Josh Gilbert, market analyst at eToro Group Ltd shares his three things to watch in Australia in the coming days.
RBA Minutes
RBA meeting minutes will be released tomorrow, providing some insight into the board’s conversation behind this month’s surprise rate pause.
The vote to pause rates was not unanimous. The 6-3 split indicates an overarching disparity between board members. We know RBA chair Michele Bullock leans towards quarterly CPI readings, not the monthly ones, for a more stable indicator of economic health and that this caution likely motivated her to vote for a pause, but analysts will be keen to get a deeper understanding of the board’s broader perspective.
Even if this surprise move prompted analysts to recalibrate their expectations, last week’s uptick in unemployment has stoked hopes of an August rate cut. It will be very surprising if we see consecutive pauses from the RBA come July, even with global economic volatility persisting. The market now sees the RBA cutting three times in the second half of the year. That’s an optimistic view, but it could come to fruition if key data like last week’s jobs numbers continues landing within target bands.
Tesla earnings
Even if Tesla delivers a solid set of numbers, it’s unlikely to escape heavy scrutiny when it reports earnings on Wednesday, US time. The optimistic scenario is that cost-cutting efforts and developments in AI and autonomy provide some relief. Realistically, expectations are low. Vehicle sales are under pressure, with global deliveries falling 13.5% year-on-year in Q2 to 384,122, missing analyst estimates. The Cybertruck has also been arguably somewhat of a flop so far, with a third consecutive quarter of falling sales now hitting their lowest point in a year.
Elon’s position as a Tony Stark-like personality at the head of the company was a boon for a long time, but it’s hard to argue that his prominence isn’t having some detrimental effect on the brand. The Tesla CEO made a broad commitment to step away from politics after his controversial time with DOGE. However, that promise has been short-lived, and the entrepreneur has almost immediately opted to pursue founding his own US political party. Musk has previously been criticised as being absent as Tesla’s CEO, so these renewed political aspirations are unlikely to please investors who were hoping for a steadier hand at the helm of Tesla.
Elon is also eyeing Tesla’s cash reserves in the hopes of transferring some of those funds across to his private artificial intelligence company, xAI. This will require Tesla investor approval, and even if there is a theoretical future benefit for Tesla in doing so, it’s going to be a very hard case to make.
There are still high points to look for in this earnings call. Tesla remains a market leader and is making progress in autonomous driving, particularly with its Robotaxi program. That’s worth watching closely, although any meaningful contribution to revenue is still years away. Tesla is a household name, and even amidst the chaos of Musk, there is a solid company at work here. That’s why it maintains its position as the second most-held stock on the eToro platform in Australia, and why so many shareholders back it as a long-term investment. Markets expect EPS of US$0.44 with revenue of US$22.8 billion.
Alphabet earnings
Alphabet reports earnings Wednesday, US time, and with the stock currently trading at the lowest valuation among the Magnificent Seven, investor interest is rising. A flurry of broker upgrades last week reflects growing optimism around the company’s outlook for the second half of the year.
The company’s cloud services and YouTube growth are expected to be high points in the report but the long-term play will be, predictably, artificial intelligence. The company continues to develop its Gemini assistant, AI advertising tools and is investing heavily in talent behind its AI coding platform.
Some investors are concerned about the long-term impact that generative AI technologies will have on Google search. Increasingly, people are using ChatGPT and similar AI platforms to assist them in information gathering and recommendations.
This, coupled with recent studies that indicated younger generations are defaulting to social media platforms like TikTok instead of search engines when seeking out information, could be cause for some concern. However, search ad revenue has remained resilient so far, and the integration of more AI tools directly into Google Search could act as a tailwind in this week’s results.
We’ll also be watching capital expenditure closely. Big Tech is in an arms race to scale infrastructure for AI, and Alphabet is no exception. With demand growing rapidly, full-year capex guidance could increase again. In this environment, it's spend or get left behind. As always, Google Cloud will be a key focus. The market is looking for around 27% year-on-year growth, and a beat here, paired with solid Search performance, could see the stock push higher following earnings.