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Tesla’s Key Robotaxi Rollout
00:25:26
FICO turns to BNPL data and Fiserv embraces a new stablecoin.
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- [00:00]
Matt Frankel
Foreign.
- [00:05]
Andy Cross
Tesla's Robo Taxis Get Rolling Molly Fool Money Starts now. Welcome to Motley Fool Money. I'm Andy Cross, joined by Motley fool contributors Matt Frankel and Jason Hall. Today we're discussing Tesla's Robo taxi rollout and yet another stable coin that's on the horizon. But first, let's get to our headlines for Monday, June 23. On Saturday, the US launched strikes on Iranian nuclear facilities, triggering investor concerns about raising oil prices and the potential for geopolitical escalation. Yet in that nothing ever happens market to coin the popular investing meme, investors look past the news to bid stocks higher. The s&P, Nasdaq and Dow Jones are all up today. Moving to company news, Tesla rolled out its long awaited Robo taxis in Austin, Texas on Sunday. The initial rollout is limited and featuring a small fleet of 10 to 20 Model Y's operating within a Geo fenced area. The event was accessible on an invite only basis to well connected social influencers and a Tesla safety monitor was present in each vehicle for rides that cost a flat $4.20. More on Tesla in a bit Eli Lilly reported that its experimental anti obesity bill or full grip run helped diabetics lower weight and lower their blood sugar in a Phase three trial with results that were comparable to injectable GLP drugs like Exempic and Mounjaro. Side effects were also similar, so the company is aiming to file for regulatory approval as a weight management pill later this year and a treatment for diabetes in 2026. The Wall Street Journal is reporting that Fair Isaac, the company behind FICO scoring system will, will for the first time introduce a new model that includes Buy Now Pay later loan data as a factor. It has been testing this model in a partnership with a firm on 500,000 buy now pay later users. It actually found that its users with more than five Buy Now Pay later loans saw scores increase or stay stable in the early testing. We'll talk a little bit more about FICO in. Finally, on a sad note, Fred Smith, the founder of FedEx, died this weekend. Mr. Smith was one of the great entrepreneurs and business leaders of the past 50 years. He started FedEx in the early 1970s, creating the overnight package delivery industry that is so ubiquitous today and so many of us rely on for our purchasing habits. Fools. We'll get to that Tesla news in a few minutes, but let's start with this reported FICO news because I think that's important. Matt, how important is the FICO news and how important is it that BNPL LO data is factored into its algorithm.
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Matt Frankel
Well, I mean, it is important. A lot of consumers don't realize that they don't even have a FICO score. One of the requirements is you have to have an active loan account within the last six months. And if all you have are buy now, pay later loans, you might not have that. On the other side. This is, it's in testing phase right now. It's going to roll out later in the fall in a new version of the Fico Score 10 model. But it's really worth pointing out that The FICO score 10 isn't even widely in use yet. In fact, The FICO score 9 isn't even very widely in use beyond some parts of the personal loan industry. It's really the FICO score 8 version that's still the most widely used by lenders in practice. So it's really going to take some time before this actually helps anyone get a lower interest rate on a mortgage or helps anyone get a better credit card.
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Andy Cross
I think why I find that kind of encouraging is at least they continue to innovate and they're adding new and new spots because Jason, they have, I mean there's lots of competitive threats out there to the FICO scoring system. And I think this allows them, even though they're continuing to use maybe an older model and we'll see how long this takes, it at least keeps them on the cutting edge.
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Jason Hall
Yeah, it's interesting because I just got an email literally in the past 24 hours from capital One excited to tell me that they were moving over to FICO 8. So I think it's very much whoever the financial services business you have the relationship with, it's dependent on. Right. Because it's interesting as Capital One is kind of one of the tech forward, they live on the Internet sort of businesses and here we are. But I think that it's a reminder. This is just a gigantic market and we're going to see FICO need to continue to innovate and offer different things as consumers. Spending habits and the way people buy changes in the way those things get categorized by the financial system. It's a reminder. There's just, there's a lot of opportunity out there too.
- [04:52]
Andy Cross
Well, I mean in the BNPL space it means a hundred billion dollar, or if not now will soon be a hundred billion dollar loan market. And it's really popular with some of the younger consumers. So Matt, I think it, I think it does represent some positive news for FICO, which actually earlier this year the stock's down 8 or 10% this year to date because of just some of the, some of the inclinations and some of the talk from the Federal Housing Finance Agency about, hey, we pay a lot of money for this FICO data. Do we need it all?
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Matt Frankel
FICO does need something to get people to adopt the newer versions of their scoring system. So this could be kind of a kickstart. There really, for example, there really wasn't that much difference between FICO score 10 and FICO score 9. That gets people to upgrade what they're paying FICO for. But I mean, at the same time, the Federal Housing Finance, they make a great point in that, you know, why do we need a separate score from three different credit bureaus? Why are there 10 active versions of the FICO score still in existence? You know, can't we have some consolidation? This needs to simplify. And I mean, yes, they have new products, but the direction is definitely toward lower fees and financial services. So FICO really needs to differentiate its product and this could be a positive step for that.
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Andy Cross
Well, it's a $44 billion business and a stock that has crushed the market over the past 1, 3, 5 and 10 years. But it's down, like I said before, 10% this year. So what do you all think? Is, are you, is, does FICO jump to your top of your list as a buying opportunity today?
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Matt Frankel
For me, it's not a stock that I own. I've never owned the stock. I do think the direction of fees is going to gravitate downward over time. Their product is very valuable. It's something that businesses rely on. But I do think that the fee direction is the FHFA is not the last one that's going to have an issue with paying too much for credit scoring.
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Andy Cross
Jason?
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Jason Hall
Yeah, I agree with that. And then there's just valuation too. There's a time to pay a premium for a business and that's when it's young and it has the ability to grow and take market share. This is the giant, this is the gorilla in this space. And just on a sales metric, I know sometimes that's empty calories, but I think directionally it's useful here. As much as the stock is down, it still trades for 25 times sales. Its 10 year average is closer to 11. So that says to me, especially considering the potential for some over the long term, a little bit of a squeeze compression on margins, then I'm a little less interested today. Now, they did raise prices six months ago. So in the near term, I think margins are Gonna go up and the market's betting on that. But I think over the longer term it's more likely we see the other trend.
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Andy Cross
Well, still in a very healthy quarter. But like you said, Jason, I think the reason we haven't featured it as a, as really as a top buy very frequently is because that valuation. Top buying stock advisors, because that valuation. So I'm continuing to watch it, I think it's a high quality business. But they do have these threats. So I think I'm not really rushing in to buy it right now. When we come back, more on Tesla's robo taxi rollout. You're listening to Motley Fool Money.
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Unknown
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Andy Cross
The top of the show, Tesla launched its robotaxis this weekend in Austin. Jason, how much is this launch a needle mover for this $1 trillion?
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Jason Hall
I think it depends on how you define it. If you're just focused on just this one thing, this is small, right? By design it's small. But if you step back and you look at a 35,000 foot view, this is a huge step towards monetization of autonomous transportation. We have to remember that's one of the pillars of Tesla's future. It's supposed to be one of the cash cow businesses that it needs to pay for. All of the other things. We continue to see advancements in fields like robotics, energy. You gotta remember, Elon Musk has told us repeatedly that Tesla's future is an integrated energy and transportation business.
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Andy Cross
Yeah, I think this is one part of that puzzle. I think it is a very important step though because when you look at the valuation for Tesla, a good chunk of it is obviously, as you mentioned, Jason, it is not just in their current car business, Matt. So I think the future does depend on these kinds of innovations. So I was very happy after a few kind of delays and Tesla's had a little bit of a struggle the past six months. I think it is a good sign that they got this out. And even though it was very well controlled, geofenced in, monitored in the cars, monitored by a Tesla safety official. I think it is good news to at least get this started inside Austin because the competitive pressures are out there.
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Matt Frankel
The competitive pressures are out there. I don't really mind a delay. And when you look at what happened with Cruise, that's a really good cautionary tale. It's not just that a setback would be like, okay, back to the drawing board and we start this again. Cruise ran over one person and it was a death sentence for the business. So I don't mind the delays to get it right. I don't mind a smaller scale rollout than some competitors are doing to get it right. I do think this is definitely a step in the positive direction. There were a couple of minor issues reported, like breaking too hard for the situation, but nothing that's a big safety issue. So it's a success and the stock's up and rightfully so.
- [10:38]
Andy Cross
Yeah, it is up nicely a little bit today. Let's handicap the field. What does this mean for Waymo, which is the driverless unit from Alphabet or from Google and Amazon Zoox, which is I think, a little smaller and lesser known. Where is Uber these days? How do you all see, Jason, how do you see the field of competitors when it comes to autonomous driving and robo taxis?
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Jason Hall
It's a massive market, so there's going to be lots of competitors. I expect potentially multiple winners in this area. Potentially. We don't know how it's going to be regulated. Just in the US there's 51 plus regimes, every state, the federal government, and then you're going to have local regulation as well. That's going to play a role here. So we need to see how that's going to play out. I think looking across the space, if I were to handicap it, Waymo is the distant leader right now. It's not even close in terms of miles driven dedicated vehicles doing it. You have to remember Tesla, this is not the cybercap. This is not their, their. This is their, this is their. Just the model, the Model Y, I believe that they're doing right. So they still don't even have the full commercial vehicle yet. Zoox is a commercial vehicle that's purpose built. Waymo is purpose built. So it's, it's Tesla has a long way to go here. But part of what Tesla is banking on is all of the billions of miles that Tesla's writ large have driven in the wild, so to speak. That's a big part of their strategy and the data that they've used to train their autonomous driving, so they're going about it in a different way. So I think putting it in the geofenced area, where you can really get good, measurable data is going to be really, really important. And then they can maybe translate that over to other vehicles. The wild card here is Uber, Andy. And I think Uber is still positioned to be a huge winner in autonomous driving. We have to remember, you go back five or six years ago, Uber had an autonomous driving R and D business that they sold off because there was this realization that the math was not favorable. So the decision was made, hey, let's just build the best rideshare platform, be a really good partner for drivers. And eventually drivers are going to be companies with the autonom technology. They'll become partners with us too, because they're going to come to us the same way that banks go to Visa. Yeah, we have the platform and the customers and they've done an extraordinary job with that. So I think being able to share in autonomous driving when it's road ready and profitable was a smart move for Uber.
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Andy Cross
Matt, do you have a. Do you have a key question on Tesla? When you look forward, whether it's driverless technology or other things that you're paying.
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Matt Frankel
Attention to, really, it's how much of a competitive advantage they have over companies like Waymo. You know, it's really tough to overcome a first mover advantage. And Tesla has the edge that they manufacture their own cars. That's a big one. The infrastructure they have set up already is something that would be really tough to replicate even for an Amazon or an Alphabet. And it's just how much of a competitive advantage is that when it comes to this race? Because, I mean, Elon Musk has said that this is the future of the company and the stock reflects that. So how much success will they actually have with Robotaxis?
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Andy Cross
Yeah. And why Waymo has, you know, they're doing 250,000 miles, I think, or trips per week and they have a fleet of cars across multiple cities. Making those cars at scale are far more complicated than I think making the Tesla. So that's an advantage for Tesla when it comes to scale. Jason, when you think about Tesla going forward, what are some key questions you want answered?
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Jason Hall
I think the biggest thing is how are you going to pay for everything? The one true success Tesla has had so far was coming to market with a very fast, high performance car you could sell for a ton of money and commoditizing the batteries instead of trying to build these aerospace grade batteries, commoditizing the batteries to Drive cost out. That's Tesla's biggest innovation. Their second biggest innovation has been using tax incentives to raise substantial funds for energy credits. So that's been, those are the two things that Tesla's done well so far. It hasn't really been successful in energy, it hasn't been successful in solar with the solar roofs. So we need to see something, start getting to the point where there's obvious commercial opportunity to generate revenue because the auto business is in a really tough space right now.
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Andy Cross
Yeah, well, I think they continue to kind of like think about that ecosystem, especially with Jason, as you mentioned, all the cars that are out there hopefully at some point. Again this is part of evaluation is tied into the system to be able to have fully autonomous driving across their entire, their entire, the car fleet that's out there in operations.
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Jason Hall
No, nobody else would be in the position if, if they start showing success to literally flip the switch.
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Andy Cross
Right.
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Jason Hall
And begin monetizing something without pouring billions into capital and taking months to years to build off the, the infrastructure to do it.
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Andy Cross
Okay, how about, how about a prediction guys? So when you look out where, at what point, what year will fully autonomous vehicles start to eclipse the number of human driven cars out there? Jason?
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Jason Hall
2045. And I'm being, and I think I'm probably being overly ambitious, Matt.
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Matt Frankel
I'd say around then, just because every setback would cost years, you know, like I'm hitting somebody with a car would, you know, add years to the timetable.
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Andy Cross
Yeah, yeah, I think I, I'm in that 25 to 30 year period probably at that time. But I am excited. I have not yet ridden, ridden in a driverless autonomous taxi like a Waymo. But I, I certainly would, I would, I, I think I would, I would, I would even put my probably in there if I was out in San Francisco and had an opportunity to do it or one of the other cities. You guys doing that?
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Jason Hall
Yeah, I would agree with that. I think the safety measures are there. They're so focused on safety right now. I do believe that those environments are probably safer than being in any other vehicle on the road right now.
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Matt Frankel
Yeah, I've only done one in a very controlled situation in the hyperloop. Or not the hyperloop, the boring company's tunnel in Vegas, but with a safety driver sitting in the seat in the car. But yeah, I would try it.
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Andy Cross
After the break, Fintech juggernaut Fiserv turns towards stablecoins the Disney Hulu Max bundle.
- [16:55]
Unknown
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- [17:07]
Matt Frankel
We can make people happy.
- [17:09]
Unknown
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Matt Frankel
Anything you can imagine is possible.
- [17:14]
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Andy Cross
Pfizer of the 90 billion in market cap financial giant that runs the infrastructure behind today's financial networks is launching its own stablecoin and a new digital asset platform now. Matt, why should investors and consumers care about this news from Pfizer today?
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Matt Frankel
Well, a lot of people joke that stablecoins are solving problems that don't exist, but I don't really see it that way. If that were the case, it wouldn't cost so much money to send an international transfer for example. No one's really figured it out how to do that effectively with US dollars. And that's really one of the situations where stablecoins come in. Instant transfers are another thing that have proven more difficult than you would think without using some sort of stablecoin. So as far as investors, it really kind of just helps fiserv preserve what it does rather than create a new revenue stream. It helps keep it fee competitive long term. Where in all the financial service industry the direction of fees has been downward for like 10 years and continues to be that way. So I see it more of a defensive maneuver by both Fiserv and PayPal but a necessary one.
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Andy Cross
Yeah, PayPal is their own stablecoin, Jason. I mean stablecoins are just really starting. We saw a Circle go public and that's the, the, the home of the, the US stablecoin, the USD stablecoin. So we're just seeing more and more conversation go out this and we saw the Amazon Walmart also starting to explore stablecoins because of the those benefits for it. And I think do you see this as just maybe the beginning of us starting to move down the whole stablecoin direction?
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Jason Hall
It's the beginning of something, there's no doubt about that. The, the I think the biggest news in all this was Shopify last week partnering with Coinbase and Stripe to bring usdc, which is Circle's coin that Coinbase has a big stake in to shopify merchants. That's really big to me because that's when you actually start to see monetization happen in a very big scale. So the question I have is that what we're hearing a lot of like with Fiserv and others is creating their own stablecoin. This hearkens back to the, you know, the 1800s when banks had their own banknotes. There wasn't a US dollar, it was banknotes. Right. So we're going through a weird phase like that where when I think it's really going to get interesting to me is when we start seeing those things consolidate down and go away and where we end up with just one or two and I don't know how long that's going to take and what's the value. And I think at the end of the day we're going to see the payment processors and the Visa and mastercards they're going to compete in this too. They're not going to give just seed share. And also the thing that I want to see, biggest question I have around stablecoin broadly in financial services, everything that we're hearing is debit. It's talking about replacing debit, it's not talking about replacing credit and credit rewards programs, all of those, those are the things that really drive the fees structures out there for credit.
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Andy Cross
Right.
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Jason Hall
Is those programs that we all love. So until somebody shows a crypto solution to that then, then I think we're going to end up right back where we started. Maybe it's in 20 years but that's the thing behind the fees that nobody wants to talk about.
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Andy Cross
Yeah. And there's, I mean there are exactly Jason. There's so many advantages that consumers like with the, with the credit transaction. There are those advantages with these stable coins scale and distribution, real time settlement is a big one lowering costs. So we start to see. I think we will, those benefits are going to be coming over the next few years so I think we will see continued utilization launching utilization of these mat I do wonder when Main street they become more mainstream. Some similar to our question about Tesla. That's my question to you all. When do you think these stablecoins will start to become a little bit more stream, more mainstream and consumers will start to see them show up more the.
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Matt Frankel
More seamless they become to use. That's when you start seeing mass adoption of any technology when it becomes really easy for people to use. Right now if you told me how PayPal stablecoin's been in existence for 2023 and I follow the company closely. If you ask me how to use it, I don't know. So if you, no matter how revolutionary a technology is, if it's not easy, people aren't going to Adopt it on a mass scale. So that's really going to be the iPhone moment with this is when you see it really become easy and seamless for people to use, like swiping a button on a phone.
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Andy Cross
Jason, are you going to be using stablecoin sometime in the next year or two?
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Jason Hall
I mean, in the right circumstance, I would. I have a significant interest in crypto, so I'm definitely not somebody that's anti crypto here, but I would say my guess is that it's going to either happen within the next five years or it's not going to happen happen one of those two.
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Andy Cross
Does this make either of you more excited to be to look at fiserv as a potential investing opportunity?
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Matt Frankel
I would say Maybe. I'm a PayPal investor already, so I'm kind of. And I mean they just announced a partnership where they're going to. Their two stable coins are going to kind of intercommunicate. So I have a pretty big position in PayPal and for that reason alone is why I probably wouldn't add fiserv. But if I didn't already, it would be one that's worth a much closer look.
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Jason Hall
To a certain extent, it just feels like a defensive move. We're seeing a lot of these kind of legacy tech companies in finance just do these sorts of things because they don't really. They need to. To either move forward or to retrench. So it doesn't make me any more interested in 5 serve than I would have been a week ago.
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Andy Cross
Yeah, same with me. I'm with Matt. I'm a PayPal shareholder and I think that's the win that I think I'm most excited about across the fintech space right now. The Shopify news was great, Jason. I agree with that. I think that's a really more competitive position for Shopify and their payments are so important to their business. I saw that as a natural segue for them to go.
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Jason Hall
It's going to become. Andy, it's going to become table stakes, though. You're going to see the same thing across the industry and it's not going to drive value, but it reminds a reminder of the mindset for Shopify's management that they're constantly going to be arming their merchants with these sorts of tools and they're going to be ahead of the competition, but it becomes table stakes there. If you talk about upside, I agree PayPal is probably more set to profit and shareholders get rewarded from this sort of thing.
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Andy Cross
Well, Jason, Matt, thanks for joining me here on Motley Fool Money to talk about Tesla, stablecoins and a little bit of fico. Here at the Motley fool, we love hearing your feedback. To be part of that feedback or to ask a question, email us@podcastsool.com that's podcastsool.com as always, people on the program may have interest in the stocks they talk about in the Motley Fool. Me at have formal recommendations for or again, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for Jason Hall, Matt Frankel and the entire Motley Fool Money team. I'm Andy Cross. We'll see you tomorrow.