Chicago for what is moving this stock. Phil reporter melissa it is not just that the q2 loss was greater than expected, tesla losing 1. 12 per share. The estimate was for a loss of 1. 40 a share the estimates were all over the map, a wide range there. Revenue coming in at 6. 35 billion, a little shy of expectations it is the automotive Gross Margins that will get a lot of attention here they came in at 18. 9 . Remember, the concern was those margins were going to be squeezed as they were pushing out the model 3, was that push to make deliveries of more than 90,000 going to hurt margins coming in at 18. 9 when many people were looking for them to be at least 20 . By the way, thats down not only compared to the Second Quarter of last year but also compared to First Quarter of this year where both of the quarters, the automotive gross margin topped 20 . They do reiterate their guidance of delivering between 360,000 and 400,000 vehicles this year the shanghai plant is on schedule to open by the end of the year guidance on theed mo model y, s scheduled for fall of 2020 when you look at the automotive Gross Margins, that will get a lot of attention coming in at 18. 9 . By the way, Free Cash Flow, 614 million positive. Back to you. Yes that was compared to what was expected which was 136 or so million dollars. Yes. It was much better. Also the cash at the end of the quarter, cash and cash equivalence, 5 billion, highest in tesla history. Right and that cash flow speaks to higher deliveries. Thats what you would expect. Sure. When you have deliveries topping 90,000, coming in at about 95,000, they added a couple hundred more compared to what they said when they initially reported deliveries. Right, the wrinkle is that this shareholder letter which we pars through as soon as it is released, this is the only thing we have until a Conference Call at 6 30 p. M. Eastern time. After we are long gone at home they dont even do the show. Then they get under way i know. You could get ford you get ford i suspect they wanted to make sure the automotive analysts could do ford and then do tesla. Okay. Thats why you have it in that order. That makes sense. All right. So much for my conspiracy theory, phil thank you. Phil lebeau in chicago for us. You bet so a lot of misses cash flow better they say in their outlook section, we believe our business has grown to the point of being selffunding is this 11 decline in the stock in your view, is that warranted given the results . Im going to let tim talk about the Free Cash Flow because it is a staggering number, but is the move to the down side warranted given what phil said and everything we will probably talk about i think the short answer i think is yes this stock was 177 on june 3rd up to today 267 they needed to crush in order for the move to continue i think. So is the move warranted yes. If you are looking for an entry point, and mind you that i think we did a good job . June identifying a low carter worth and dan specifically we did a good job on the way up. I thought the stock would fail at 225 or so i happen to think it might be the entry point to get back in on the long side so, yes, i have gotten it wrong for the last couple month or so, but i think you will get a shot to buy it again and that comes in the form of a 50 retracement of the june low and the recent high. Look, they lost 400 million in a yaquarter with record deliveries this to me sets up a worse Third Quarter. Remember the First Quarter the trend here to me is awful. Again, the gross margin at least begins to tell people i think people that didnt think this, this is a structurally unprofitable car i am talking about the model 3 the bad news is that the model x and model s continue to see slower sales those are the cash cows, the higher margins we saw last delivery round they were down roughly 30 in terms of those delivery numbers. Growth company doesnt cut cap x, dont take restructuring charts to me it is exactly the story that i have seen for a long time yes, im impressed by a Free Cash Flow number and i think that the Balance Sheet is different than a quarter ago the question always is, can this company i dont know they can sea th say they are selffunding when you are building on it sounds positive when you say selffunding it makes you want to buy the stock when it says selffunding. Thats been the major problem. Right, except you see an 11 decline in after hours. Yes all of the averages it has broken through, the 50day moving average around 220, thats when you step in and buy it margins are getting worse and the tax credit is cut in half july 1st and going away completely at the end of the year that will crimp margins further. What if i told you guys two weeks ago the stock was trading exactly where it is today . I think we have to keep it in perspective, right july 10th, july 11th it is trading at 235 yes, it has pulled back probably for the right reasons given what they delivered in terms of the margins and everything else. The Free Cash Flow is interesting. I tend to be more bullish than bearish on this stock. On june 4th is when we talked about stock was 180. They bought 10,000 of the july 2nd, 50 calls. Those went into the moddy deep today. I took some off today and rolled up to get a little more, mel, because i expected they might be able to squeeze out something this quarter that would be positive for the markets they didnt. But im still owning i own the 275s out in august so i will be waiting to see if we ever get to that level again. I think this is a great trading vehicle. To your point, guy got a 31 Short Interest right now. Right. You can have more volatility. For a person like you that plays options, it could be tomorrow morning the stock might be trading different than it is tonight depending on what happens further into the evening. I agree with that 100 . Listen, absolutely right in terms of the stuff that pete said, you know, playing it through options is something you have said for quite sometime the interesting thing about this, and i dont know if people at home would agree, i think this gives some people on the bull side a lot of ammunition and conversely i think if you are bearish in name what is the bullish case out of this result Free Cash Flow. The Free Cash Flow. I think with that number im not an accountant. And the production. Those two things i think. And the cash flow and they were profitable third and Fourth Quarter they said that they went right back to a loss in january, but they said that these quarters were going to be challenging ones this one is definitely a surprise to the down side, but theyre supposed to theyve already said that they look to be profitable next quarter that remains the question. They had record deliveries though. Right. And, again, they lost this kind of it makes no sense to me this is a company that has to work, and we have seen the different ways in which they can try to get the model 3 out there and let me ask you, in what way does it have to work does it have to work in that it can selffund itself to the pound so maybe it has a shot as being profitable some day . Are we looking at amazon in the growth stages where we shouldnt care about losses necessarily . Im just wondering. Good question it has to work means i think at some point tesla no longer has that base of investor support. We have seen some of the biggest investors in the world leave the shareholder book of these guys, but when i say it has to work, really what i meant is the model 3 has to work. Thats thats the story of this company, not the model x and the model s. Those are great car has are highmargin cars that did very well the reason you own this company, or at least some is for the model 3. Other investors and weve had them on the show, that dont talk about deliveries, dont care about auto. They care about some of the technology they care about the data and the leadership that they have in driverless and what that means for this company and the value inherent. For more reaction to tesla earnings lets bring in gene munster of roLoup Ventures. What do you make of the results . There seems to be a little bit for everybody here. Well said tesla is always an emotional story. Melissa, im going the try to go down the middle and look at the results unemotional. I think it is an overreaction and i want to step through why thats the case. The stock should be down as a starting point because the expectation was that they would increase their gross margin from 20 to slightly higher i recall a couple of quarters ago i think phil mentioned that it was 24 , so it would be the third consecutive quarter of a decline. But i would put from a 20 to 19 pi 19 as a modest decline especially because of the mix, the big 78,000 delivery number of the model 3 was driven byth cheapest versions of model 3, the lowest profitable margin on those model 3s so i think that that 19 actually is somewhat respectable given the way the mix was in the quarter. I think you can argue that 19 is not zero or a loss. I want to just shift gears and talk about putting the loss into perspective. 408 million, big number we are looking for a lot of 110 million, 117 of that loss was a onetime restructuring i suspect, and they will talk about this on the call, that a large portion of that so to answer tims question about how do you have that big of a loss and you have those record deliveries, they spent on other things, in particular shanghai giga factory i would encourage anyone to do a google search, a Youtube Video of where thats at right now most impressive how quickly it is coming together theyre spending a boat load of money to advance that. So i think of this the fact they continue to expect demand, moving in the right direction. The fact theyve really got their arms around manufacturing, is generally moving in the right direction. One last thought to your point, melissa, about amazon and thinking about this relative to almost this hidden valuation question i dont have a good support, even though im a believer in tesla and think that this stock can go much higher i dont have a very clear avenue when i talk about valuation because it is obviously difficult or impossible at this point to try to value this company off current financials. How do you know that the stock is going to be higher, gene well, when you look at the market opportunity, we think that there are just a handful of what wewould call undeniable truths of the future one of those is the electrification of cars. As we look at the pricing of the different cars and availability, we think tesla has an inherent advantage today, specifically around range versus price, and will in the future around some of the data being collected, some of the things i think tim was talking about and some of the advances i am not talking about a robo taxi fleet to drive the valuation but simply safer cars. When you say inevitable truths of the future, it sounds a ways out it doesnt sound like stocks could be higher in a year. If your time frame is shorter, the conviction is lower it sounds like. I think well, my conviction is still high i just dont have the framework around valuation. Right. I would say this. If model 3 units increase in the september quarter, which is what theyre saying is going to happen, the stock will rebound okay. Gene, thank you. Were going to let you hop on the facebook call. Thank you. Which is going on right now we will check in with you later on theyre always, by the way, commenting in the outlook letter by the model y preparations for production began in the Second Quarter. Theyre able to leverage some of the costs from model 3 because the parts overlap, et cetera, so that will be theoretically a lower cost car to produce. We remain on track to launch local production in china by end of the year. I will say it gep. I think theres something for bull and bears you dont have to be in the stock, lets be clear. This is the way i would look at it today if you are looking to play it, i think if it gets down to the 225 level it makes sense in terms of risk reward. I dont know if it is going to get there. If you want to play from a long side with only stock, thats your entry point. We are just Getting Started here on fast money tonight coming up, shares of facebook higher in after hours session, up 2 . We will tell you what is moving the stock, what to watch for on the Earnings Call going on now plus, check out paypal and las vegas standards all on the move after reporting results. We will see what execs had to say about the quarter. Were live from times square, more familiar right after this for your heart. Your joints. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally discovered in jellyfish, prevagen has been shown in Clinical Trials to improve shortterm memory. Prevagen. Healthier brain. Better life. Here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Welcome balk to fast money check out shares of facebook jumping in after hours, up as much as 4 at one point. Now it is up 2 . Beating on the top and bottom lines, revenue rose 28 compared to last year this results come of course after the company struck a 5 billion settlement with the ftc. What should we make of this, pete think when we look when it comes up to the 5 billion number, yes, it is a Record Number and all of the rest, but look at the cash flow of the company. They have 46 billion in cash the cash flow somewhere around 10. 5, 11 billion, you know. So theres a lot of Different Reasons why, yes, it is a penalty on anybody yes, it is a penalty on facebook but they digested that, mel, before we came into the earnings when you look at the earnings numbers and you see they still are putting out growth had is a Company Everybody said, oh, were all leaving. We want to leave this platform im going to zbreinstagram. Facebook happens to own instagram. Sounds like you are laying the case for the government here for antitrust. If they choose to and that will make facebook wealthier if they put it out there to the public, what is instagram worth now today as theyre growing, at the pace that theyre growing . Could be the best thing they do for shareholder. Could be best in the world. Out of the 47 analysts that cover, you have 40 buys, six holds and only one sell. Sounds like a crowded position. Sounds like herd mentality. It is. But they didnt flip up until about 190 on the stock most of the guys at 140 and 150 were like, you got to stay away. When you look at the closure of this, i saw your interview today, it couldnt preclude further action on the antitrust front but people are getting numb to a lot of the headwinds this is a shocker, up 56 yeartodate it is a being shoer tos mo cket people, but you cant bet against them. When it comes to the quarter, all that it matters is that advertisers are ticking by facebook at this point regardless of what the headlines are, you want to see the basis of the business keep going in this quarter what did you like the advertising revenue didnt show a sign of weakening. This is a Trans National company that it will be difficult for the worlds governments to team up on this, too. To be clear, steve talked about the headwinds, people are becoming somewhat inured to. I think you still have to Pay Attention to expenses. I think the down side for the stock is, you know, gross margin as well. I think you have to watch where they are because it is still a question of whether they can truly measure what the expense load is going to be going forward. Meanwhile though, the revenue side of the Balance Sheet right now is extraordinary yeah. Guy. Everybody said everything on that, so lets add one more sort of arrow to the superlative. Thats arrow to whatever you like. We are going to shoot all of the arrows at some point. You dont have to shoot them. Put them in your quiver and hold on to them. Tell me what the arrow is. Something i said for a while of i dont want to like facebook for a number of reasons. With that said, with that move to 164 on june 3rd was textbook and the stock set up extraordinarily well to push towards the alltime highs from last july. It is pretty much exactly what has taken place. You know, 211 and change was last julys high here we are now. Ask the question, i mean pete talks about discipline all the time do you stay with it here for the breakout i guess you could. Or do you start taking money off the table in light of the comments we had at top of the show last night . I think the prudent thing to do is start to layer out of some of this. I got to tell you, i own it and im not thinking about that right now. The reason is when i see numbers going up, growth in different areas, and we all know instagram is growing very rapidly and soon will be about 30 of the revenue that comes in. How about the fact the average revenue is over 7 per user. These numbers i want to put it out there. Our pool. I didnt want to say our pool but when you look at the things and what was expected . 20 or 30 less than they came out with it tells you how much power these guys have. How about the fact it is not over bought on a relative strength index we are holding in on the old highs and you want to buy old highs. You want to buy new highs. You want to buy them when theyre running towards it the momentum is to the side of the bulls. When you look at a fundamental side of this thing and see a pe trading at 22, 24, Something Like that going forward, it is still very cheap yet it has incredible growth you look at the Balance Sheet, she dont have debt, have a lot of cash. You take 5 billion out of it and they put 5 billion right back in there. Shouldnt there be a discount for the headwinds it faces, all of the regulatory clouds everything pete is saying is absolutely right what were saying is we are talking about a company that has no issues with the regulators though thats