♪ taylor: i'm taylor riggs in for emily chang and this is the "best of bloomberg: technology." coming up, tesla's turnaround. at least one analyst says it looks incredible. we hear about a guest who raised his price target to 370. plus, covering all of tech in the new year's with one of wall street's most watched analysts.

why they like facebook and apple. 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 $420 -- of $420. an analyst joined meet 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 demand and profitability perspective. base case, 370.

is 580-300. 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, i've 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 , andin asia on the ground 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 self-driving to others, that's 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 have a lot to discuss regarding uber, a company cofounded by

travis kalanick. this week, he cut his last ties , -- to uber, stepping down from the board at selling his shares. he was ousted in 2017 following months of chaos and controversy. focus on newnts to business and philanthropic and that her's -- endeavors. i asked guests about the move. doesn't 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 early november after the post-ipo block expired. this is a little bit of a sort of slow moving divorce. from what i hear, travis's 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. you're 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 uber's 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 i'm 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. it's 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. that was bluebirds brad stone and dan ives -- bloomberg's brad stone and dan ives. dan ives tells us his top calls for next year, that's next.

and if you like us, check us out on the radio and in the u.s. on sirius xm. this is bluebird. -- bloomberg.

taylor: we are coming up on the conclusion of a decade and a big tech has made its mark. -- and 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. iphonesions of those 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 re-rating 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 doesn't 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. i would have to go back 5, 6 years in terms of where i've seen it. that is why we have such a bull thesis on apple in terms of the iphone in terms of services and re-rating. 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 jaw-dropping 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 re-rating stock and numbers continue to go higher. that is one that is only halfway through this cloud story playing out. wedbushthat was 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, 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 maybe five -- this in five, ten days? mark: i don't 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 full-time 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 long-term 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. perhaps this year's biggest flop. we explain what happened and what the road ahead looks like. and later, we hear from one of tiktok's biggest critics. the changes she wants to see on the viral app. this is bloomberg. ♪

taylor: in our series rewind, we look at the world's 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 businesses. w july, bloomberg reported ework was targeting a sale of $3.5 billion. the company was then said to continue -- consider 20-30,000,000,000 dollars. 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. performance and

what lies ahead, i got perspective from our guests. been much there has ink spilled about situation, but our perspective was fairly straightforward. big,oss profile was so 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 indicatedt nothing the core process was objectionable. taylor: what's your take? >> i think this was the straw

that broke the unicorns back. company trying to go losses,ith billions in reminding the market that there's a difference between being a tech company or a tech-adjacent company. this is at the big breaker andeen lyft, uber, companies that had attacked within the product but were actually in legacy sectors. taylor: you mentioned that had the information been presented , 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. they have released all of the information someone would need to build a good model. it's heartbreaking to see they had all along. givejust decided to not

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. 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 don't think they could have raised the same amount of cash. -- they would

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, ar. fast-forward to present day. the cost at measures you have seen, are they enough? what theard to say day-to-day operating plan is. a company that's 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 wake-up calls if the company did not get itself back on track that makes some sense.

the other thing we could say is people were worried it could take down the ipo tech market. , it has been quarantined into its own kind of thing. is, it's not representative of the mainstream tech companies people are looking forward to seeing. tiktok as a national security risk. marsha blackburn has called it "china's best detective." t hear what she said after iktok made some changes. check us out on twitter. this is a bloomberg. -- is bloomberg.

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"best of bloomberg: technology." i'm taylor riggs. been afterers have the popular viral video app tiktok for a variety of reasons. it has been the target of national privacy -- national security and privacy concerns. one thing they are concerned about, that it allows children to make in app purchases. something marsha blackburn highlighted in a letter to the parent company, saying it is tote paving the way

unfettered access to our children's lives. upping theded by minimum age to 18. i spoke to marsha blackburn to find out if that is enough to appease -- appease lawmakers. >> it is an important first step. having these children streaming these videos, buying these is just inappropriate. we want to protect children online and make sure they are age-appropriate. 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 can't tell where beijing's commercial and military sector begin and end. they are one and the same. is determined to build a surveillance state. we have seen this used on hong kong protesters and acres -- uighers. when you think about profiles they are building of these -- hown and how with a they would use that, it is of tremendous concern. now that theyr, have responded and raised the minimum age, is that enough recommend it? other we are going to continue to meet at work with them. i look forward to sitting down

with their leadership team. --lor: do you agree tictoc tiktok should be under the city's review -- under review? >> i do. we can then decide if it should be. it is the right question to be asking. taylor: having questions with leadership is a great way to start. how do you take it to the next level and prevent data to be sent overseas to the government? >> one thing we discussed today in commerce committee was having privacy legislation and data security legislation. you have gdpr, which went too far in -- on privacy. you have california looking at doing their own legislation.

u.s. to build the a basic federal privacy standard on the books. this is something online consumers want. they want to the ability to protect their virtual "you." they want the ability to secure their identity online. so we had this hearing with great bipartisan participation. our panel of expert witnesses was all-female. one of the reasons for that is because women are so concerned about the privacy issue. didn't see that and want to address that. one of the tweets we had earlier this week was about google and censoring conservative voices. what are your facts to support that? >> when you look at the research

that has been done, and we have done a good bit of work in our office, when you look at the groups who are censored that gill left of center and the ,osts that go right of center you see that those on the right are censored much more heavily. there are plenty of numbers out there that you can look out -- look at for this. indeed, one significant thing when we worked on this issue, you had a ceo saying their employees are in california and bring their personal opinions into the workplace. it is their worldview. this is something that needs to if indeed your social media and online connections are going to be the new public square.

taylor: that was senator marsha blackburn of tennessee. uber was one unicorn got investors excited about its debut. and since the ceo was brought justber has been more than a ride-hailing service. we prepare to fight more sophisticated cyber threats? we discussed the possibilities. this is a bloomberg -- this is bloomberg. ♪

get back to our year-end series rewind. headed to congress to

testify in regards to regulation. some headed to new york while others had less success. and it would not be complete if we did not mention the streaming wars. ♪ one taylor: taylor: of the biggest trend is cutting the cords. the list of streaming services does not seem to be getting any shorter. the list of most valuable companies will introduce their own services, spending billions to compete with established players and what has become known as the streaming wars. disney plus and apple kick things off in november. disney costs half as much as netflix and offers a library of programs irresistible to families. apple is cheaper, but only a small library of original programs. other services to watch out for,

hbo max and one from comcast. the higher netflix's stock rose, the hired got for companies to enjoy -- to ignore the change in viewing habits. 63% said they watch their favorite show online. makingh u.s. producers at least 100 more shows per year now, the pace does not seem to be slowing down. as for the performance of pigot streaming services, uber technologies -- technology's kurt wagner got perspective from our guests. >> i think that is the real fallacy. we like to call it streaming wars and we like to talk about

one eating into the other, but the reality is we will see an explosion of streaming services. you have seen it with hulu and youtube andlook at how much time is being spent. look, there is more and more content. the reality is, the consumer is 80-100 a month for linear tv patches. have still got millions of subscribers to multi channel television. my guess is that the number of homes that have to have sports , you have got 30-40,000,000 homes coming out of the bundle. they will find new ways to get confident -- content.

of these are far easier and cheaper to subscribe to than cable. you can have a few for a time, this really empowers the consumer to create the bundles they want. paying forple are espn and never watch it? >> i do feel this can be someone confusing. -- somewhat confusing. i'm wondering, are these streaming services doing a good job of actually marketing themselves and how is that playing out? >> one challenge they have is they are drawing so much attention. so the narrative about the services is difficult for them to control. it makes it difficult to get the right message out around price

points and messages. we are already talking about 2020 andvailable in that kind of meets the mutes theon -- conversation about what is available today. >> every streaming service needs to create addicts. the services that have one or two shows, you will not build habitualt behavior -- behavior. you may go on to disney to watch themed lori and -- mandalorian, but there's not a lot to watch as an adult. turned on the you cable box and scrolled through to find something, that is what netflix is trying to create.

there's always something for everybody and always something new. they are trying to build that addictive behavior. that is very different they end most of these other services that are not really in the same game. plusu mentioned to disney theyntioned disney plus, are trying to do similar shows. feel they how do you have landed at the end of the year? >> disney plus has been an incredible success story. part of their day one subscribers are people who took it free through fries and -- verizon, but it is still incredible. they are probably headed towards a million plus subscribers. -- 20 million plus subscribers,

a staggering number. the question is how you grow. right now, you are burning through a lot of library. through, they will realize there isn't a lot of fresh content. that's where it will be interesting to see how much disney is relying on legacy movies and content. them spendtainly see windows.y and collapse frozen 2 want be on disney plus for six months, my guess is that window starts to close. taylor: as 2019 was the year of the tech ipo, uber dominated the news as it was one in particular investors had been waiting for.

♪ taylor: it was supposed to be the ipo of the year. it was supposed to be the world's most valuable with a market value of $120 billion. but all of that change during the debut, dropping nearly 11%. but while words like debacle were thrown around, the ceo remained optimistic. >> can't pick when you go public. can control how you operate as a company, but we believe we will be profitable over time. taylor: people agreed. >> investors want profitability and you will get it pretty soon. >> i see it as an important milestone. i think it was an achievement in terms of making the company available. taylor: but the stock price has continued to take hits,

including a record low in october. and bloomberg disclosed thousands of sexual assaults on its platform last year. they remain optimistic. >> the business itself can be quite profitable. the next four years are about growth and then we flip it over. taylor: the ceo spent the year cost-cutting, shedding thousands of jobs and rearranging the vision. lacklusternies look since going public and they are thankful for that debut. thank god we went public when we did. taylor: as for the performance in 2019, i got perspective from a senior research analyst.

>> it is clearly disappointing. uber and lyft -- part of the problem was they were slow to react to investor expectations about a path. -- path to profitability. expectations shifted quickly and they were slow to react they did not communicate clearly that path and investors punish them for it. we have seen lots of high-growth whennies that went public they were not yet making money at the ipo's were successful. , the sheere magnitude of losses were something investors struggled with. your take on the 35% drop?

>> i think what they saw out of the market this year over the aurse of the year was less of willingness from public market investors. really, a record-setting year for tech ipo's. class and i think all of that ipo supply led to technical challenges. you also had others where the trend termed -- turned to stay private forever. there were a lot of lockups that expired and led to a lot of surprises. there were a lot of technical issues at play as well. facingd uber cap

headwinds and negative news -- kept facing headwinds and negative news. low and wentiment will see if that conflict flip over the course of 2020. ahead, we see -- we've seen a rampant cyberattacks over the last few years. what will the tech landscape look like in 2020? we find out next. this is a bloomberg -- is bloomberg. ♪

taylor: cybersecurity concerns have been on the rise with data

breaches frequently occurring in spaces like financial institutions and social platforms. approaching, i was joined by a guest to discuss what the cyber landscape will look like next year. they are eight cyber security that helps companies safeguard their data. >> the reality is the cyber concerns are increasing not decreasing. people need to improve their spending oni expect cyber related products and services to increase over the coming year. taylor: you were talking about three key trends going forward. the first of which is they target people, not the infrastructure. how are they becoming more personalized, where more and more, we get tricked, if you will? >> i think the reality is infrastructure broadly has become more secure.

so what is more vulnerable is a person. some type of targeted attack using some sort of social engineering. they look at your facebook account, instagram, they try to figure out something about you and they craft a lure to try to make you click or engage with in some way. tayor: what do we do to stop it? is there anything? >> there is a number of things. we provide security to help organizations block these threats. we also do work helping raise awareness of every single employee. we can all be better at ensuring we are not being lured into a cyber threat. the unfortunate reality, if they attack you at work, they probably will attack you at home as well. taylor: the second point that shocked me was email. i thought we knew how to ignore spam emails. how are we still getting tricked by emails? >> it's the way business runs today. if you look back, 94% of all breaches come back to a single

person, and the way our our -- the way they are being targeted is either an email or some way an employee is interacting with some cloud app. taylor: we are quickly approaching 2020 elections. what are the threats at this moment, the biggest issues? >> any time there is some form of uncertainty around major events, and an election is a perfect example, you have more actions by cyber actors. lures thatreate create -- the late to that specific point in time. relate to that specific point in time. people will click on things and are more susceptible to being lured into some kind of attack. taylor: how are you assisting political campaigns in that? >> for us, we are trying to help all of our customers be better secured and secure their employees. we are very much focused on watching what threat actors are doing and where the market is headed, making sure we are one step ahead from where the threat actors are. taylor: do you see similar

threats like we saw in the dnc hack with clinton back in 2016? are those threats similar, and are we better prepared? >> i think we are better prepared, but the attacks are probably more sophisticated today. as we enter the election year, you will see more participants more broadly in the threat environment. everything from state actors, to organized crime, to anyone trying to take advantage of another person. taylor: what do we do to prevent -- not hacking on voting machines -- but utility, power grid. is there anything to do to prevent those, which fortunately have been fewer in the u.s.? >> i think there is broader awareness today across all of those organizations. they are raising the awareness of their employees and improving their infrastructure. i think that going back to the first point we made, the thing that is most vulnerable today is people, because that ultimately is the root of any kind of breach that ultimately happens. organizations are thinking harder about how to better defend their people, because they are the key to unlocking

what is behind those doors. taylor: any big change we can make today to help keep the election safe in 2020? >> i think everyone needs to be vigilant. over the last 18 months, $26 billion have been lost related to even a simple category as business email compromise. so the motivation and incentive is there, and we all as individuals at work and home need to be more vigilant. taylor: that was proof point ceo gary steele. that does it for this edition of the "best of bloomberg: technology." tune in each day at 5 p.m. new york and 2:00 p.m. san francisco. we are livestreaming on twitter, check us out. and be sure to follow our global breaking news network at quick take on twitter. this is bloomberg. ♪ what are you doing back there, junior?

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♪ taylor: from san francisco for our viewers worldwide, i'm taylor riggs in for jonathan ferro. bloomberg "real yield" starts now. ♪ taylor: coming up, yields on the u.s. 10-years slipping back below 1.90 heading into the final week of the year, as investors place their bets on rates in 2020. plus, signs of optimism. it may not signal the all clear just yet. what it means for inflation and growth expectations in the new year.