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Tesla stock: earnings surprise to the upside

Tesla stock: earnings surprise to the upside

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April 30, 2020 Update: Tesla stock slipped during regular trading hours today despite the surprise profit the EV maker posted on its first-quarter earnings report. The automaker reported earnings of 9 cents per share or $16 million compared to the GAAP loss of $4.10 per share it posted in last year’s first quarter. On an adjusted basis, Tesla reported $1.24 per share in earnings, compared to the year-ago adjusted loss of $2.90 per share.

Sales increased from $4.54 billion in the year-ago quarter to $5.99 billion in the first three months of 2020. Tesla stock initially climbed by more than 9% following the earnings release Wednesday afternoon. However, the shares struggled during regular trading hours today as the stock market as a whole slipped into the red.

Tesla stock downgraded amid negative oil prices

April 22, 2020 Update: Bank of America analyst John Murphy downgraded Tesla stock to Underperform just weeks after upgrading it. He does think the company is a leader in electric vehicles, but he also expects it to experience production issues.

He also predicts a spike and burnout pattern for Tesla’s new vehicles and continuing cash burn from low deliveries and production, high costs and construction of new factories. He also expects the automaker to face competition from other companies as they release new EVs.

BofAML has a $485 price target on Tesla stock, which suggests an approximately 30% decline in the shares.

GLJ Research analyst Gordon Johnson has an even more bearish view of Tesla stock in light of the negative oil prices. He expects the shares to plunge to $70 due to low gas prices, competition and slowing growth.

He believes Chinese retail investors have been driving Tesla’s rally since the company opened its factory in Shanghai. He also believes that even though the automaker has been selling a lot of cars in China, it won’t last. He pointed out that the company has launched eight new car variants over the last two years, but during that timeframe, its sales have only increased 5.5%.

Tesla jumps on Buy initiation, China sales

April 15, 2020 Update: Goldman Sachs analysts initiated coverage of Tesla stock with a Buy rating and $864 price target this week. They like the automaker’s long-term secular growth in the electric vehicle market. Analyst Mark Delaney expects Tesla’s “early-mover advantage and technology cadence” to enable it to continue to hold a solid share of the market and maintain strong gross margins.

He believes Tesla has a significant lead in electric vehicles and expects the Model Y to help the company gain more traction in the SUV market. He also believes the automaker is attractively valued based on its growing revenue. He also likes Tesla’s EBITDA margin compared to that of its peers. He expects Tesla to see a more than 20% compound annual growth rate for the next five years.

Tesla stock also climbed due to a jump in vehicle registrations in China, according to Reuters. Registrations of Tesla vehicles in China surged 450% in March on a month-over-month basis, according to data from auto consultancy LMC Automotive. Overall sales of vehicles in China plummeted more than 43% last month amid pressure from the coronavirus pandemic.

After this afternoon’s gains, Tesla stock is now up by more than 25% for the week.

Tesla stock rises amid record-high China sales

April 9, 2020 Update: Tesla stock has been on a bit of a run this week, alongside major indices like the Dow Jones Industrial Average and S&P 500.

The company surprised investors with solid delivery numbers for the first quarter. Now it has surprised again with data from a third party. The China Passenger Car Association reported that the automaker sold 10,160 vehicles in China last month. That’s a new record for monthly sales in the biggest auto market in the world.

Tesla’s goal is to produce 150,000 Model 3 cars in its factory near Shanghai. The company sold about 30% of the battery electric vehicles sold in China in March, according to the CPCA. Tesla sold about 3,900 vehicles in China in February, an increase from the 2,620 vehicles it sold there in January.

Earlier this week, Jefferies analysts upgraded Tesla stock from Hold to Buy and cut their price target from $800 to $650. They said the automaker is the only one that is legacy-free and in a positive electric-vehicle-sum gain. The analysts also said Tesla is leading the technological transformation in the auto industry.

Also this week, Blue Line Capital President Bill Baruch told CNBC‘s Trading Nation that Tesla stock has a solid floor at the 200-day moving average, which is at $400. He added that that level also served as a ceiling for the shares previously. He believes Tesla stock could climb toward $600, adding that there are some “strong resistance levels” around that level. As of the time of this writing, the shares are up more than 3% at $569.14.

Tesla stock soars after Q1 delivery numbers

April 3, 2020 Update: Tesla stock surged late Thursday and continues to climb today after the company reported solid deliveries for the first quarter. The automaker delivered 88,400 vehicles during the first three months of the year, representing its best first quarter ever, even as the coronavirus continues to impact markets and economies. Analysts had been expecting Tesla to deliver 89,000 vehicles during the first quarter.

Based on that delivery number, Deutsche Bank analyst Emmanuel Rosner is looking for a profit of 5 cents per share, compared with the $1.25 per share in losses he had previously been expecting. Tesla is slated to release its first-quarter earnings report toward the end of April or in early May.

Despite the record first quarter, it’s important to point out that Tesla’s deliveries were down in the quarter compared to where they were in the three quarters before.

Tesla stock downgraded for risk

March 23, 2020 Update: Elazar Advisors downgraded Tesla stock in a Seeking Alpha post earlier this month, and today the firm offered a further explanation for the downgrade.  The firm needs three criteria before it rating a stock a Strong Buy.

The three criteria include 45% 12-month upside potential based on earnings one year out, multiplied by historic midpoint P/E. Since Tesla hasn’t had much history with earnings, it didn’t have a P/E, so Elazar just used 45 times. The second criteria is quarterly numbers ahead of consensus, while the third criteria is “wow,” referring to the story, the numbers or some other exciting factor.

As far as trading, the firm requires strong fundamentals, stocks that are moving up, and not allowing losses to run too far. Elazar sold Tesla stock because it felt the wow factor was gone, and losses from the highs were building. The firm also saw earnings risk as sales in Europe were plunging and the coronavirus was ramping up in China. Elazar sees continued risk for Tesla stock as the coronavirus impacts business operations.

Tesla stock continues to dive with the Dow

March 16, 2020 Update: Tesla stock plummeted more than 15% during regular trading hours today, falling alongside the Dow Jones Industrial Average’s 9% drop. The virtual carnage on the stock market is ever more apparent as the day drags on. RBC analysts slashed their price target on Tesla stock due to the coronavirus pandemic, while Bernstein analysts said despite the 40% plunge, the shares still aren’t cheap.

In a note to investors today, RBC analyst Joseph Spak slashed his price target for Tesla stock from $530 to $380 per share and reiterated his Underperform rating. He expects demand for the automaker’s vehicles to be constrained during the second quarter, possibly forcing production to be scaled back.

He now estimates that Tesla will deliver 364,600 vehicles this year, a significant reduction from the 524,200 vehicles he had been estimating before. He noted that the company’s vehicles are luxury vehicles, and consumers will be struggling under the economic fallout of COVID-19. Thus, he believes investors won’t pay as high of a multiple as they had been willing to pay when delivery estimates were higher.

More hedge funds went long on Tesla stock in Q4

March 13, 2020 Update: Many hedge funds have reported that they’re shorting Tesla stock. However, it sounds like more funds became bullish on the stock during the fourth quarter. That means a significant number of hedge funds could have enjoyed significant gains during the first quarter, especially if they got out before the stock dropped.

Insider Monkey reports that as of the end of the fourth quarter, 51 of the hedge funds it tracks had long positions in Tesla stock. That’s a 59% increase from the end of the third quarter. In the fourth quarter of 2018, 47 hedge funds had long positions in Tesla.

Morgan Stanley cuts price target on Tesla stock

March 12, 2020 Update: Morgan Stanley analyst Adam Jonas trimmed his price target for Tesla stock from $500 to $480 a share. He also cut his delivery estimate for this year to 452,000 vehicles. His previous estimate for 2020 was 500,000 vehicles, which he said is now his bull case. He reiterated his Underweight rating on the stock.

In a report today, Jonas cited the coronavirus pandemic as one reason for the reduction. He said the impact on profitability and working capital results in a lower forecast for cash flow. He now estimates Tesla’s cash flow at -$300,000 for this year on an adjusted basis, which results in his lower price target for Tesla stock.

He said one factor is a slight decrease in his expectations of demand rather than supply. He added that Tesla “is in pole position in EVs,” but he adds that the company’s vehicles are a “high priced and discretionary purchase.”

Jonas still forecasts a 10% increase in North American volumes this year, mostly due to what he believes to be a strong backlog for the Model Y offsetting potentially adverse vehicle sales in the first half of the year. He expects volumes in Europe to fall 10% year over year this year as incentives in important markets soften and amid a potential buyer’s strike before the Gigafactory opens in Europe.

According to the China Passenger Car Association, Tesla delivered 3,958 vehicles in February in China, compared to about 3,500 the month before. Jonas said this implies a production run rate of a little over 1,000 units per week as of the end of February. He assumes the production ramp in China will be delayed by about two months due to the coronavirus. He was previously expecting Tesla to be producing 3,000 vehicles per week at the China factory by April. Pushing the timeline back, he estimates between 100,000 and 120,000 vehicle deliveries in China for this year, depending on how the recovery from the coronavirus shutdown goes.

Tesla stock rises as Musk announces 1 millionth vehicle

March 10, 2020 Update: Tesla stock rallied along with the rest of the stock market today as CEO Elon Musk delivered some big news. Last night, he congratulated the Tesla team on manufacturing its 1 millionth vehicle.

The automaker has been delivering the Model S, Model X and Model 3, and deliveries of the Model Y are set to begin by the end of the first quarter.

Tesla stock plunged more than 13% yesterday amid a broad-based selloff in equities. However, today brought relief as the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all saw relief.

Tesla stock sells off with the stock market as oil prices plunge

March 9, 2020 Update: Tesla stock plunged amid worries about a price war in oil, which sent crude prices tumbling. Shares of Tesla fell by as much as 14% during regular trading hours, sliding as low as $605 before a broad-based equity selloff triggered a market-wide halt in trading. The last time Tesla stock was trading in this neighborhood was in late January.

Falling oil prices spurred by the breakdown of the OPEC+ alliance are bad for Tesla. Saudi Arabia and Russia are both pouring cheap oil into the market, Bloomberg reported. Cheap oil means lower gas prices, which makes Tesla’s expensive all-electric vehicles a harder sell.

Another problem for Tesla is the sharp downturn in China’s automaker. The nation plays an important role in the company’s growth story.

New Street-high price target for Tesla stock

March 3, 2020 Update: Tesla stock was in the green most of the day today, but by early afternoon, it had flipped into the red, falling as much as 2%. Two analysts weighed in on the EV maker today. One of them offered a Street-high target price, while the other said Tesla stock has more to fall before it will start to rise again.

JMP Securities analyst Joe Osha upgraded Tesla stock from Hold to Market Outperform and set his new price target at $1,060. Excluding price targets that look out years into the future, Osha’s is the highest from major Wall Street firms.

He said although the price target implies an earnings multiple that some may feel seems “excessive,” investors have been buying low-growth automakers at high multiples. Further, Tesla has notched a compound annual growth rate of 23%.

He also said that based on estimates for next year, Tesla stock is trading at around 20 times estimated earnings. That’s not much higher than the S&P 500, which is trading at about 18.2 times estimated earnings for 2021. Osha’s price target is based on 32 times estimated earnings and five times estimated revenue based on 2021 numbers.

He believes the recent pullback caused by the coronavirus presents an opportunity for investors to enter the stock. He also said investors may find more opportunities to buy Tesla stock in the first half of this year as further impacts from the coronavirus become apparent.

Osha also believes Tesla won’t see much competition from other automakers. He believes the electric vehicles from other automakers won’t be able to stand up to Tesla’s EVs.

Wait before buying

Morgan Stanley analyst Adam Jonas still sees Tesla stock as an Underweight and kept his price target at $500 per share. On Monday, he said it’s too early for investors to dive into the stock.

The coronavirus has taken a bite out of Tesla stock because of the important role China plays in the company’s growth. Jonas said he would be bearish on the automaker even without the coronavirus outbreak. He believes investors should prepare themselves for “challenging” earnings numbers for the first quarter.

Excluding the impact from the coronavirus, he expects the company’s first-quarter numbers to be weak. He noted that Tesla has been working through its China production and Model Y ramp and that demand in some parts of Europe has been weaker following a strong fourth quarter.

Jonas recommends that investors wait to see if a difficult first quarter and disruptions to supply occur before deciding whether to buy into Tesla stock again. The coronavirus uncertainty only adds to those concerns, he added.

Tesla up as short-seller calls it “biggest single stock bubble”

Mar. 2, 2020 Update: Tesla stock is back on the rise today following its biggest one-week lost since the initial public offering in June 2010. Longtime bear Mark Spiegel of Stanphyl Capital published an update on his sort of the stock, calling February “a refreshing change” because it actually worked in his favor.

In his most recent letter, which was posted in its entirety by ValueWalk, he called CEO Elon Musk a “securities fraud-committing pathological liar” and again said why he believes the company is in danger. He noted that Tesla raised $2.3 billion in a recent stock offering just weeks after Musk said on the company’s earnings call that “it doesn’t make sense to raise money because we expect to generate cash despite this growth level.”

“In other words, if Elon Musk’s lips are moving, there’s an excellent chance he’s lying,” Spiegel wrote.

He also called investors who are long on Tesla “a mass of idiots bidding this stock to the moon because they think it’s a ‘hypergrowth’ company.” He alleged that the company’s earnings are usually inflated by $200 million or more each quarter due to “its massive ongoing warranty fraud.” He argued that Tesla actually lost money during the fourth quarter.

Spiegel believes demand for the Model Y is “disastrous,” arguing that it will cannibalize sales of the Model 3 and be up against “superior competition from… much nicer electric” vehicles. He called the Cybertruck a “joke of a ‘pickup truck.'”

He also called attention to the number of executive departures, saying that they must be leaving “because Musk is either an outright crook or the world’s biggest jerk to work for (or both).” He noted that Consumer Reports found Tesla’s Autopilot system to be unsafe.

You can read Spiegel’s letter on Tesla stock in its entirety here.

Whitney Tilson email on Tesla

Former hedge fund manager Whitney Tilson told colleagues in an email seen by ValueWalk the following regarding Tesla stock.

Last week I met with someone who I can’t identify, so you’ll just have to trust me when I say he knows what he’s talking about. He told me that the full-self-driving milestone that Tesla announced it reached (something about being able to handle highway entry and exits I recall), which the company used to justify releasing deferred FSD revenue into its income statement (thereby boosting its reported profitability), is a “complete joke” – it wasn’t an important milestone in any way.

The same person, however, said Tesla has some of the best engineers working for it, its battery packs are TWICE as efficient as any other car maker, and he’s optimistic about the Model Y – he doesn’t think there will be production issues (in part because it’s just a slightly modified Model 3) and said they’ve fixed the cold-weather battery issue.

Ron Baron loves Tesla stock

Feb. 28, 2020 Update: Billionaire Ron Baron believes Tesla could be worth $1.5 trillion by 2030. He offered his latest insight into Tesla stock in an interview with Barron’s this week.

He bought almost all of his 1.62 million shares of Tesla stock between 2014 and 2016 at an average price of $219.14 apiece, amounting to $355 million. Baron noted that the company’s annual revenue was only $2.5 billion in 2013 but grew to $25 billion in 2019. He expects to see it hit $33 billion this year.

By 2024, he predicts Tesla’s revenue will be between $100 billion and $125 billion, and he expects Tesla stock to carrying it to a valuation of $300 billion to $400 billion. By 2030, he looks for Tesla’s revenue to be between $750 billion and $1 trillion with operating profit in the range of $150 billion to $200 billion. By then he expects Tesla to be worth $1.5 trillion.

Tesla stock tanks after news of weak China registrations

Feb. 27, 2020 Update: Tesla stock tanked by more than 10% during regular trading hours today as the rest of the stock market pulled back. The shares’ decline was also worsened by a report of disappointing registration numbers on Tesla vehicles in China before the coronavirus outbreak.

Registration data in China revealed a major month-over-month slowdown in demand there. Data from the government-operated China Automotive Information Net revealed that registrations of new Tesla vehicles tumbled 46% from December to January. There were 3,563 Tesla vehicles registered in China last month. Of those vehicles, 2,605 were models that were actually built in China.

Demand for electric vehicles in China has been waning over the last few months, although Tesla had managed to avoid the problems that struck the rest of the industry. However, January’s steep decline in registration numbers indicates that the U.S.-based automaker isn’t immune to the problems faced by the rest of the Chinese EV industry. The nation’s overall vehicle market looks on track for a third consecutive annual decline amid the economic slowdown, trade tensions and now the coronavirus outbreak.

Tesla stock plunged 7% right after the markets opened. The shares were up 86% year to date through Wednesday’s close. Some of the optimism that’s been driving the stock has been due to the start of production at the factory near Shanghai. The automaker started delivering China-built vehicles last month. Tesla hopes to tap into the tax exemptions and subsidies that are only available on domestically built vehicles.

Concerns about the coronavirus are weighing on both Tesla stock and the broader market. U.S. stock indices also plunged during regular trading hours today.

Tesla stock driven by ESG trends instead of short squeeze?

Feb. 24, 2020 Update: Tesla stock plunged along with the rest of the stock market today, falling more than 7% to $834 per share. The shares have bucked the wider trend of the stock market in recent weeks, continuing to rise even while stock indices were falling, but that’s certainly not the case today.

One firm had some interesting insight into what may have been moving Tesla stock over the last several months. Jefferies analyst Christopher Wood said in a note dated Feb. 20 that the trend in ESG (environmental, social and corporate governance) investing may actually be responsible for a significant portion of the stock’s movement.

It has been widely reported that a short squeeze has driven the meteoric rise in Tesla stock, but Wood notes that ESG funds have seen massive flows recently. Tesla may be the quintessential ESG stock.

Wood argues that “big money can be made” in identifying stocks that are likely to capture ESG fund flows. He also suggests that the massive flows to ESG funds may actually be what has been driving the automaker’s shares rather than short covering. He pointed out that Tesla stock had surged 119% so far this year by the time of his report, and its short interest declined only 13% during that same timeframe.

tesla stock

Given the number of hedge fund managers who have said that they are still short Tesla, it is an interesting argument to consider.

Tesla closes stock offering with $2.31 billion gain

Feb. 20, 2020 Update: Tesla informed the Securities and Exchange Commission that it has successfully closed its latest stock offering. The automaker raked in $2.31 billion, easily unloading all 2.65 million shares. The underwriters also immediately exercised their options to buy shares, although they had 30 days to do so.

The total share sale in the offering was 3.05 million shares, which sold for $767 each. The amount expected to be raised was $2.01 billion to $2.31 billion, and Tesla easily managed the full amount at the high end of the range. The automaker said it would use the proceeds for general corporate purposes and to strengthen its balance sheet.

Even though share offerings dilute current shareholders’ investments, Tesla stock soared since the latest offering. However, on Thursday, the shares tumbled following a report about how McAfee was able to trick a Model S into speeding up by 50 miles per hour — using only a piece of tape.

These major funds bought Tesla stock right before it soared

February 18, 2020 Update: Tesla stock continues to soar, unimpeded by anything else in the market. The shares are up another 6% in early trading today after the long three-day holiday weekend. Now we’re hearing that two major hedge funds bought shares just before the latest meteoric rise.

Hyperion Asset Management’s Global Growth Companies Fund is in the top 1% of hedge funds based on returns. It has managed a 28% return over the last three years, surpassing 99% of its peers.

According to Bloomberg, the fund has been focused on investing in companies that can thrive when growth is low through the efficient use of technology. The strategy emphasizes companies that center on different trends of themes Hyperion management believe will last for at least 10 years. Hyperion usually holds stocks for 10 years, and its top holdings include Amazon, Microsoft and Visa.

Another fund, Renaissance Technologies, also invested in Tesla stock before the latest meteoric rise. According to Business Insider, the fund boosted its holdings in the EV maker in December to 3.9 million shares. At the time, the position was worth approximately $1.6 billion. The shares are now worth nearly $3.2 billion following the 91% increase in their value so far this year.

Charlie Munger: I would never buy or short Tesla stock

Feb. 13, 2020 Update: Charlie Munger of Berkshire Hathaway, longtime business partner of Warren Buffett, spoke about Tesla during his address at Daily Journal Corp’s annual meeting. He said he would never buy or short Tesla stock. He called Tesla CEO Elon Musk “peculiar,” adding that “he may overestimate himself, but he may not be wrong all the time.”

Tesla stock initially declined today after the company said in a statement that it will sell $2.3 billion in shares to raise capital. However, after the premarket decline, the shares recovered quickly and were up nearly 2% by 11 a.m. Eastern.

Model Y is one of the most-anticipated vehicles

Feb. 11, 2020 Update: Tesla stock finally seems to be taking a breather today with a climb of less than 1% at midday. Of course, it takes hardly any news to lift Tesla stock, and what we have to report could serve as a bit more fuel for the fire.

Tesla’s Model Y is one of the most-anticipated vehicles for 2020 so far. PartCatalog put together a list of the most-anticipated vehicles for each state in the U.S., and the Model Y captured California, Washington and Hawaii. It’s no surprise that Tesla took its home state of California, but it is interesting that there’s interest in two other states as well.

The most-anticipated vehicle is the much-hyped Ford Bronco with 19 states. The Chevy Corvette Stingray is in second place with 13 states, and the Land Rover Defender is in third place with six states.

tesla stock model y

Image source: partcatalog.com

Tesla stock climbs as Shanghai factory reopens

Feb. 10, 2020 Update: Tesla stock continued its rapid climb early today as the company reopened production at its factory in Shanghai. The shares briefly topped the $800 level again but dropped back below that level as the early hours of trading continued.

Reuters reported on Friday that Shanghai authorities said they would help companies like Tesla restart product as quickly as possible. The factory there reopened today after an extended Lunar New Year holiday caused by the spread of the coronavirus. Tesla stock continues to be very speculative as today’s gains come days after it was revealed that production in China would restart today.

A short squeeze is also driving Tesla stock as short-sellers are being forced to cover their positions. However, some short-sellers aren’t willing to give up yet, as evidenced by the letters from hedge funds that continue to short the stock.

Concern over Tesla

Feb. 7, 2020 Update: Gene Munster of Loup Ventures, previously known for his analyst reports on Apple, is concerned about Tesla. The venture capitalist noted in a blog post that Tesla stock has soared, doubling the company’s market capitalization over the last month and tripling it since the end of the third quarter. He also said that the excitement that has driven the meteoric rise in Tesla stock presents risk in the short term. He believes bulls may be overlooking a few things.

For example, he expects the first quarter to bring a sequential decline in deliveries. The automaker delivered 112,000 vehicles during the fourth quarter. Munster pointed out that Tesla removed an important statement from its fourth-quarter letter to shareholders. In the second and third quarters of 2019, the company wrote that “deliveries should increase sequentially,” but that statement doesn’t appear in the Q4 letter.

Tesla stock and China

Munster believes it means a significant decline quarter over quarter is in order. He also noted that the company said production will probably outpace deliveries this year. Model 3 production is set to ramp in Shanghai, and Model Y production is beginning in Fremont.

The venture capitalist also noted that the first quarter is usually seasonally weak for automakers due to poor weather, discounts at the end of the year and releases of new models. Tesla also said in its fourth-quarter letter that its finished vehicle inventory level was at 11 days of sales, the lowest in the last four years. Munster said that means the automaker delivered every vehicle it could in the fourth quarter, “leaving many showrooms empty and online inventory searches yielding ‘no results.'”

He also notes that the company has been teasing its upcoming Plaid powertrain, and many Model S and X buyers are likely to wait until it is released. Other factors include the coronavirus impact on Shanghai production.

Tesla stock rumbled 0.46% to $745.52 during regular trading hours.

Hedge funds short Musk

Feb. 6, 2020 Update: Aristides Capital published an update on its short of Tesla stock in its letter to investors dated Feb. 3, 2020, which was reviewed by ValueWalk. Managing Member Christopher Brown had some very harsh words for Tesla CEO Elon Musk.

After doing well shorting Tesla stock most of the year in 2019, Brown said he should have stayed away after covering most of the position in the low $200s. However, he said he dug in a bit too hard in the fourth quarter, explaining that he has written so much on Tesla stock that he has lost his willingness to change to a different view on it.

Aristides covered some of its short of Tesla stock before the company posted its earnings and then covered most of the rest of the position by the end of the month. Brown noted that when companies shift from needing a continual supply of capital to being sustainable on their own, which is how Tesla fans now see the company, the valuation gets expanded.

Another problem for his short of Tesla stock is that the company’s EV competitors didn’t gain as much ground in the market as he thought they would have by now. Additionally, he thought Tesla’s “poor reliability would catch up to it” as the owner base expanded beyond fanboys, but that didn’t happen. Brown sees the automaker as “one of the least reliable brands and also the most loved/highest in loyalty.”

Elon Musk a liar?

Finally, Model 3 orders in the U.S. seems to be going much better than what Brown had expected. But it was his words about Elon Musk that really had an impact.

“Yes, Elon Musk is a narcist and a liar, yes, he has committed multi-billion-dollar securities fraud on more than one occasion, and yes, there is certainly the appearance of some accounting shenanigans at Tesla, but none of that seems to matter,” he wrote. “It’s a ‘cool’ car with a CEO who lied to bailout [sic] Solar City, lied about a takeover, libeled an actual hero, attacks journalists and whistleblowers, and never faces any serious consequences for it whatsoever.”

He also said he won’t promise that he will never short Tesla again, but if he does, it will be because he sees “a huge near-term edge on some sort of catalyst.”

Updates on Tesla stock

Dorsheimer continues to see Tesla as “the leading EV juggernaut and expects the upcoming battery day in April to be a major milestone to help investors understand the automaker’s lead in the EV maker. However, he also believes that patient investors will see a better entry point for Tesla stock if they wait.

Interestingly, advice on Tesla stock is trending so much on Feb. 5 that if you type in “should I” into Google, the top two auto-fill suggestions are “should I buy Tesla stock” and “should I sell Tesla stock.”

Previously: Tesla stock continues its hot streak on Feb. 4, 2020 with another $200 gain in a single day. The shares topped $700 on Monday and then $900 on Tuesday following another 20% gain. The EV maker’s stock has been on a run for months, and it received yet another shot of adrenaline last week from the fourth-quarter earnings release. Tesla Inc. (NASDAQ:TSLA) stock shows no signs of slowing down, and short-sellers have really been taking a hit on it.

Tesla stock: running of the bulls

Shares popped on Feb. 4 following bullish commentary from billionaire Ron Baron on CNBC‘s Squawk Box. The automaker’s valuation topped $160 billion, dwarfing General Motors’ $49.4 billion market capitalization.

In fact, GM, Ford and Chrysler are worth a combined $110 billion, and their combined revenue in 2019 was $425 billion, compared to Tesla’s $25 billion in revenue. Tesla’s stock rise puts it on track to compete with Toyota, which is the most valuable automaker in the world at a market cap of $232.1 billion.

Baron told CNBC that he sees Tesla hitting “at least” $1 trillion in revenue over the next decade. He also said he sees “a lot of growth opportunities from that point going forward.” His fund Baron Capital owns almost 1.63 million shares of Tesla stock, and he said they won’t be selling any of those shares. He believes the latest bull run in the shares is “just the beginning” and predicts that the automaker “could be one of the largest companies in the whole world.”

Tesla stock ratings

Numerous analysts updated their Tesla stock ratings following the company’s 4Q19 earnings release. The most astonishing price target increase came from ARK Invest analysts, who wrote on Feb. 1, 2020 that they expect the shares to be worth $7,000 by 2024. Interestingly, that’s their base case.

Their bull case puts Tesla stock at $15,000 or higher, while their bear case has it at $1,500, well above the $900 current price. One of the biggest factors in their price target increase is their expectation that the automaker will be able to slash costs and boost margins. They see an 80% probability of Tesla reaching 40% margins.

Wedbush analyst Daniel Ives boosted his price target for Tesla stock from $500 to $710 following the company’s Jan. 29 earnings release. He set his bull case for the shares at $1,000 and said he expects the “bull party” to continue. He has a Neutral rating on the stock.

Other ratings

Feb. 5, 2020 Update: Analysts at Canaccord Genuity downgraded Tesla stock in a note dated Feb. 4, 2020. Analyst Jed Dorsheimer said he now rates the shares at Hold, down from Buy, with a $750 price target. Tesla stock powered past $960 per share in trading on Feb. 4 but then pulled back on Feb. 5 following the firm’s downgrade. The stock plunged more than 12% to fall closer to $775 per share.

In his report, Dorsheimer said he saw a balanced risk/ reward for the shares following this week’s meteoric rise. He said they saw a clear buy signal for the stock entering the year, but he believes the coronavirus in China is a clear headwind for Tesla’s new Shanghai factory, which he said calls for “a more pragmatic position.”

“Given the 3,000 per week China Model 3 production expectations in a country that remains on lockdown, we feel a reset of expectations in Q1 is likely and thus needs to be reflected in the valuation,” he wrote.

Ivey wrote in an update on Feb. 3 that he believes the automaker will see 150,000 units of demand out of China alone in the coming year. He also believes the company’s guidance of achieving 500,000 deliveries in 2020 is achievable. He believes Wall Street is looking for between 530,000 and 550,000 deliveries in 2020. The big factor in the number of deliveries to expect include the automaker’s ability to ramp production and demand in China this year and next.

Analysts can’t keep up with price surge

Canaccord Genuity wrote analyst Jed Dorsheimer wrote in his Jan. 30, 2020 update on Tesla stock that the company is “feeling more like Space X.” The automaker posted $7.4 billion in revenue and earnings of $2.14 per share for 4Q19, compared to consensus estimates of $7 billion and $1.77 per share. Dorsheimer said one thing that’s important to note is that the company ended the fourth quarter with $6.3 billion in cash and generated $1 billion in free cash flow, which he believes should quiet concerns about the automaker’s balance sheet. He had a Buy rating and new $750 price target on Tesla stock as of Jan. 30, but the shares have now surpassed $900, putting that target underwater.

Morgan Stanley analyst Adam Jonas remains extremely bearish on Tesla stock with an Underweight rating and $360 price target as of Jan. 31, 2020. He said that in the almost nine years he has been covering the stock, investor commentary has not been as optimistic as it is now following the 4Q19 earnings release. Jonas downgraded the shares to Underweight on Jan. 16.

Hedge fund views of Tesla stock

Multiple hedge funds have covered Tesla stock in their letters to investors. Lakewood Capital wrote about its short of the shares in its fourth-quarter letter to investors dated Jan. 14, 2020. Unsurprisingly, the fund’s short of the automaker was its biggest losing position during the fourth quarter at 85 basis points.

The shares rallied into the end of the year after the company posted a “slight” profit in its third-quarter earnings release, Lakewood’s Anthony Bozza wrote.

“We’ve done this long enough to know that sentiment on stocks like Tesla can be nearly impossible to predict and are [sic] subject to large, sudden price fluctuations, and hence, we size our shorts prudently,” he told investors.

He described the fourth-quarter rally as “frustrating” but added that the position didn’t significantly detract from the fund’s full-year 2019 results.

Although we have seen this story countless times, what’s rather unique in the case of Tesla is the sheer scale of the situation,” he added.

Short-sellers feel the pain

Data from S3 Partners reveals that short-sellers have lost over $8 billion just in the last month alone. On Feb. 3, 2020, short-sellers lost a staggering $2.5 billion just in a single day. Despite the sizable paper losses they have recorded in the last few years, short interest in Tesla remains high with about 24.4 million shares being borrowed and bets against the company valued at more than $15 billion. That amounts to more than 18% of Tesla’s float.

Tesla is the most-shorted stock, and short interest is significantly higher than interest in the next two companies with the second- and third-biggest short interest. Less than 1% of the float is being bet against Apple and Microsoft each.

Short-sellers have been forced to cover some of their position in Tesla. According to S3, they have covered $12.6 billion worth of shares since they were below $200 in June 2019. It’s likely that some of the post-earnings run in late January and early February is the result of short-sellers finally caving and covering their positions.

The post Tesla stock: earnings surprise to the upside appeared first on ValueWalk.

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After a near 10% rally this week can the Netflix share price make a comeback?

The Netflix share price rallied by nearly 10% (9.6%) this week after co-CEO Ted Sarandos confirmed the film and television streaming market leader is to…

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The Netflix share price rallied by nearly 10% (9.6%) this week after co-CEO Ted Sarandos confirmed the film and television streaming market leader is to introduce a new ad-supported, cheaper subscription. The company also announced it is to lay off another 300 employees, around 4% of its global workforce, in addition to the 150 redundancies last month.

Netflix has been forced into a period of belt-tightening after announcing a 200,000 subscriber-strong net loss over the first quarter of 2022. The U.S. tech giant also ominously forecast expectations for the loss of a further 2 million subscribers over the current quarter that will conclude at the end of this month.

netflix inc

The company has faced increasing sector competition with Paramount+ its latest new rival, joining Amazon Prime, Disney+, HBO Max and a handful of other new streaming platforms jostling for market share. A more competitive environment has combined with a hangover from the subscriber boom Netflix benefitted from over the Covid-19 pandemic and spiralling cost of living crisis.

Despite the strong gains of the past week, Netflix’s share price is still down over 68% for 2022 and 64% in the last 12 months. Stock markets have generally suffered this year with investors switching into risk-off mode in the face of spiralling inflation, rising interest rates, fears of a recession and the geopolitical crisis triggered by Russia’s invasion of Ukraine.

Growth stocks like Netflix whose high valuations were heavily reliant on the value of future revenues have been hit hardest. No recognised member of Wall Street’s Big Tech cabal has escaped punishment this year with even the hugely profitable Apple, Microsoft, Alphabet and Amazon all seeing their valuations slide by between around 20% and 30%.

But all of those other tech companies have diversified revenue streams, bank profits which dwarf those of Netflix and are sitting on huge cash piles. The more narrowly focused Meta Platforms (Facebook, WhatsApp and Instagram) which still relies exclusively on ad revenue generated from online advertising on its social media platforms, has also been hit harder, losing half of its value this year.

But among Wall Street’s established, profitable Big Tech stocks, Netflix has suffered the steepest fall in its valuation. But it is still profitable, even if it has taken on significant debt investing in its original content catalogue. And it is still the international market leader by a distance in a growing content streaming market.

justwatch

Source: JustWatch

Even if the competition is hotting up, Netflix still offers subscribers by far the biggest and most diversified catalogue of film and television content available on the market. And the overall value of the video content streaming market is also expected to keep growing strongly for the next several years. Even if annual growth is forecast to drop into the high single figures in future years.

revenue growth

Source: Statista

In that context, there are numerous analysts to have been left with the feeling that while the Netflix share price may well have been over-inflated during the pandemic and due a correction, it has been over-sold. Which could make the stock attractive at its current price of $190.85, compared to the record high of $690.31 reached as recently as October last year.

What’s next for the Netflix share price?

As a company, Netflix is faced with a transition period over the next few years. For the past decade, it has been a high growth company with investors focused on subscriber numbers. The recent dip notwithstanding, it has done exceedingly well on that score, attracting around 220 million paying customers globally.

Netflix established its market-leading position by investing heavily in its content catalogue, first by buying up the rights to popular television shows and films and then pouring hundreds of millions into exclusive content. That investment was necessary to establish a market leading position against its historical rivals Amazon Prime, which benefits from the deeper pockets of its parent company, and Hulu in the USA.

Netflix’s investment in its own exclusive content catalogue also helped compensate for the loss of popular shows like The Office, The Simpsons and Friends. When deals for the rights to these shows and many hit films have ended over the past few years their owners have chosen not to resell them to Netflix. Mainly because they planned or had already launched rival streaming services like Disney+ (The Simpsons) and HBO Max (The Office and Friends).

Netflix will continue to show third party content it acquires the rights to. But with the bulk of the most popular legacy television and film shows now available exclusively on competitor platforms launched by or otherwise associated with rights holders, it will rely ever more heavily on its own exclusive content.

That means continued investment, the expected budget for this year is $17 billion, which will put a strain on profitability. But most analysts expect the company to continue to be a major player in the video streaming sector.

Its strategy to invest in localised content produced specifically for international markets has proven a good one. It has strengthened its offering on big international markets like Japan, South Korea, India and Brazil compared to rivals that exclusively offer English-language content produced with an American audience in mind.

The approach has also produced some of Netflix’s biggest hits across international audiences, like the South Korean dystopian thriller Squid Games and the film Parasite, another Korean production that won the 2020 Academy Award for best picture – the first ever ‘made for streaming’ movie to do so.

Netflix is also, like many of its streaming platform rivals, making a push into sport. It has just lost out to Disney-owned ESPN, the current rights holder, in a bid to acquire the F1 rights for the USA. But having made one big move for prestigious sports rights, even if it ultimately failed, it signals a shift in strategy for a company that hasn’t previously shown an interest in competing for sports audiences.

Over the next year or so, Netflix’s share price is likely to be most influenced by the success of its launch of the planned lower-cost ad-supported subscription. It’s a big call that reverses the trend of the last decade away from linear television programming supported by ad revenue in its pursuit of new growth.

It will take Netflix at least a year or two to roll out a new ad-supported platform globally and in the meanwhile, especially if its forecast of losing another 2 million subscribers this quarter turns out to be accurate, the share price could potentially face further pain. But there is also a suspicion that the stock has generally been oversold and will eventually reclaim some of the huge losses of the past several months.

How much of that loss of share price is reclaimed will most probably rely on take-up of the new ad-supported cheaper membership tier. There is huge potential there with the company estimating around 100 million viewers have been accessing the platform via shared passwords. That’s been clamped down on recently and will continue to be because Netflix is determined to monetise those 100 million viewers contributing nothing to its revenues.

If a big enough chunk of them opt for continued access at the cost of watching ads, the company’s revenue growth could quickly return to healthy levels again. And that could see some strong upside for the Netflix share price in the context of its currently deflated level.

The post After a near 10% rally this week can the Netflix share price make a comeback? first appeared on Trading and Investment News.

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Hedge Fund CIO: How Will The Fed Do QT? Each Crisis Has Increased Markets’ Dependency On Fed Liquidity

Hedge Fund CIO: How Will The Fed Do QT? Each Crisis Has Increased Markets’ Dependency On Fed Liquidity

By Eric Peters, CIO of One River Asset…

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Hedge Fund CIO: How Will The Fed Do QT? Each Crisis Has Increased Markets' Dependency On Fed Liquidity

By Eric Peters, CIO of One River Asset Management

“The Fed is “all in” on re-establishing price stability,” Fed Governor Waller pronounced in pleasantly direct language. “Experience has shown that markets need time to adjust to a turn from accommodation to tightening.”

In response to questions, Waller spoke with blunt determination: “I don’t care what’s causing inflation, it’s too high, it’s my job to get it down. The higher rates and the path that we’re putting them on, it’s going to put downward pressure on demand across all sectors.”

Powell offered his own sober message, “A soft landing is our goal. It is going to be very challenging. It has been made significantly more challenging by the events of the last few months – thinking of the war and of commodities prices and further problems with supply chains.”

New York Fed economists provide a bit more precision, arguing that “the chances of a hard landing are about 80%,” starting in Q4 2022.

Something will break. Something always does.

Digital did and the regulatory landgrab has started in full force. Lagarde, with plenty of serious policy decisions ahead, observed that “crypto assets and DeFi have the potential to pose real risk to financial stability.”

Spain’s Minister of Finance, Montero, announced digital asset owners would need to declare holdings and trading “in anticipation of regulations that would soon be carried out throughout the European Union.”

The East-West divide is clear in policy focus. President Xi is focused on growth, vowing to “strengthen macro-policy adjustment and adopt more effective measures to strive to meet the social and economic development targets for 2022 and minimize the impacts of Covid-19.”

Strains in emerging markets are being managed from within. Sri Lanka’s 22mm people are in the most severe economic crisis in nearly a century and India’s Foreign Secretary Kwatra underlined, “India stands ready to help Sri Lanka through promoting investments, connectivity and strengthening economic linkages,” beyond the $4bln aid already provided.

The East-West center of gravity between global war and peace sits in Kaliningrad, a tiny Russian province pressed between NATO countries. Lithuanian President Nauseda offered that “Russia cannot be stopped by persuasion, cooperation, appeasement or concessions.”

Elevated rhetoric continued when Russia’s Foreign Minister Lavrov drew comparison to Hitler’s war against the Soviet Union. “The EU and NATO are bringing together a contemporary coalition to fight and, to a large extent, wage war against Russia.”

* * *

Liquidity Unknowns I: How much QT is too much QT? We don’t know. There is no tidy math formula, no general equilibrium model, no linear approximation that will tell you. The trouble is, in a world of false precision, everyone wants a number. And policymakers have a hard time saying, “we don’t know,” especially when it’s true. Through the week ending June 22, balances with Federal Reserve Banks – previously known as ‘excess reserves’ – stood at $3.115trln. Powell guided the market that the end point for the Fed balance sheet would shrink another $2.5trln to $3trln. How does that math work?

Unknowns II: Yet again new tools were needed in this cycle. To make sure rates didn’t fall below the Fed’s floor, they needed a broader mechanism to absorb excess liquidity. That mechanism was private sector access to the reverse repo facility. Remember the 2018 period of QT. Excess reserves were $1.9trln before liquidity conditions started to bite in September. Private sector reverse repos were basically zero. Today? $2.5trln. The Fed’s liabilities are acting as the riskless asset to private money funds in a way. The Fed clearly thinks reverse repos will decline. We don’t know. Behavior could drive it up if everyone wants liquidity and wants to face the Fed. As reverse repos rise, excess reserves decline. QT has more liquidity plumbing risk today – tools can turn into weapons.

Unknown III: The risks are different but the strategy with QT is the same – start small, increase gradually, and then let it run. It isn’t the obvious choice. Reducing the pace as liquidity is withdrawn is a more natural path – you typically slow as you approach a stop sign, after all. We will know when the tightening – both in liquidity and interest rates – has gone too far. Weak links will break. Digital plays the role of EM in this cycle – big enough to be noticed, not enough to get policy to stop. Asset deflation, a USD credit crunch, and risks from maturity transformation has led to capital controls with 11 digital intermediaries. As in the Asia Crisis, the ecosystem will respond to gain independence and resilience.

Unknown IV: Digital is the warning sign, not the circuit-breaker. Typical candidates – a rapid rise in the US dollar, EM currency and debt crisis, and banking strain – are just not applicable. After each crisis is a response, and those responses act like a vaccine against future ‘shocks.’ Emerging markets have insulated themselves with large holdings in the US dollar. Currency depreciation forced EM central banks into more orthodox positions well ahead of the Fed, ECB, and BOJ. Banks don’t have the space to make the mistakes of the GFC, with leverage financing pushed to capital markets. But markets have not been weaned from liquidity. To the contrary, each crisis has increased dependency on Fed liquidity.

Unknown V: The adjustment in broader markets is orderly. How else would it be? Disorder is how it ends, not how it starts. “It is like jumping from the 100th floor of a building and saying, ‘so far, so good’ halfway into the drop,” a prolific investor remarked when confronted with “contained” language head of the GFC. Liquidity transformation in traditional markets, the driver of digital weakness, is everywhere. And it is a so-far, so-good story. ETF discounts make the point emphatically. An illiquidity pocket means that ETFs would clear the way closed-end funds do – hunting for a price where a buyer is willing to absorb the liquidity risk. Mortgage ETFs are down 9.7% for the year and trade exactly on net asset value. So far, so good.

Unknown VI: What we can see is rarely the problem. The grandest mismatch resides in private markets. “Prior to the pandemic, many had already grown concerned about public market valuations and were exploring private capital markets in the hopes of addressing lower return projections for their traditional 60/40 portfolios.” Pronouncements like these became the norm. A generation of “J-curve” investors – the pattern of private investments to draw capital and then deliver rapid returns – was born. Everyone wants a liquidity buffer. Nobody has one. And in the everything bubble, to get one you are selling assets in the hole. You sell what you can. You promise never again, even if enticed by the Fed toolkit. Until it happens again.

Tyler Durden Sun, 06/26/2022 - 21:13

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The Sussex researchers who used international collaboration and 3D printing to stem PPE shortages in Nigeria

Researchers at the University of Sussex and their partners in Nigeria used open-source designs and 3D printing to reduce personal protective equipment…

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Researchers at the University of Sussex and their partners in Nigeria used open-source designs and 3D printing to reduce personal protective equipment (PPE) shortages for a community in Nigeria during the Covid-19 pandemic – tells a recently published academic paper.

Credit: Please credit Royhaan Folarin, TReND

Researchers at the University of Sussex and their partners in Nigeria used open-source designs and 3D printing to reduce personal protective equipment (PPE) shortages for a community in Nigeria during the Covid-19 pandemic – tells a recently published academic paper.

In their paper in PLOS Biology, Dr Andre Maia Chagas from the University of Sussex, and Dr. Royhaan Folarin from the Olabisi Onabanjo University (Nigeria), explain how their collaboration led to the production of  over 400 pieces of PPE for the local hospital and surrounding community, including those providing essential and frontline services. This included face masks and face shields, at a time when a global shortage meant it was impossible for these to be sourced by traditional companies. 

In their collaboration, they leveraged existing open-source designs detailing how to manufacture approved PPE. This allowed Nigerian researchers to source, build and use a 3D printer and begin producing and distributing protective equipment for the local community to use. Plus, it was affordable.

One 3D printer operator and one assembler produced on average one face shield in 1 hour 30 minutes, costing 1,200 Naira (£2.38) and one mask in 3 hours 3 minutes costing 2,000 Naira (£3.97). In comparison, at the time of the project, commercially available face shields cost at least 5,000 Naira (£9.92) and reusable masks cost 10,000 Naira (£19.84). 

Dr Maia Chagas, Research Bioengineer at the University of Sussex, said: “Through knowledge sharing, collaboration and technology, we were able to help support a community through a global health crisis. 

“I’m really proud of the tangible difference we made at a critical time for this community. As PPE was in such high demand and stocks were low, prices for surgical masks, respirators and surgical gowns hiked, with issues arising around exports and international distribution. 

“We quickly realized that alternative means of producing and distributing PPE were required. Free and open-source hardware (FOSH) and 3D printing quickly became a viable option.

“We hope that our international collaboration during the pandemic will inspire other innovators to use technology and share knowledge to help address societal problems, which were typically reliant on funding or support from government or large research institutions. 

“With open source designs, knowledge sharing and 3D printing, there is a real opportunity for us to start addressing problems from the ground up, and empower local communities and researchers.”

Dr. Royhaan Folarin, a Neuroscientist and lecturer of anatomical sciences at Olabisi Onabanjo University in Nigeria, said: 

“During the pandemic, we saw the successful printing and donation of PPE in the Czech Republic by Prusa Research and it became a goal for me to use the training I had received in previous TReND in Africa workshops to help impact my immediate community in Nigeria.”

The international collaboration came about as a result of the TReND in Africa network, a charity hosted within Sussex which supports scientific capacity building across Africa. 

After initial use, testers provided feedback commending the innovativeness, usefulness and aesthetics of the PPE and, while the team’s 3D printer was not built for large-scale serial manufacturing, they identified the possibilities for several 3D printers to run in parallel, to reduce relative production time. During the pandemic, this was successfully demonstrated by the company Prusa Research, which produced and shipped 200,000 CE certified face shields. 


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