happen, may be the economy starts to slow . What would need to happen for you to turn more bearish . If i look at the work we have done in asia on the ground, and overall demand, how quick could you get to 100,000 units in china . Could that be quicker than the u. S. Or europe . If the answer is yes, then i think this is something that really could take the story to the next level. In terms of the bear thesis, ultimately, you hit some sort of regulatory road block in china, giga three hits a snag, or you have competition that slows down the underlying demand story in china. That would be the bear thesis. Some have been skeptical, as you and me have talked about many times over the last six months. Elon musk has proved things over the last few quarters. Got to give them credit. Stocks had a parabolic short squeeze, but china is the next leg of the growth story. Taylor so much of the bull thesis relies on demand for the model three. That is the least profitable of all the models. At what point do you need demand to shift to the more profitable models . Dan when you look at s and x, demand has started to tail off. What has been key to the tesla bull thesis and the stock going from 300 to now 430, it is really profitability. They have done a great job getting profitability on core model three and what that trajectory looks like. But i do agree, you need to see. It is really software and sort of upticks within the actual versions. You need to see that Software Version from selfdriving to others, thats an extra 5,000, 7,000, 10,000 per car. That is all profits that go to the bottom line, so that is the key, the Gross Margins story for tesla over the coming quarters. Taylor dan stayed with me as we a copany cofounded by regardin travis kalanick. This week, he cut his last ties to, to uber, stepping down from the board at selling his shares. He was ousted in 2017 following months of chaos and controversy. He says he wants to focus on new business and philanthropic and that hers endeavors. I asked guests about the move. Doesnt simplify things anymore than 2017 when travis was ousted from the ceo spot, went to the board. I guess he was the largest shareholder and he was on the board but focused on his new company, cloud kitchen. He started selling the stock in this early november after the postipo block expired. This is a little bit of a sort of slow moving divorce. From what i hear, traviss voice was not all that loud, so it codifies things already underway. Taylor dan, do you agree . Did anything change for you on tuesday on this announcement . It ended a dark chapter. Youre talking about something that sold almost 3 billion worth of shares. It has been an overhang on the stock. It would be awkward if he stayed on the board. Fundamentally, it speaks to uber being a train wreck since the ipo. This is the final chapter. Now for investors, the hope is optimism going into 2020, but there is a lot of pressure. There is a fork in the road situation. When you look at uber, that is the issue right now. Look at what look at some of the issues they have faced. I think right now there are a lot of worries going into 2020. Taylor brad, you are nodding your head. What are some of the issues they will be facing . One issue is profitability. This is a company that is still losing billions of dollars. It is 12 years old. Its core market, ridesharing in north america growth has slowed, so investors want to see growth in the newer geographies, also uber eats. Around 20 of ubers growth bookings. The question is can it keep growing. The ceo has put a stake in the ground, profitability is around the corner, but investors want to see it get there. Taylor investors do want to see it. If you want to look at a chart im showing inside my terminal, it is uber and lyft, both down now 30 since the ipo. Uber has been on an uptrend early to mid december. Dan, in your case, what is the bullish thesis for uber . Dan look, i mean, for uber right now, you look at underlying growth not just drivers, but user penetration, 2 to 3 today, the opportunity to monetize that going forward. If you look at growth and profitability in 2021, and if you look at uber eats, i see an eight dollar to 10 overhang on the stock. The question right now for uber is, do they cut that business or significantly get to a point of profitability, because it has been an anchor on the ship. Its the sum of their parts. Investors right now, it continues to be a heartburn situation because of execution, overhang, i think as well as just miscommunication with the street. It has been that trifecta. Taylor that was bluebirds brad stone and dan ives bloombergs brad stone and dan ives. Dan ives tells us his top calls for next year, thats next. And if you like us, check us out on the radio and in the u. S. On sirius xm. This is bloomberg. Taylor we are coming up on the conclusion of a decade and a big big tech has made its mark. I spoke to dan ives for his forecast of 2020. Really, a continuation of the thesis in terms of the super cycle. It really comes down to the math. 900 million iphones worldwide. About 1 3 of those, 350 million have not upgraded in 39 months. We are going into a super cycle, 5g on the tail end of that, and when you look at that, some of the parts, i think this is a rerating stock that continues to go higher. I think 350 is base case. I continue to look out two, three years, you could see a stock that starts to approach 1. 5 trillion to 2 trillion in terms of that core thesis playing up for the next two playing out for the next two years. Taylor what if the super cycle doesnt materialize . Dan , great question. I think that is the bear thesis. What happens if 5g is a bust . Especially on the first part, i look at the iphone 11, you look at the trajectory going into later this year. From our work in asia, it looks like the line in the sand is about 200 Million Units with the 5g cycle, so in terms of suppliers, all indications are that will be a strong product cycle. There could be speedbumps and we will hit those in a given quarter going into 2020. But as of right now, the visibility looks as strong as we have seen it. I would have to go back 5, 6 years in terms of where ive seen it. That is why we have such a bull thesis on apple in terms of the iphone in terms of services and rerating. Taylor part of the bull thesis continues to be a supreme balance sheet. I am taking a look at another chart showing frankly 100 billion of net cash, cash after the debt they have. What is the best use of cash . Dan it generates 60 billion in free cash flow. I continue to believe they will get vertically integrated. They will have more technology within the phone. You saw the intel 5g acquisition, i could see more of those, but i do think content is what they go after. I think they will acquire a studio in 2020, mgm, lionsgate, you know, a handful of others that i think would fit the bill, because content is key, that is services. When you look at the streaming tv service, that is something they could look to acquire. They will continue buybacks significantly, but i do believe cupertino gets more acquisitive in 2020. Taylor i want to go to microsoft. According to the bloomberg terminal, you still have an outperform rating on microsoft. I keep hearing their azure cloud product is poised to benefit more than amazon from the shift to cloud. Do you agree . Dan that continues to be why it is our top pick, along with apple. The ceo in my opinion, covering tech for 20 years, it is one of the most jawdropping turnarounds i have seen for any tech company. Because right now, microsoft is the cloud play. I think they further narrowed that gap with aws. Look at the jedi deal. I think on the first phase of cloud, it was amazon. They won that. The next phase will be microsoft. That is why it is a rerating stock and numbers continue to go higher. That is one that is only halfway through this cloud story playing out. Taylor that was wedbush managing director dan ives. For more predictions, i was joined by mark mahaney on monday. It is our facebook of 2020. It is a dislocated stop, stock. Unpopular, a failed ipo. Nobody wants to buy uber. We think the story is going to get better and better as we go through the year. It is likely to have more upside like facebook did. The economics are starting to prove themselves out. What the company has to do is bring down operating losses each and every quarter. We think they will, and we think that by the end of 2020 going into 2021, we can have a break even quarter. You want to buy stocks going through that kind of order. Taylor moreso than lyft, because of its diversification . Rather than just rideshare . Mark i think they are probably joined at the hip. It is hard to see one dramatically outperforming the other. What i find is that the shorter term oriented funds have preferred lyft because it does not have the food business and is just in the u. S. Market, but the flipside is that uber has more leverage, they can sell one levers they can pull to get profitability. They can sell one of their international assets. And they also have 70 market share in the u. S. Generally the company with the greater market share determines economics. That is uber. Taylor how do they overcome this in five, ten days . Mark i dont think it will be implemented immediately. I think this is going to be a court fight. We think that it could lead to Something Like a single digit percentage increase in cost. Keep in mind there are two or three hedges. First, uber and lyft gave out a lot of subsidies to drivers in order to get them to drive with uber and lyft in the first place. If you are giving them benefits, there is less need to give out subsidies. Second, they can pass some of these expenses onto consumers. And third is, there is only a small percentage of drivers that are actually fulltime drivers. Those are the hedges. Taylor i want to take a look at number two and number three top picks, google and facebook. With all of the risks, the antitrust, google and facebook are number two and number three. Mark i think regulatory fares fears have been rising for a couple of years. I think we are close to peak regulatory fears. It is highly unlike these assets get broken up. In which case, we have already seen the worst of it. We have seen fines imposed against both companies, and it has not impacted their advertising Revenue Growth rates. The interesting angle on google is that as the business has finally gotten scalable and big enough it is less of a drag on margins, so you could actually have a positive earnings story out of google this year. With the two cofounders kind of stepping aside, we may get more rationality in some of their investment spending, what they call the other bets area. Taylor are you thinking facebook is poised to see better ad Revenue Growth than google . Mark absolutely. Keep in mind, we have two things coming up this next year, the quadrennial year. We have the olympics and the elections. I think both of these companies materially will benefit from that. You will have an acceleration in u. S. Advertising spend. Facebook and google are a great way to play that. Taylor another big tech name is notably absent on your list. Where is amazon in your bull thesis . Mark i think there is an overhang there. For us it is a medium buy, not a strong buy. As a longterm asset, it is great. The overhang is that the aws business has been slowing down, margin pressure, greater competition from microsoft. I think we and investors want to see clearing of the air before we get more aggressive on the stock. Taylor that was mark mahaney of rbc capital. Wework, perhaps this years biggest flop. We explain what happened and what the road ahead looks like. And later, we hear from one of tax tiktoks biggest critics. The changes she wants to see on the viral app. This is bloomberg. Taylor in our series rewind, we look at the worlds Biggest Technology companies and the challenges they faced. In less than one year, wework went from the darling of the Venture Capital world to needing an 8 billion infusion to avoid running out of money. There was a big rebrand, the company broken up into three distinct business lines. We work, we live and we grow. In july, bloomberg reported wework was targeting a sale of 3. 5 billion. September came and the company was then said to continue consider valuation between 20 billion and 30 billion. The ipo was delayed and the ceo stepped down. In october, softbank came in with a rescue plan for 80 of the company. An earlier this month, they clinched billions in financing led by Goldman Sachs. For more on its performance and what lies ahead, i got perspective from our guests. I think there has been much ink spilled about situation, but our perspective was fairly straightforward. The loss profile was so big, investors needed to work to figure out how they were not losing 2 billion a year. The company spent two dollars for every dollar of revenue generated, so our perspective is that could have had a different perspective from the buyers. Then there are the unforced errors, but nothing indicated the core process was objectionable. It was the way the offering itself was handled. Taylor whats your take . I think this was the straw that broke the unicorns back. The First Company trying to go public with billions in losses, reminding the market that theres a difference between being a tech company or a techadjacent company. This is at the big breaker between lyft, uber, and companies that had attacked tech within the product but were actually in legacy sectors. Taylor you mentioned that had the information been presented differently the ipo might have , stood a chance. What would you have liked to see differently . The tragedy is that they have since out that information. Since they have put out that information they have released , all of the information someone would need to build a good model. Its heartbreaking to see they had all along. They just decided to not give investors the advantages others had. What phil said is right. Investors know how to evaluate a fast company. When you have a company that is not easy to evaluate, you have the burden of proof. At this magnitude, even if 47 billion was not the right number, we are talking a Large Company and transaction. The metrics were all on hand and are now public. Taylor have they come out and said they were a Real Estate Company if they had come out and said they were a Real Estate Company come up with this have gone through . I think it would have been successful. I dont think they could have raised the same amount of cash. The story was they were going to embed technology to reach more scale. It brings to the forefront a slew of Enterprise Companies that are far more recognizable to things in the market with great margins, Revenue Growth, and profitability. The market is going to get excited about it. Taylor we fastforward to present day. The cost at measures you have cut measures you have seen, are they enough . Its hard to say what the daytoday operating plan is. You have a company thats basically going to be private for some time, even though it is making disclosures beyond what a private company would do. We have maintained that there are a lot of smart, capable, experienced people around the company. I would be surprised with the parade of wakeup calls if the company did not get itself back on track that makes some sense. As opposed to the optics that were put forward to the market when they tried to go public in the fall. The other thing we could say is people were worried it could take down the ipo tech market. Luckily, it has been quarantined into its own kind of thing. Whether it is real estate or tech adjacent or whatever it is, its not representative of the mainstream Tech Companies people are looking forward to seeing. Taylor tiktok as a National Security risk. Marsha blackburn has called it chinas best detective. We hear what she said after tiktok made some changes. Check us out on twitter. This is bloomberg. Taylor welcome back to the taylor welcome back to the best of bloomberg technology. Im taylor riggs. U. S. Lawmakers have been after the popular viral video app tiktok for a variety of reasons. The Chinese Company has been the target of National Security and privacy concerns. One thing they are concerned about, that it allows children to make in app purchases. Something tennessee senator Marsha Blackburn highlighted in a letter to the parent company, saying it is quote paving the way to unfettered access to our childrens lives. Earlier this month they , responded by upping the minimum age to 18. I spoke to Marsha Blackburn to find out if that is enough to appease lawmakers. It is an important first step. Having these children streaming these videos, buying these emojis is just inappropriate. We want to protect Children Online and make sure they are ageappropriate. That was a step, and you mentioned the other concerns. We are going to work with them. When you look at facial recognition, the profiling that is done, the concerns on National Security. You cant tell where beijings commercial and military sector begin and end. They are one and the same. And china is determined to build a surveillance state. It is not only on their people. We have seen this used on hong and uighers. Rs when you think about profiles they are building of these children and how they would use that, it is of tremendous concern. Taylor senator, now that they have responded and raised the minimum age, is that enough for you to recommend it . We have other we are going to continue to meet at work with them. I look forward to sitting down with their leadership team. T