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Tesla’s Earnings Raise a Bigger Question & What’s Driving One Key Consumer Sector
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This episode is brought to you by Charles Schwab. Timing the Market Fighting inflation Managing risk Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help join host Mark Riepe as he breaks down practical strategies to help overcome the mental traps that may affect your investing decisions. Listen@schwab.com FinancialDecoder
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Filled with megadeals, celebrity brands and rollercoaster share price rides, there's one sector that investors love to track for consumer insight. We welcome it's attend founder Carolyn Aronson for her insider scoop on the beauty industry. Netflix has a new bet after it loses out on Warner Bros. Discovery. We break down the latest plus today's news from Microsoft, Meta and Lululemon and the latest from Uber and Lyft. Tesla earnings out we get under the hood to see where Musk may take the multi hyphenate company. Next for Thursday, April 23rd is Blue Markets Daily and I'm Ann Berry. More market details to come. But first, Tesla last night reporting first quarter earnings that at first glance looked solid, a reminder of the magic of Musk as the market prepares for his spare SpaceX to IPO. But underneath, Tesla's report told a more complicated story and raised one specific question for me. Tesla's headline numbers were strong, revenue coming in around $22 billion, up about 16 to 17% year over year and with adjusted earnings beating expectations at 41 cents per share. Margins, all important margins also improved and Tesla generated positive free cash flow. So from a pure financial standpoint, this was a pretty good quarter. But here's the catch that revenue missed Wall street expectations. Now, one area that investors have been watching closely is Tesla's energy and battery business, a long term bright spot with strong margins and growing strategic importance. But in this last quarter, performance actually softened. Energy generation and storage revenue fell about 12% to roughly $2.4 billion, and deployments came in at just 8.8 gigawatt hours, well before expectations. Perhaps most importantly, the core auto business is showing cracks. Vehicle deliveries came in lighter than expected and competition keeps on intensifying globally, especially from Chinese players BYD and Xiaomi. Well, one nugget that stood out is that the autodisruptor is faced with its own OG innovations aging out because on the earnings call, Musk said that older model Tesla vehicles that feature hardware3 computers likely won't be able to use the company's upcoming unsupervised FSD systems and just cutting through that acronym. These FSD systems are intended to enable Tesla cars to have driverless operations, meaning safe for use without active human supervision. To handle the technology mismatch, Tesla said it plans to set up a discounted trade in for cars that have the older hardware and will allow customers to upgrade their car computers and cameras to enable future self driving system use. Costly moves, but necessary to keep Tesla on the cutting edge of auto. Which is why the most interesting story in all this isn't really about cars anymore. It's about a pivot to other things. Musk used the earnings call to double down on Tesla's future as an AI and robotics company. We had updates on robo taxis expanding in US cities, continued development of the Optimus humanoid robot, and a massive ramp in spending over $25 billion planned for this year, which by the way is $5 billion more in CapEx than had been guided. Which begs the question, if you're going to pivot, why not just do an all in pivot to merge Tesla with SpaceX, Musk's AI, space exploration and satellite communications conglomerate, that one as file to IPO at an expected valuation of between 11 3/4 and $2 trillion, dwarfing Tesla's 500 to 600 billion dollar market cap, trading range and shareholders real fear, possibly as a result overshadowing the car company in terms of attention received from the mighty Musk. Well right now somewhere between 35 and 40% of Tesla shareholders are retail individual folks. And the narrative in the markets is this shareholder composition reflects a widespread desire by people to own just a little bit of Musk in the absence of any other way to do so. That's because the rest of his endeavors, SpaceX, which includes Xai, Neuralink, the boring company and X formerly known as Twitter, are all still private. So when SpaceX goes public, will any of the Tesla faithful dump that stock to own Musk through SpaceX shares instead? Well, it's a risk and just one person's view. A reason why I think a merger with Tesla will stay on the table, especially with its car thesis having lost its VA VA room. Well, Tesla stock down 7.5% today and that SpaceX IPO rumored for as early as June of this year. We'll keep watching. Coming on up, Carolyn Aronson's insights into one bellwether consumer sector, plus Lululemon's new CEO pick, Meta and Microsoft shaking up jobs and what's going on in the world of rideshare. But first, a word from our sponsor, Charles Schwab. Trading at Schwab is powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more websites or curated just for traders. Plus guided learning paths with content designed to fit your unique interests. And no sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more@schwab.com trading well, there's a sector with all the drama you could ask for. Mega mergers with public companies Estee Lauder and Pooch engaged in a $40 billion deal discussion. There's Celebrity with $4 billion market cap elf scooping up Hailey Bieber's brand to catapult it into Sephora. There's AI L' Oreal partnering with Nvidia to speed up new product development 100 yes, 100 fold and their stock price roller coasters with Olaplex shares rocketing to nearly 30 bucks on its IPO before limping along at under $2 a share before Henkel rode into its rescue. And it's been a popular sector with investors over time, famously holding up pretty well during recessions in what's affectionately known as the lipstick effect, the notion that consumers will trade down and trade out certain categories of spend when times get tough, but that they'll keep shelling on out to look good. So to figure out the big picture, we wanted to dig into the micro one with a little help from a seasoned founder deep inside the beauty industry. For that, we're excited to welcome Carolyn Aronson, CEO of IT for 10, the award winning hair care brand. Carolyn Aronson joining us from Miami. Thank you for taking the time to speak with us. You've got such an incredible background doing many things. You're an entrepreneur, you're a consummate investor yourself. So let me ask you this. If you are investing in public beauty companies today and perhaps you'll give us some insight as to whether you are or not. If we looked in your portfolio of stocks, would we see some of the big players in there? Given your expertise, what are the one or two metrics or measurable signs you'd be looking at to see if these were winners in your space?
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C
I think some of the things that I would look for is the potential for continued growth over long term within my sector. I always kind of consider the beauty industry almost like the restaurant, sometimes even the fashion industry. There are things that really come through very quickly, explode and then Fizzle out. And so I have tried to be a long withstanding brand. We just celebrated our 20th anniversary. And so really when I look to investing within my industry, that's what I really look for. I don't know if there's too many industries with our type of margins and especially if as an entrepreneurial company, I'm run extremely lean, really, really looking at margins at times analyzing them, negotiating them, and using the power of growth to renegotiate some of even our deals. So those margins are crucial to be able to create a brand that's going to withstand the test of time, but also really be able to continue to reinvest in the innovation which is crucial to our industry. Our industry is constantly evolving because of regulations. So you have to really have those financial, that financial background to be able to pivot and turn on a dime. Because all of a sudden you may get a Prop 65 or some type of regulation that says you have to change all your formulas. You have to be able to afford to do that.
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Just define for us if you're for our audience, if you don't mind, what Prop 65 actually is.
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So Prop 65 is a regulation process within California that actually regulates the beauty space and really is becoming more and more conscious about ingredients that may be harmful to people.
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And just to give us a sense over time, you know, give us a sense of the kinds of brands, the extent to which this has had an impact. Have you seen product recalls coming out of this? Have you seen reformulations coming out of this? Again, if we're public investors looking out for something like this, who's been impacted, who hasn't?
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You know, it's interesting because I think everyone's been impacted at one point or another, especially a brand. If you've been around a moment, but you know, you can, you can even look at, you know, I remember when Divacurl got purchased, as soon as they got purchased, they actually were heavily regulated and found that there were some ingredients in that particular brand even after the purchase, that they suddenly had to pivot and turn and make some changes. So it's something that affects really every aspect of the beauty and you have to be on top of it at all times. You need an R and D team that is regulating the changes. I mean monthly, daily, weekly, because that's how quickly something can change. And you have to make sure that you're on top of it and you don't get caught. I'm shocked that the company that purchased it didn't really look into that. A Little bit more when they purchased Diva Curl because it was a major issue.
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Well, I was going to get exactly to that, Carolyn. And the reason we're excited to have you join is if you take a look at what's going on in the beauty industry at the moment, there are deals happening, feels left, right and center. We saw Elf buying Hailey Bieber's Brand Road. We see Estee Lauder and Pooch in conversation to do a merger. So the amount of diligence that needs to be done, I think I'm hearing you say it needs to be done literally in a product by product fashion to try and make sure nothing gets missed. Is that what I'm hearing?
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C
It does. And so the diligence really needs to include a deep dive to into the company and their regulation process and what they've done over the years to make sure that they are compliant and staying compliant.
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Let's talk about some of the shifts that you've seen over the course of your tenure in this industry, Caroline, because your perspective is great. You've got, you've seen so much. And one of the ones I want to talk about is the change in distribution channels. We've seen QVCs filed for bankruptcy, officers having a resurgence. Yeah, why can't you believe it? Tell us about qvc. Tell us your perspective on this.
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C
You know, I just think, you know, it's interesting. I was just getting my hair and makeup done and I was saying, you guys, did you hear qvc?
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And you look great, by the way. Everyone should know. Karen looks great. Great to have an amazing glam team,
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of course, but shout out to Nordia Maika. But, you know, it's really, really important, you know, that we stay on top of all of these factors. I read everything about every company, every merger, acquisition, and that's fascinating to me. You know, when I told them, they were just like, no, no, not qvc.
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But we used to prize Carolyn. I mean TV is dying, right? Traditional tv personally, not.
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I'm listen. And they said it so perfectly. They said we used to buy all of our stuff on QVC but now we buy on TikTok.
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Talk about that, talk about your brand. How much is. It's a 10. Selling through social channels right now.
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So quite a bit. We are revving up to do even more. I actually have done some TikTok lives and they were amazing. And I think that the world has changed and as a 20 year old brand we change with it, we pivot and you have to. And I think sometimes within our industry that's what doesn't happen? I think that founders build a company and they kind of think, okay, you know, I've got it to here, I'm going to ride off into the sunset. And so especially at like a 20 year mark, to me, 20 years is when you have to totally reinvent yourself and you almost have to start over and be willing to invest in yourself to do it.
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You have your flagship brand, it's a 10, and you built that through the professional salon channel before expanding more broadly.
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Yes.
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You now have a newish brand called Cloud.
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C
Yes.
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Why did you decide to launch a brand dedicated to retail versus doing what you've already had so much success in, which is going through the professional channel, which, by the way, I think is an undervalued and under discussed distribution channel in the United States. So talk to us about your strategy for cloud and why it's different.
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Well, I think the really, Cloud is kind of just a whole different Avenue. Price point, 9.99 board. And what I have really observed within the retail world is that the products obviously are price driven, but the quality isn't there as much. So my concept within the beauty industry is obviously bring something to market that is lacking and you too will live the dream. I'm living proof of it. So that was the concept when we created this retail brand, is to really bring affordable hair care, but with quality. And so, I mean, thus far we're doing great. We're in Sally's. We're in. We're in multiple CVS and multiple retail chains. And, you know, like anything, we're baby steps. We're just getting a brand awareness. At this point.
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B
You've decided to go into retail. So this is bricks and mortar. You just mentioned, Sally. You've done some TikTok live streams, but it's a 10. It's interesting to hear you playing at sort of both ends of the spectrum. Right. You've got traditional retail on the one hand, you've got tick on the other. Could you talk to us for a minute, Carolyn, about your perspectives on Ulta Beauty? Because this is one, you know, it was the poster child and almost the bellwether for what's going on in the beauty space. It had a rough couple of years. The new CEO Keisha Stillman was brought in and it looks as though her turnaround is working. But I'd love to get your perspective as someone who works across lots of different distribution channels. Is it still Ulta versus Sephora? And that's the key to winning? And are your brands in either of Those and if so, why not? Or if so, why so?
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C
Great question. I've been in Ulta. I think it was 2008, maybe 2009, but it was young. Ulta was young. When I was coming in, they were in hundreds of stores. I mean they were maybe two or three hundred stores. Now they're like twelve hundred. I mean it's really exploded over the years and we've grown as they've grown. They've been an amazing partner to us. We are not in Sephora. I know a lot of brands live on both shelves, but we never have. And yeah, you know, it was a little scary at one point a couple of years ago when they seemed to be kind of struggling. I think they, with Keisha on board, I think what they're doing is incredible. We just left the Ulta Beauty World in Ulta in Orlando and it was massive. And you know, I actually had a conversation with her and I said, you need to continue this, expand it. I've been in the hair. I've been a hairdresser for 44 years. I've been going to these shows my entire life, since I was a kid, pretty much. And we are lacking within this category right now. The professional industry is floundering currently. Even our trade shows are lacking. They're getting more retail based. And I said to her, you can be the next CosmoProf. Putting these pods all over the United States, having multiple shows. And something you should really expand on because you educate your Ulta employees at those shows. You have the public coming in, but you also have professionals coming in. So you could really have all three sectors under one roof and just it's an opportunity. I think that would be amazing for them. I'm a firm believer in a one stop shop. You know, if I'm building a home, I'm going to Home Depot. I'm not going to a plumber store, I'm not going to a, you know, a wood store. I like doing business like that. So it's a great fit for me.
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So just the last question for you, Carolyn, what you've just described with Ultiworld and just to pay paint the picture, Ulta World was a massive activation that Ulta Beauty did this year in Florida. Last year they did somewhere else. And it's basically getting together a lot of the brands in a massive space and inviting Ulta loyalists, actually those on the customer award program and shoppers to come and basically have an immersive experience with a lot of those brands that you see on Ulta shelves and online. And increasingly an Ulta market. So a real example of something we talk about on this show a lot, which is the growth of experiential in retail and why that's so important. Just a final comment from you, Carolyn. You did something recently that I saw that fell sort of in that category, which was the it's a 10 college tour and I thought this was fascinating. Tell us what it's a 10 college tour is.
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C
Well, it is a tour that went around to 10 different colleges and we basically engage with the college students giving out free samples. This company was built on giving out free samples. When we had no marketing budgets, we had no money to do anything. We literally put thousands, really millions of samples into hairdresser's hands. And then when we got in with Ulta, we were the first and only brand to give out a million samples nationwide. So I believe in that concept. If you have a great product and you're bringing something new to the market, get it in people's hands. That's how you can invest in yourself. But with the college tour, getting it into younger demographics hands, that was our we're a 20 year old brand over the last I became sole owner in 2017 of this company. So since that year we have been able to reverse our demographics by seven or eight years. We are starting to engage more directly with the younger consumer. And I was there on site and they would say, oh my God, I know this. My mom used it and I used to steal it from her bathroom and I love it. So reconnecting with the younger, younger demographic is how you really withstand the test of time. You have to invest in those types of things.
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A real lesson there for so many brands trying to figure out exactly that, Carolyn, whether it's apparel, whether it's food, whether it's in this case haircare. And that just caught my attention because it was a differentiated way, differentiated way to get out there.
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I would say you have to put yourself in the way of success and that's a part of it.
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Wise words there from Carolyn aronson, founder and CEO of It's a 10 Haircare. Thank you so much Carolyn for joining. Let's take a break and when come back, we take a spin through the headlines. Moving the markets today. In finance, what if Questions can often feel like the name of the game.
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Learn more@vaneck.com Brewrax that's vaneck.com Brew R A A X read fun disclosures in the podcast Description
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D
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It's 4pm on the East Coast. There it is, the closing bell. The market's wrapping up for the day. Well, the S P500 and the Dow closing down about 0.4%, a bit worse over on the Nasdaq down 0.89%, although both the S P500 and the Nasdaq had hit record intraday highs. That was before settling back down on software declines as IBM and ServiceNow posted mixed earnings plus an oil price jump added to stocks hitting the red. But in other market headlines, Lululemon shares tumbling over 12% today, hitting their lowest levels since March 2020. That's after a leadership shakeup failed to impress investors. The apparel company named former Nike executive Heidi O' Neill as its next CEO. She spent more than 25 years at Nike, most recently as president of consumer product and brand. Well, she's going to need to lace up those Nike sneakers because there's an uphill battle ahead. The leadership news comes amid Lululemon's continued disappointing performance. Latest earnings showed it expect America's sales to fall between 1 and 3% in 2026. The company is also in the middle of a dramatic proxy battle, with founder Chip Wilson openly criticizing both the business and its board. Well, o' Neill takes over in early September. I guess she's still got time to change her mind, because there's plenty of pressure on her shoulders, not least with investors already questioning if a Nike veteran really is the right person for the job. Nike is in the middle of its own turnaround, with its stock down more than 65% over the past five years. O' Neill left the footwear giant in September last year and more likely than not is associated with Nike's decline. Meanwhile, over at Netflix, the streamer is joining Adobe in betting on itself, announcing a $25 billion share buyback program that comes on top of the $15 billion repurchase plan it had approved in December 2024 and which still had just under $7 billion remaining. So the question of Netflix is why now? Well, the move comes after Netflix shares fell following its first quarter earnings report earlier this month that included a somewhat disappointing 2026 outlook and news that co founder and Executive chair Reed Hastings is stepping down from the board. Well, Netflix is sitting on a significant cash pile and it's really trying to figure out how to use it after walking away from buying Warner Brothers Discovery as it abandoned that bit in so the message here is pretty clear. Netflix telling its investors that it believes its own stock is the best place to put that capital where shares rose in pre market trading. Folks liked the vote of confidence Netflix was showing in itself, but ultimately ended the day slightly lower. And new news in AI's impact on jobs we're seeing Microsoft rolling out the first voluntary retirement program in the tech Giant's history. Roughly 7% of Microsoft's US workforce is eligible for buyouts as the software OG looks to restructure its expense base in the wake of AI rollouts. To qualify, employees must be senior director level or below, and their age plus years of surface must total at least 70. The move comes as Microsoft keeps ramping up its spend on data centers and AI infrastructure, and this move also follows multiple rounds of layoffs last year when the company coupled up thousands of jobs. Additionally, Microsoft is changing the way it awards stock, no longer tying it directly to employees bonuses, which is a notable shift away from the traditional Silicon Valley compensation model or Shares were down about 4% today, investors not liking what this indicates and Meta a very similar story with shares also sliding today, in this case by around 2%. That's after reports that the company plans to cut 10% of its workforce, or roughly 8,000 employees like Microsoft Meta looking to boost efficiency and offset massive AI spending. Meta expects to shell out as much as $135 billion this year on AI related spend, nearly double the amount of last year. While in a memo to employees Meta said the cuts will take effect on May 20. It also said it will no longer fill 6,000 open roles it had planned to hire for just the latest report, leaving its employees unhappy. That's because earlier this week, Reuters reported that Meta told US employees it is installing mandatory keystroke tracking software on company computers to help train its AI agents, according to Business Insider. The top rated internal response read, quote this makes me super uncomfortable. How do we opt out? Not clear, frankly, that anyone's going to be able to on now to one of my favorite sectors, and that is Rideshare, with news from my homeland. Lyft shares fell more than 3% today after the company placed a bet that investors don't seem to like. And that's on London's black cabs, which made me sad because in my opinion, those cavernous black cabs are one of the best ways to ride in style. The US Rideshare company said it's acquiring GETS UK business a major player in London taxi booking. Lyft also said it plans to begin testing autonomous rides in London later this year, making it one of the few platforms offering both human driven and autonomous rides in the UK's capital. The deal is expected to close in coming weeks and finally shifting gears but staying in the rideshare world, Uber and Block announcing a new global partnership, one that they claim will make life easier for both restaurants and customers. Square will now integrate directly with Uber Eats, letting restaurants manage delivery orders from one system that's instead of juggling multiple devices. And the deal is expected to expand internationally. Cash App Pay will become a checkout option for us. Uber rides and Eats orders, so the big picture Block gets to build out a more widespread ecosystem, while Uber gets access to the payment firm's 59 million mostly younger users. That's it for today's Brew Markets Daily.
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Brew Markets Daily is hosted by Anne Barry, produced by John Crateau, Tarek Abdelatif, Avani Laroya and Emily Millern. Our technical director is Uchena Waoghu, Brittany Dotako is our audio engineer and the president of Morning Brew Inc. Is Devin Emery.
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Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow. Same time, same place.
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Some follow the noise. Bloomberg follows the money. Whether it's the funds fueling AI or crypto's trillion dollar swings, there's a money side to every story. Get the money side of the story. Subscribe now@bloomberg.com.