Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Wed, 16 Jun 2021, 9:25 AM

 

Wall Street Breakfast: Tesla Time

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Earnings season will kick into high gear this afternoon as Tesla (NASDAQ:TSLA) reports Q1 results. The EV automaker has already seen record sales in the first quarter, delivering nearly 185,000 vehicles, but it will need to convince investors that it can hold on to its lead in an increasingly crowded playing field. The stock is flat YTD, after jumping over 700% in 2020, and shares have a long history of volatile moves on earnings day.

By the numbers: Wall Street expects impressive growth for non-GAAP earnings per share, which could soar 208% Y/Y to $0.77, and revenue forecasts are optimistic, with consensus estimates standing at $10.3B, or a Y/Y increase of 72%. Gross margins are also on watch. Model refreshes and stalling production of the higher-priced Model S and X during the quarter may see margins slip further, after falling to 24.1% in Q4, from 27.7% in the prior period.

Headwinds? Recent negative headlines from China (malfunction protests and a military complex ban), as well as a crash in Texas (that seemed erroneously connected to Autopilot), are likely to come up in the conference call. There's also risk that as traditional automakers drive on to the EV scene, they'll need to buy fewer regulatory credits from Tesla to keep in line with emissions rules. While the credits are a small source of revenue, they can help bolster profits since there are no costs associated with them.

Outlook: While Tesla has not yet provided a specific vehicle delivery estimate for 2021, it could be a lofty number. Tesla's vehicle deliveries already grew 36% to nearly half a million in 2020, and Technoking Elon Musk has commented that the company could see an annual growth of 50% or more this year. Investors are also hoping for comments surrounding Tesla's new plants in Germany and Austin, Texas, and other growth forecasts, as Tesla continues to roll out its international expansion.

Stocks - Earnings deluge

U.S. stock futures were mixed, but little changed, overnight, with the Dow up 0.1%, and the S&P 500 and Nasdaq off 0.1% and 0.3%, respectively. The moves come ahead of the busiest week of earnings season and follow the first weekly loss in five on Wall Street. Analysts say high valuations have kept traders' enthusiasm in check, but indexes are within 1% of their all-time highs.

About a third of the S&P 500 are set to update investors over the next five sessions. Tesla (TSLA) will kick off the action this afternoon, while Big Tech will make headlines the rest of the week, with results from Amazon (AMZN), Alphabet (GOOG, GOOGL), Apple (AAPL) and Microsoft (MSFT). Investors will also be gauging economic reopening plays, such as Boeing (BA), Caterpillar (CAT) and Ford (F), which are expected to detail price pressures from rising materials and transportation costs.

Statistics: Corporations have been putting up some nice numbers thus far. About a quarter of S&P 500 companies have already published Q1 results, with 84% reporting a positive per share earnings surprise and 77% topping revenue estimates. If 84% is the final percentage, it will tie the mark for the highest percentage of S&P 500 companies reporting an EPS beat since FactSet began tracking the data in 2008.

That's not all: President Biden is due to release his "American Families Plan" this week that would double the capital gains tax for the ultra-wealthy. The Fed also meets Tuesday and Wednesday, and is expected to defend its policy of letting inflation run hot. At a press conference following the announcement, Chair Jerome Powell is likely to assure markets that the pick-up in prices is only temporary, before the March personal consumption expenditures index, one measure of inflation, comes out Friday.

Covid - Surge in India

India continues to report a record number of fresh COVID-19 cases and deaths daily as the country struggles to contain a devastating coronavirus outbreak. On Monday, the government reported almost 353,000 new daily infections, the fifth consecutive day the country set a world record. The nation also saw over 2,800 COVID-related fatalities yesterday, bringing the total death toll to 195,000.

"Just as India sent assistance to the United States as our hospitals were strained early in the pandemic, we are determined to help India in its time of need," tweeted President Biden. The U.S. is considering sending some doses of AstraZeneca's (AZN) vaccine, which is not yet approved in the U.S., as well as funding a "substantial expansion" in manufacturing capability to enable Indian vaccine maker Biological E produce at least 1B vaccine doses by the end of 2022. Raw materials will also be sent for therapeutics, rapid diagnostic test kits, ventilators and protective equipment.

Thought bubble: While the Indian government is moving to vaccinate people as quickly as possible, the size of the population makes the task daunting. India is in talks with Pfizer (PFE) to deploy its vaccines, while Johnson & Johnson's (JNJ) single-shot COVID-19 vaccine is expected to be imported by July 2021. A vaccine from Ocugen (OCGN) partner Bharat Biotech, called Covaxin, has meanwhile shown efficacy against new variant behind India's second wave.

Other medical aid: European Commission President Ursula von der Leyen tweeted Sunday that the bloc was "pooling resources" to respond rapidly to an Indian request for help, Singapore sent oxygen containers to New Delhi on Saturday, while Germany airlifted 23 mobile oxygen generation plants to the country. India is also working with private companies to ship 80 metric tons of liquid oxygen from Saudi Arabia, while China, Russia and Pakistan have also offered to assistance.

Healthcare - Vaccine recommendation

The CDC is advising pregnant women to get COVID-19 vaccines after preliminary data from the biggest study on the demographic showed that Pfizer (NYSE:PFE) and Moderna's (NASDAQ:MRNA) jabs were safe for expectant mothers and their babies. Pregnant women are more likely to be hospitalized and run a higher risk of death when infected with COVID-19, making vaccination especially important among the population.

"No safety concerns were observed for people vaccinated in the third trimester or safety concerns for their babies," CDC Director Dr. Rochelle Walensky declared. "As such, CDC recommends pregnant people receive COVID-19 vaccines."

By the numbers: The peer-reviewed study published by The New England Journal of Medicine showed no "obvious safety signals" among any of the 35,691 women who participated, with ages ranging from 16 to 54 years old. Injection-site pain was reported more frequently among pregnant persons than among non-pregnant women, whereas headache, myalgia, chills and fever were reported less frequently. Of the 827 participants who completed their pregnancy, rates of miscarriage were the same as rates observed before the pandemic. The data covered the first 11 weeks of the U.S. vaccine rollout, from Dec. 14, 2020 to Feb. 28, 2021.

Conclusions: "Preliminary findings did not show obvious safety signals among pregnant persons who received mRNA COVID-19 vaccines," according to the study. "However, more longitudinal follow-up, including follow-up of large numbers of women vaccinated earlier in pregnancy, is necessary to inform maternal, pregnancy, and infant outcomes."

Space - New investing frontier

The team aboard the International Space Station grew to 11 on Saturday following the arrival of SpaceX's (SPACE) third crewed capsule in less than a year (Demo-2, Crew-1, Crew-2). It was also the first group to be propelled into orbit via a rocket booster recycled from a previous spaceflight. Reused boosters are at the heart of SpaceX's rocket strategy to help make spaceflight more economical.

Close call: While en route to the ISS, the SpaceX capsule, called Endeavour, had a near miss with an unknown object. Astronauts on board were told to "buckle up and prepare for a crash as there was no time to perform an avoidance maneuver." The SpaceX team also had the crew don their pressure suits "out of an abundance of caution," but they thankfully arrived at the ISS unharmed.

After the space shuttle program was retired in 2011, NASA turned to private companies for space station deliveries. SpaceX began supply runs in 2012, before launching astronauts last year and ending NASA's reliance on Russia. NASA also hired Boeing (NYSE:BA) for a taxi service under its Commercial Crew program, but the company's Starliner capsule isn't expected to fly astronauts until next year. "While not done yet, [Commercial Crew] is poised to save the Agency approximately $20B-$30B, and provide two, independent crew transportation systems," according to NASA commercial spaceflight director Phil McAlister.

Investing sphere: "With another $4.5B invested into 77 space companies in Q1, there has now been $186.7B of equity investment into 1,480 unique companies in the space economy over the past 10 years," Space Capital managing partner Chad Anderson wrote in the latest Space Investment Quarterly. "Coming off a massive year of investment in the space economy, the trend towards larger late-stage deals continued in Q1, with the top 10 rounds accounting for 77% of total investment in the quarter. At the early-stage, we're seeing larger deal sizes at higher valuations and looser terms as VCs push to deploy the historical amounts of capital they raised in 2020."

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