Comment of the Day
2nd March 2023
Video commentary for March 2nd 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Advance-Decline Line tests MA, Tesla rolling over, Salesforce rebounds, Treasury yields continue to trend higher, Euro slightly weaker on rate differentials, China steady, PDD firm, gold pauses, oil firm.
Tesla Shares Drop After Investor Day Without Any New Models
This article from Bloomberg may be of interest to subscribers. Here is a section:
“I’d love to really show you what I mean and unveil the next-gen car, but you’re going to have to trust me on that until a later date,” Franz von Holzhausen, Tesla’s design chief, said at the company’s headquarters in Austin, Texas. “We’ll always be delivering exciting, compelling and desirable vehicles, as we always have.”
Tesla shares fell as much as 8.6% as of 8:40 a.m. Thursday in New York, before the start of regular trading. Anticipation of the event contributed to a surge in the stock that added more than $300 billion of market value in two months.
Letdown
Musk, 51, confirmed Tesla will build a new plant in Monterrey, Mexico, in what he said was probably the most significant announcement of the day. The chief executive officer said Tesla will make its next-gen vehicle there, and that the company will hold a grand opening and groundbreaking at an unspecified date.
When asked when the carmaker will show a prototype and if he could share details about the size, content and performance of the vehicle, Musk responded that Tesla also will hold a “proper sort of product event” at some point, but didn’t say when.
“We’re gonna go as fast as we can,” said Lars Moravy, Tesla’s vice president of vehicle engineering. “We expect that to be a huge-volume product.”
Eoin Treacy's view
I watched most of the Tesla investor day presentation last night and was struck by how much the past tense was used. Everything was about the efficiencies that have already been implemented which is obviously already in the price. There was no Steve Jobs “just one more thing” moment. In fact the biggest takeaway for me was a statement Musk made about the future of battery chemistry.
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First Solar Shares Surge to 14-Year High as Order Backlog Swells
This article from Bloomberg may be of interest to subscribers. Here is a section:
The surging demand comes as the company is poised to benefit from the Inflation Reduction Act, the landmark climate bill signed last year by President Joe Biden that subsidizes domestic manufacturing. Even before the bill passed, First Solar saw strong demand for its modules. It has since announced a new factory in Alabama and Chief Executive Officer Mark Widmar indicated on an earnings call that further expansion is possible.
The years-long backlog of orders caught the attention of analysts and investors. Goldman Sachs (NYSE:GS) Group Inc. analyst Brian Lee boosted the price target on the stock to a Wall Street-high of $260 from $231 on Wednesday, noting the company is “booking well into the 2nd half of the decade at this point.”
The US is expected to significantly boost its reliance on solar power in its push to slash carbon emissions. First Solar, the country’s biggest panel maker, has focused on dominating that market.
Eoin Treacy's view
Solar stocks tend to be very interest rate sensitive because most residential business plans involve no upfront costs. That generally means the installer has to carry the cost of the panels until cashflows catch up. The business model worked wonderfully during the low interest rate environment and has been challenging over the last year as rate ramped higher.
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Flying recovery proves a tailwind for new Rolls-Royce boss's turnaround
This article from Bloomberg may be of interest to subscribers. Here is a section:
"There is good performance improvement opportunity in this business in all the divisions, especially in civil aerospace and power systems," he told reporters. "And that is ongoing and then strategic review will create the clarity."
He said he would focus on reducing its debt, which stood at 3.25 billion pounds at year-end, to obtain an investment grade, before resuming payouts to shareholders.
Rolls, which also has defence and power systems divisions, posted operating profit of 652 million pounds for 2022, up 57% and beating an analyst forecast of 478 million pounds.
It guided to underlying operating profit of 0.8-1.0 billion pounds and free cash flow of 0.6-0.8 billion pounds this year, based on a forecast for its engines to fly 80-90% of 2019's level.
Eoin Treacy's view
Rolls Royce has three divisions. These are Civil Aerospace, Defence and Power Systems. Within each of those units it has maintenance contracts. Aftermarket service represents about 55% of all revenue. That means the company is highly leveraged to the
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