Why Shares Of Ford Are Down By 9% Today?

Ford Video 29.04.21.

Chip Shortage Hurts Ford’s Production Plans

Shares of Ford found themselves under pressure after the company reported its quarterly results. Ford reported revenues of $36.2 billion and earnings of $0.81 per share, beating analyst estimates on both earnings and revenue.

However, the stock dived as the company stated that it would likely lose 50% of planned second-quarter production due to chip shortage. The chip shortage, which was already a major headache for the auto industry, was exacerbated by a fire at a key chip supplier.

At this point, Ford believes that the “full recovery of the auto chip supply will stretch into fourth quarter of this year and possibly even into 2022”. As a result, the company expects to lose 10% of planned second-half 2021 production.

In total, Ford will lose about 1.1 million units of production in 2021, so it decreased its adjusted EBIT guidance to $5.5 billion – $6.5 billion.

What’s Next For Ford?

While chip shortage is not news for anyone interested in the auto industry, the 50% hit to the second-quarter production clearly took investors by surprise. The recent Tesla report and the subsequent earnings call highlighted problems with chips, but it was hard to expect problems of this magnitude at Ford.

Production problems have spoiled the impression from a solid first quarter, and now the market will focus on forecasts for supply of semiconductors rather than Ford’s first-quarter financial results.

At this point, the negative sentiment is prevailing, and Ford’s established peers like General Motors and newcomers like NIO are all under significant pressure. Ford had a successful start of the year, and the company’s shares were up by more than 40% before the release of the earnings report. In this light, there is plenty of room for a pullback. At the same time, Ford was performing well before chip supply problems hit the company, so it will have a good chance to attract value hunters in case the stock continues to move lower.

For a look at all of today’s economic events, check out our economic calendar.

The Best Trades For The Green Energy Revolution

The great bond bull market of the past 40 years has made millionaires out of many, so has the rise of blockchain, cryptocurrencies and the digitalization of the financial system. Another such paradigm shift upon us is the worlds unified move to decarbonize and green the economy.

What we are witnessing is a worldwide push for industries to move away from excessive greenhouse gas (GHG) emissions. Such unification around a common goal is perhaps unlike anything we have witnessed in the entire history of humanity. With governments and companies worldwide fully committing to the green transition and most aiming for net-zero emissions by the middle of this century, many are taking several significant steps to achieve this goal.

The move from internal combustion engines to electric vehicles (EVs) is the most obvious and popularized move thus far. For example, the EU has announced a target of 30 million electric vehicles by 2030, Britain plans to ban the sale of new traditionally powered petrol and diesel engines by 2030 and so too are the Japanese. California is also adopting a similar goal. Likewise, the automakers themselves are largely embracing the change as they realistically have no option but to do so. Ford, Jaguar and Volvo are some such examples. What is abundantly clear is the climate change goals of nations are no longer within the realm of speculation; the transition is real and it is coming, whether we are prepared or not.

People are now far more open-minded, educated, and aware of the potential damage to both our environment and our economy that global warming can unleash. Our world leaders and notably the Biden Administration are agreeing there is much to be done to green the economy. This is a huge task and is occurring from a global, country, sovereign and individual level. Whilst the evidence above suggests most of the action thus far has centered around the use of electric vehicles and renewable energies, the process of electrifying everything is enormous in scope. Upstream, midstream, and downstream; the way we generate, transport, store and use energy must be revolutionized.

The green energy transition is a once-in-a-lifetime paradigm shift that we can trade and profit from. Much will change during this generational transformation.

Copper

Copper and other metals used in the electrification process are undoubtedly a popular way to trade the green energy transition. Regardless of the rapid price appreciation in such metals over the past 12 months, there are abundant reasons why so many investors are bullish over the long-term. The role these metals will play in the green energy transition is so very important.

Front and center of the electrification metals sits copper; perhaps the biggest winner of the green transition. Its role is critical in all aspects of the push to electrify the economy. With the world’s motor vehicles set to become almost completely electrified over the coming decades and coppers use therein being three to fourfold relative to traditional vehicles, we are going to need a lot of copper.

According to the International Copper Association (ICA), a battery-powered electric vehicle (BEV) uses 83 kg of copper, a hybrid electric vehicle 40kg and an internal combustion engine only 23kg of copper. From just the transition to electric vehicles alone, the demand for copper is set to increase three to four times from its current levels. Indeed, the ICA predicts the number of electric vehicles will rise to 27 million by 2027, a nine-fold increase from the roughly 3 million as of 2017. Such an increase is set to increase copper demand for the production of EVs from 185,000 tons to 1.74 million tons.

Source: International Copper Association - The Electric Vehicle Market and Copper Demand
Source: International Copper Association – The Electric Vehicle Market and Copper Demand

Based solely on the adoption of electric vehicles, we can clearly see the demand for copper is set to increase dramatically over coming decades. What’s more, such projections as those of the ICA are modelled only on coppers use within EVs, the green energy transition will require an immense amount of copper for much more than just its use within electric vehicles.

Indeed, according to the ICA, electric vehicle chargers themselves will require from around 0.7 kg up to 8 kg each, equal to an additional 216,000 tons of copper demand by 2027. Additionally, the adoption of renewable energy sources such as wind and solar are heavily dependent on the use of copper n their construction. According to the Breakthrough Institute, a California based environmental research center, “wind energy requires on average 2,000 tons of copper per gigawatt, whilst solar needs 5,000 tons per gigawatt – several times higher than fossil fuels and nuclear energy”.

The graphic below illustrates coppers use in the generation of electricity from conventional methods compared to wind and solar. Copper will be required to a significant degree in all forms of renewable energy generation.

Source: Kutcho Copper
Source: Kutcho Copper

A hugely underappreciated and at this stage seemingly underfunded part of the green transition for many developed countries, notably the US, is the need to rebuild, or at the very least significantly improve their electrical grid. For the most part, the electrical grid does not have the ability to store electrical energy. One of the major issues with wind and solar-generated power is their intermittency, that is, their inability to constantly generate power. The sun is not always shining nor is the wind always blowing. Thus, the ability to be able to store the electrical energy created from such sources for future use becomes paramount.

What’s more, the United State’s electric grid as is currently constructed is not able to provide and transmit the necessary electricity to power an entirely electrified economy. If the majority of the population came home from work in the evening and were to plug their EVs in to charge, the grid would simply be unable to support such demand and would shut down. In some parts of the US, the electrical grid is nearly a century old. It was designed and built from a completely different era. Those living in Texas can no doubt attest to the limitations of the grid.

Rebuilding the electric grid will require astronomical amounts to copper and other important metals. The importance of this enormous task will only become more prevalent in the minds of policymakers as we continue down the road to electrification.

What makes copper so useful is its ability to conduct electricity and transmit heat. It is roughly twice as conductive as aluminum, making it far more efficient in its use. Copper is the primary source of conductors in wires and cabling, electrical equipment and renewable energy infrastructure. Whilst silver is another such metal that can serve a similar purpose, it is simply too expensive and not as abundant.

Precious metals aside, pound-for-pound copper is the best conductor of electricity and heat. It is also one of the few commodities that cannot be feasibly replaced by any alternatives in the electrification process in the way that battery technology is susceptible to innovation. Additionally, copper itself is also renewable and is one of only a few materials that is fully recyclable.

Also favoring copper is its long-term supply dynamics. In spite of this huge forthcoming growth in copper demand, copper itself is notoriously difficult to source. As detailed by energy and commodity experts Leigh Goehring and Adam Rozencwajg in their Q4 2020 market commentary; “a structural deficit has crept into global copper markets that will become increasingly obvious to investors as the decade progresses. Confronting this strong demand is copper mine supply that will show little in the way of growth over the next five years.

Few large copper mining projects are slated to come online over the next five years”. They also note that “the lack of massive new copper mining projects, coupled with an ever-accelerating copper mine depletion problem, means growth in mine supply should remain minimal over the next five years. Global copper consumption exceeds copper mine supply and recovered copper scrap by about 500,000 tons per year presently and will get worse”.

Whilst an increase in the price will of course lead to further capital injected into the sector to source further supply, the process of getting this new supply online to meet demand is not as simple as it may appear. Clearly, there is a structural supply shortage of copper. This presents an incredibly favorable demand and supply dynamic for copper over the comin years, one in which the copper price and the miners themselves will benefit enormously.

Finally, turning to the technicals, lovers of a long-term chart will find it hard not to appreciate the recent bullish breakout from copper’s near two-decade wedge pattern.

Source: StockCharts.com
Source: StockCharts.com

Whilst much of the rapid price appreciation we have seen over the past 12 months can somewhat be attributed to the COVID-19 lockdown induced supply shortages and rampant speculation, it is important to remember this is a long-term trade. Though the immediate risk-reward may not be as attractive, any significant dips in the price of copper and the copper miners should be bought with earnest for those who believe in the long-term viability of this trade, as I do.

Copper and copper miners are the simplest long-term play on the green energy transition.

Uranium

With so much focus and capital being directed towards renewable sources of energy in wind and solar, there is relatively little thought given to the limitations of these as sources of clear energy. Due to such limitations I will endeavor to detail below, herein lies the inevitability of nuclear power’s role in electricity generation as we progress through this green revolution.

The limitations of renewables

Whilst renewable energies will play a significant and important role in the green energy transition, they are not the panacea for carbon reduction as one might initially believe. There are significant limitations to the sole use of renewables as a means to reach net-zero emissions.

Both solar and wind are inefficient generators of electricity. This is primarily a result of their intermittency and energy density, as I have only briefly touched on. According to Goehring and Rozencwajg, who have also released some excellent research on the limitations of renewables, note that a standard solar panel is likely to only generate between 12-20% of its capacity due to intermittent sunshine, whilst a wind turbine is only marginally better at around 25% due to the intermittency of wind.

Goehring and Rozencwajg have developed a metric to track the efficiency of energy generation from its various sources, measured as Energy Return On Energy Invested (EROEI), estimating that between 25-60% of the energy generated by renewable sources is consumed internally by the process of actually generating that electricity, meaning the EROEI for renewables is roughly 3 to 1. Compare this to a traditional gas plant, whose EROEI is around 30 to 1, meaning that it internally consumes only 3% of its generated energy. Traditional and less carbon friendly sources of energy are roughly 30 times more efficient in their energy generation compared to renewables.

What’s more, due to the inefficiency of renewables and their need of servicing and maintenance, which in itself is quite impactful on carbon emissions, in addition to the need to overbuild solar and wind farms as well as the ability to store the energy to counter their intermittency, has largely resulted in those countries who have adopted renewables to a significant degree not seeing the reduction in carbon emissions they would have hoped for.

Source: Goehring & Rozencwajg - Ignoring Energy Transition Realities
Source: Goehring & Rozencwajg – Ignoring Energy Transition Realities

As we can see above, much of the gains toward a green economy made by the adoption of renewables will be offset by their inefficiencies and the additional energy requirements to maintain the infrastructure and store their sourced energy. Few people understand how energy intensive the green transition will be.

Whilst they will play an important role in the green energy transition, renewables will not solve problem of global warming to the degree that is desired. This leads to nuclear power, one of the few solutions able to provide the carbon-free, base load power required.

Why uranium?

Uranium is the fuel that powers nuclear reactors which then generates power. Nuclear power is generally misunderstood. On the whole, it is a clean, safe and reliable source of of base-load energy.

If we return to Goehring and Rozencwajg’s Energy Return On Energy Invested (EROEI), “a modern nuclear reactor generates electricity with an EROEI of nearly 100 compared with 30 for gas and 1-4 for renewables. As a result, only 1% of the generated electricity is consumed internally compared with 3% for gas and 25-60% for renewable energy”.

Compared with renewables, nuclear energy is anywhere from 40-100 times more efficient. What’s more, nuclear energy is far more scalable than renewables and completely avoids their intermittency shortcomings. The green energy transition simply must have an increased reliance on nuclear energy, it is one of the few sources of clear energy that has the ability to drive the green energy transition in an efficient way.

Not only is nuclear energy the most efficient source of electricity generation, but it is also less carbon intensive than renewables.

Source: Sachem Cove Partners
Source: Sachem Cove Partners

Perhaps the biggest reason behind the lack of reliance on nuclear as a source of energy is the negative sentiment towards it. Nuclear energy certainly gets a bad wrap. There have been three significant nuclear incidents responsible for this; Three Mile Island, Chernobyl and Fukushima. Despite the actual loss of life being surprisingly less than one might have thought, these incidents have largely left the industry bereft of capital and acceptance as a source of energy over the past 40 or so years. However, what will likely surprise many is that nuclear energy is actually the safest form of electricity.

Source: Sachem Cove Partners
Source: Sachem Cove Partners

The use of uranium within nuclear energy does have somewhat of a dark history. The uranium cycle of nuclear energy creation, as opposed to using the thorium cycle, was chosen as the by-product of creating electrical energy using uranium is plutonium, which was used to make nuclear weapons.

The reasoning behind this choice was because the heyday of nuclear energy occurred during the Cold War, and it was the agenda’s of the worlds governments to create nuclear weapons. However, the Cold War has long since past. It is now time for policy makers to revisit the use of nuclear energy within their climate goals. Indeed, this negative view towards nuclear energy has created a huge mispricing for the sector. The math no longer is equal to the narrative.

Convincing environmentalists that the positive impacts of nuclear energy do indeed significantly outweigh the negative impacts will likely be a game-changer for how the world produces energy. Likewise, an education of the general public is needed in regards to nuclear energy. We cannot meet our climate objectives without nuclear energy in the mix.

Indeed, we now are seeing sentiment towards nuclear slowly begin to change. The pressure of governments to meet their green energy objectives will ultimately lead to nuclear power having an ever increasing role as a source of carbon free base-load energy. On the whole, nuclear energy is actually very clean, safe and reliable. Nuclear energy simply must be a part of policy makers plans should they wish to achieve their green objectives.

The industry fundamentals for nuclear energy and uranium is quite different to most other commodity and energy markets. As the sector has been in a bear market since the Great Financial Crisis, it has largely been bereft of capital. This seemingly paints a positive picture for the price going forward. Due to the lack of capital and investment, there is very little in the way of new production set to come online in the next few years in order to meet the increasing demand for uranium. This lack of new capital has been beneficial for the sector, as only the strongest, most profitable and best-run producers have survived.

Likewise, the production of uranium is a highly concentrated industry, with the two largest miners, Kazatomprom in Kazakhstan and Cameco in Canada, accounting for roughly 60% the the worlds uranium production. With both producers significantly reducing their production over the past 12 months due to COVID-19, a structural supply shortfall could well be with us for years to come so long as nuclear energy becomes a significant part of the green energy transition. Furthermore, what could result from such supply shortfalls is the producers themselves entering the spot market in order to fulfill their supply obligations to the various reactors; a bullish outcome to be sure.

From a technical perspective, the spot uranium price appears to be finally bottoming after its prolonged bear market.

Source: TradingEconomics.com
Source: TradingEconomics.com

Due to how the industry contracts uranium supply between producers and users, the spot price is perhaps not the most relevant and is a very thinly traded market. For me, I am happy to invest via the URNM ETF, which is superior to the older URA ETF. URA is more of a nuclear energy ETF than a play on uranium, and as a result there are many constituents of the fund which makes little sense as they are not related to the production of uranium. URNM is a better vehicle for those looking for a purer exposure to the uranium miners.

However, similar to copper, it is important to keep in mind the uranium trade is for those with a long-term time horizon. Given the near doubling of the price of both URA and URNM since the reflation trade took off in November of last year, the risk-reward for the immediate-term is perhaps skewed to the downside. Of course any significant pullbacks should be bought in earnest for all those who buy into the long-term bull case for uranium, as I do. The 38.2% Fibonacci retracement of the Novembers lows looms as one such attractive entry point.

Source: StockCharts.com
Source: StockCharts.com

The case for uranium is simple; nuclear energy will ultimately be required in order for governments to meet their carbon goals.

European Carbon Credits

What are European Carbon Credits?

European carbon credits, or perhaps what are more accurately defined as carbon allowances, are part of the European Union’s Emissions Trading Scheme, or EU ETS. The EU ETS is at its core, a market-based approach to controlling carbon emissions introduced by the EU as the cornerstone of their efforts to control emissions and meet their carbon goals. The Emissions Trading Scheme is what’s referred to as a ‘cap and trade’ system, which attempts to set a maximum limit of emissions certain companies and industries involved in the scheme are allowed to emit during a certain period of time. The EU ETS is the worlds first and largest ‘cap and trade’ system aiming to reduce GHG emissions.

The system works by setting an emissions cap and issuing a certain number allowances, which are referred to as EU Emissions Allowances (EUAs). The cap is set by the EU, and all the companies within the scheme are required to accumulate a certain amount of allowances (EUAs) for every ton of CO2 they emit each year. These allowances are issued via auction each year (or issued for free to various industries where there is considered to be a potential risk if they were required to pay the full cost of the allowances they need to cover their emissions), and are tradable between companies. At the end of each year, the participants are required to return an allowance for every ton of CO2 they emitted during that year.

Those companies who were unable to accumulate a sufficient number of allowances to cover their emissions (i.e. the more carbon intensive industries), are required to reduce their emissions or buy surplus allowances from companies whose allowances exceed their carbon emissions during the period. These surplus companies are also allowed to accumulate their unused allowances for use in later years.

The following graphic provides a helpful illustration of how the system works.

Source: EU ETS Handbook
Source: EU ETS Handbook

For those companies who fail to accumulate sufficient allowances or reduce their emissions accordingly, they face a fine of approximately 100 euros per excess ton of carbon emitted, as well as being required to accumulate allowances in future years to cover those not covered in past years. The system is structured such that there are significant penalties for the participants who do not meet the emissions goals.

The benefits of using a ‘cap and trade’ system as a means to meet carbon emissions goals is it allows the market to determine how the emissions can be reduced at the lowest cost to consumers and to the economy. What this means is the price of carbon is effectively set through the market via the supply and demand for allowances. Relative to more traditional methods of simply taxing carbon emitters, a ‘cap and ‘trade’ system offers far more flexibility and efficiency, resulting in carbon emissions being cut by companies and industries who will incur the smallest cost for doing so.

First launched in 2005 as a pilot program, the Emissions Trading Scheme is now in its fourth stage, and has undergone several changes throughout its history. Phase 1 (2005-2007), was the testing phase where too many allowances were issued, resulting in the price effectively falling to zero. This oversupply was partly driven by the companies themselves overestimating their carbon emissions on purpose, allowing them access to a greater number of allowances.

Phase 2 (2008-2012), was similarly driven by an oversupply of allowances from Phase 1, and coincided with the Great Financial Crisis, both working to keep prices down. Phase 3 (2012-2020) on the other hand worked to reduce the supply and increase the amount or participants. Phase 3 has been very successful and has established the EU ETS as one of the worlds most effective measures to combat carbon emissions. The system is set to further reduce supply and increase participants throughout Phase 4 (2021 and beyond).

What is important to note in regards to Phases 3 and 4 is the number of allowances available has been declining, along with the number of participants who were previously entitled to free credits is declining, and finally, the number of industries and countries included as part of the scheme is increasing. As it stands, 27 countries within the European Union are part of the scheme, along with non-EU countries Norway, Liechtenstein and Iceland. As I will touch on the in following section, the supply and demand dynamics for the scheme indicates the prices of these allowances is heavily skewed to the upside.

Demand and supply dynamics

The current supply of allowances is what’s referred to as the Total Number of Allowances in Circulation, or TNAC. This is currently set at around 1.4 billion tons of carbon emissions annually. The emissions targets of the scheme is a reduction of emissions by 43% relative to the 2005 levels when the system was initiated. This implies a linear reduction in emissions of 2.2% annually from 2020 to 2030. The TNAC will reduce accordingly in line with the targeted reduction in emissions. Simply put, the supply of allowances will reduce each year.

This creates a simple dynamic within the scheme; a reduction of supply coupled with an increase in demand. The system is skewed towards higher prices. The brilliance of the scheme is it creates incentives for higher prices of the allowances for almost everyone involved. The higher the price (i.e. the higher cost of emitting carbon), the greater the incentive for companies to own credits and thus fewer greenhouses gases are emitted. What’s more, the governments not only have an environmental incentive for higher prices, but as a result of the sovereign governments of the many nations involved in the scheme being the ones who actually distribute the allowances to the participating companies, they directly receive revenue via the auctions for doing so. Again, higher prices equals higher revenue.

To a certain extent, the allowances themselves are being viewed by the participants as a store of value. They are aware the prices are going to rise, they are aware the supply of allowances is going to continue to fall, and they are required to all hold enough allowances to conduct their business as it stands. There is little incentive to sell. Analyzing this supply and demand dynamic from a stock-to-flow perspective as one would gold, bitcoin or other scarce assets again presents a favourable outlook for the price. What’s more, unlike gold or bitcoin, it is in the governments best interests to see the prices rise. The system is being championed by government policy as opposed to an alternative to government policy.

To give some idea of how the supply and demand dynamics of the scheme are set to work within the coming years, Lawson Steele of Berenberg Bank, one of the worlds leading experts on the EU ETS, projects a cumulative supply shortfall of around 99% by 2024! If such projections were to modestly prove true, there is huge upside of the price of allowances in the coming years.

However, it must be noted the EU is somewhat cautious of a too-rapid increase in price, and do have measures in place to combat such a rapid price rise if it were to be too damaging for the companies involved in the ETS. Should it be deemed necessary, the policy makers will (attempt) to intervene via what is known as the Market Stability Reserve (MSR), as well as there ability to alter the supply of allowances as defined by Article 29a of the ETS.

The MSR is basically a feature of the system that helps to control over an oversupply or undersupply of allowances. Introduced in 2019, the MSR works to reduce the supply (i.e. the TNAC) when there is an abundance of allowances, and increase the TNAC when there is a potentially harmful allowances deficit. The idea behind the MSR is to allow prices to rise in a smooth fashion with minimal volatility.

Likewise, Article 29a of the scheme’s directive obliges the policy makers to monitor the supply and demand dynamics and intervene by reducing or increasing supply should this be deemed necessary. Whilst the purpose of Article 29a is again to try to ensure prices rise in an orderly manner, the actual rules therein are cloudy in nature and very much open to interpretation. What’s more, the many different sovereign’s involved will want different prices depending on their industries included in the ETS, thus creating somewhat of a potential conflict of interest between participants and thereby increasing the difficulty of intervention via Article 29a.

Whilst the biggest risk is an excessive rise in prices to the point whereby policy makers deem it appropriate to intervene, such a risk could be considered immaterial given that prices must rise in the first place to warrant such intervention. To be clear, the policy makers most certainly want higher prices. These measures are more so designed to achieve those higher prices in an orderly manner. At the end of the day, the priority of the scheme is to reduce GHG emissions, and if the price must rise to achieve this then so be it.

Technicals and ways to trade

Capping off the bull case for the EU carbon allowances are the technicals. The allowances themselves can be traded in the futures market. This futures market of EUA’s has a near $300 billion market cap with a significant level of liquidity.

From a long-term technical perspective, the recent breakout of the decade plus basing pattern remains immensely bullish.

Capture.PNG

The allowances can also be traded via the KRBN and GRN exchanges traded funds. The KRBN ETF is made up of roughly 70-80% of EU allowances, with the remaining constituents being that of other, smaller Emission Trading Schemes over the world. The GRN ETF, which is smaller than KRBN, trades nearly exclusively off the EUA futures. I have positions in both ETF’s and intend on adding more as attractive opportunities present themselves. Though the price action over the past 12 months has been near parabolic and I would be more inclined to wait for a pullback of some sort before buying more, the supply and demand dynamics suggest further upside is ahead.

The EU ETS is Europe’s flagship way to meet its carbon goals over the coming years. There remains a vast amount of institutional money yet to make its way into this trade as the ESG incentives for pension funds and institutions to buys allowances will only grow. Remember, a higher price equal fewer emissions.

Final thoughts

What I have discussed here are my favourite trades for the green energy transition. I do not doubt there will be other investments who will benefit significantly over the coming years as the world moves to decarbonize. Whilst EV’s has certainly been the winners to date, the risk-reward for such a trade is not necessarily skewed to the upside as much as one would like.

Geothermal, battery technology and nickel are all themes in which I am sure will receive much investment and whose investors will likely benefit, along with many others.

For a look at all of today’s economic events, check out our economic calendar.

Auto Industry Rethinks Cost-Cutting Playbook as COVID-19, Chip Shortages Disrupt Supply Chains

By Ben Klayman

Many automakers and suppliers like the Ohio maker of axles, driveshafts and other auto parts, are deciding that securing their supply lines is the most pressing order of business.

Dana’s Craig Price, senior vice president of purchasing and supplier development, is pushing companies in his supply network to change the way they do business, stepping away at times from the just-in-time, lean production practices that have guided automotive manufacturers for nearly 40 years.

Dana is sourcing such key commodities as resin, castings, forgings and some electrical components from multiple suppliers, asking suppliers to hold in warehouses a backlog of critical inventory, and building out its software network to better track suppliers, a process Dana hopes to complete this year, Price said.

That cuts against the just-in-time inventory and production approach manufacturers have adopted from Japan’s Toyota Motor Corp since the 1980s. The new catchword in manufacturing is “resiliency,” underscored by Toyota’s February revelation it had built a four-month chip stockpile.

Dana has also moved to help its smaller suppliers recruit workers and secure shipping space on containers to avoid any impact on its operations, Price said.

And in the company’s headquarters outside Toledo, Price is working on suppliers to join a data sharing network that will give Dana a detailed look at how suppliers two or three steps removed are doing – rather than just counting on shipments to show up as provided in a contract. “We are working toward complete supply-chain transparency, which is not typically available at the moment,” he told Reuters of the plans at the $7 billion company. “It’s a journey that we’re on to get as much data as we can, not for any other reason than just security of supply.”

BRITTLE SUPPLY CHAIN Efforts like Dana’s are under way throughout an industry buffeted by a series of unexpected events. The chip shortage is a high-profile problem, but not the only one.

“The whole issue is exposing the brittleness, the fragility of the automotive supply chain,” said Richard Barnett, chief marketing officer of Supplyframe, which provides market intelligence to companies across the global electronics sectors. BorgWarner Chief Executive Frederic Lissalde told Reuters companies are looking at the total cost of any approach instead of simply its upfront price tag.

“We’re trying to dual-source whenever possible critical components,” he said. David Simchi-Levi, a professor of engineering systems at the Massachusetts Institute of Technology, who has worked with companies like Ford Motor Co on strengthening supply chains, said interest has exploded in the last year. “Resiliency is here to stay.” The math is simple. Such approaches may cost more upfront, but they are likely to pay for themselves if they help companies avoid the charges of up to $2 billion and $2.5 billion faced by General Motors Co and Ford, respectively, for the chip shortage.

Ford’s chief product platform and operations officer, Hau Thai-Tang, said the No. 2 U.S. automaker previously altered its approach, but the past year has accelerated the change further. Stockpiling key parts or materials, and using multiple sources are back on the table.

“If you’re down for 30 days at the F-150 plant, what’s the cost to the Ford Motor Co versus paying this insurance to stockpile these chips?” he said, referring to the company’s highly profitable full-size pickup truck. “That’s the way we would think through it.”

Even so, Ford has had to halt F-150 production temporarily at times, and is stockpiling trucks that are missing parts.

Ford is looking at what other parts or materials could face the same pressures in the future, and has already started buying some specialized microchips directly from chipmakers rather than going through its largest suppliers, Thai-Tang said. Ford also is providing a six-month vehicle mix and volume forecast to suppliers instead of just two weeks, and looking at extending that visibility out to a year.

JUST-IN-TIME HERE TO STAY

Automakers cannot afford to abandon the just-in-time system’s down-to-the-penny cost consciousness in a business where profit margins are often less than 10 cents on a dollar of revenue. “The solution cannot be more waste,” said Ramzi Hermiz, a former supplier CEO who advises companies. “The objective needs to be how do we build more simplicity, flexibility and speed in the supply chain.” Answers could include the establishment of more suppliers closer to their final customers, including bringing back work from China and other parts of Asia, and greater use of standardized parts and systems where possible to allow for more supplier options, industry executives said. Bob Roth, co-owner of RoMan Manufacturing, which makes transformers and glass molding equipment in Grand Rapids, Michigan, said the resiliency conversations have accelerated over the past year. However, the answer cannot be simply to shift the burden to smaller suppliers like his $40 million company.

“We’re not going to tie up our working capital just because you think building inventory or stockpiling stuff is a great idea,” he said.

The answer for many companies will be stress-testing their supply chains to find weaknesses much as banks did after the 2008 subprime crisis, said Tim Thoppil, a partner and head of consulting for the Americas at engineering firm umlaut. Raw materials and parts for electric batteries and motors could be the next crisis spot.

Unexpected events like the pandemic and chip shortage are just a sign of the times, said Steven Merkt, president of transportation solutions at TE Connectivity, which makes sensors, connectors and electrical components for automakers.

“This isn’t a series of black-swan events,” Merkt said. “This is a precursor of what life is going to be like.”

(Reporting by Ben Klayman in Detroit, additional reporting by Nick Carey in London; Editing by Joe White and Matthew Lewis)

Ford Motor Ready to Play Catch-Up

Ford Motor Co. (F) posted a four-year high last week, despite a worldwide chip shortage that has forced many automakers to temporarily shut down assembly lines. The stock’s performance has lagged rivals for many years, held back by overly-conservative management and a product line that relies too heavily on truck sales. It’s also failed to announce an aggressive transition into electric vehicles, denying the buying power that’s lifted General Motors Co. (GM) to an all-time high.

Joining The EV Bandwagon

Fortunately for long-suffering shareholders, that’s likely to change in coming months. Some analysts now believe that Ford’s alliance with Volkswagen signals a shift into an aggressive electric vehicle rollout between 2025 and 2030, finally joining GM and other rivals. The Spring Investor Day looks like a perfect opportunity to announce the initiatives, which should be centered on two complimentary platforms. Look for the company to announce the event date during the Apr. 5 earnings presentation.

Barclay’s analyst Brian Johnson upgraded the stock to ‘Overweight’ and raised his price target to $16 on Friday, noting, “While we have liked Ford’s product cycle and profit improvement potential under an energetic new CEO, the lack of a clear, aggressive battery electric vehicle (BEV) strategy kept us on the sidelines. After a deep-dive into Ford Europe and in particular its Volkswagen alliance, we are more comfortable with the margin improvement outlook”.

Wall Street and Technical Outlook

Still, Wall Street consensus remains skeptical, with an ‘Overweight’ rating based upon 6 ‘Buy’, 11 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $9 to a Street-high $16 while the stock closed Friday’s U.S. session about 40 cents above the median target. While this placement suggests Ford is fairly-priced, growing bullish sentiment could ignite a rally into the mid-teens ahead of the earnings report.

Ford posted an all-time high at 38.32 in 1999 and entered a 9-year downtrend that ended at 1.01 in 2008. The subsequent recovery wave failed in the upper teens in 2011, ahead of a steady decline that posted an 11-year low in the first quarter of 2020. The stock broke out above a 21-year trendline of lower highs in January 2021, signaling the first uptrend in a decade. Multiyear resistance in the upper teens looks like a logical price target for this trend advance.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

U.S. Market Wrap and Forecast for Monday

January’s Non-Farm Payrolls report added 49,000 new jobs while the unemployment rate fell from 6.7% to 6.3%. December jobs were revised sharply lower, continuing a bleak employment scenario as the Western world works through the last stages of the winter’s second pandemic wave. The equity market yawned and bonds sold off after the news, squaring positions into the weekend so that short-term options market makers get paid.

Ford vs. Tesla

SP-500 Volatility Index (VIX) fell to the lowest low since early December. GameStop Inc. (GME) shareholders declared their loyalty in a widely read Reuters article, ready to become the bagholders of a new generation. Ford Motor Co. (F) CEO Jim Farley (no relation) declared the new Mustang Mach-E will compete successfully with Tesla Inc.’s (TSLA) Model Y, forgetting that brand is everything in the third decade of the new millennium.

Snap Inc. (SNAP) recovered after a 9% post-earnings decline, lifting to an all-time high. Fitness juggernaut Peloton Interactive Inc. (PTON) fell into the 140s despite beating top and bottom line estimates and raising first quarter guidance. The company has to compete with real fitness centers in coming quarters, lowering expectations about their vertical growth trajectory. Wynn Resorts Ltd. (WYNN) hit an 11-month high despite a 58.5% year-over-year revenue decline, offering shareholders an opportunity to get out with their capital still intact.

Heading into Monday

Fourth quarter earnings season draws to a close next week, with reports from Dow components Cisco Systems Inc. (CSCO) and Walt Disney Co. (DIS) as well as Twitter Inc. (TWTR), and General Motors Co. (GM). Disney is trading near an all-time high even though their wildly successful streaming service has done little to replace income lost from empty movie theaters, dry-docked cruise ships, and socially-distanced theme parks.

Sky’s the limit for U.S. equities, at least until the Biden administration hits a brick wall with their massive stimulus bull. At least to the point, left-leaning politicians have avoided most of the logistical mistakes made by the Obama administration in 2009.  The Republican Party is trying to rebrand itself after the departure of Donald Trump and their infighting has allowed the Democratic-controlled Congress to move aggressively on economic policy.

For a look at all of today’s economic events, check out our economic calendar.

Ford Shares Surge as Truck Sales Drive Q3 Earnings

Ford Motor Company (F) shares added 4.41% in extended-hours trade Wednesday after the Detroit-based carmaker reported a surge in quarterly earnings amid better-than-expected demand during the pandemic.

The company posted third quarter (Q3) adjusted earnings per share (EPS) of 65 cents, more than tripling analysts’ expectations of 19 cents a share. Moreover, the bottom line grew 91% from a year earlier. Revenue of $37.5 billion during the period rose by around $500 million from the September 2019 quarter and came in ahead of the $33.98 billion figure Wall Street had expected. “We executed very well this quarter,” Ford CFO John Lawler told investors during the earnings call, per CNBC. “We saw much higher demand than what we expected,” he added.

Management credited the positive results to a strategic shift several years ago of ramping up production of pickups, SUVs, and commercial vehicles while phasing out unprofitable sedans. The company said earlier this month that it had its best quarter of pickup sales since 2005. It also noted that North American results during the quarter helped offset weaker sales in Europe, South America, and China.

Through Wednesday’s close, Ford stock has a market capitalization of $30.63 billion and trades 15.59% lower on the year. However, price performance has improved over the past three months, with the shares gaining nearly 10%. The company has not indicated when it will reinstate its dividend, which it suspended in March due to the uncertainty of the pandemic.

Wall Street View

This month, Benchmark analyst Michael Ward upgraded Ford to ‘Buy’ from ‘Hold’ with a $10 price target. Ward argues the car marker’s new products and the need to replenish inventories of its full-sized pickup trucks should accelerate momentum into 2021.

Other analysts on the Street mostly remain on the sidelines. The stock receives 4 ‘Buy’ ratings, 12 ‘Hold’ ratings, and 1’Sell’ rating. However, the impressive quarter may lead to a string of upgrades, especially in light of newly minted CEO Jim Farley vowing to provide greater transparency. Price targets generally range between $5 and $10, with Thursday’s implied open at $8.05 sitting 2.5% below the median 12-month price target of $8.25.

Technical Outlook and Trading Tactics

Ford shares broke above an ascending triangle in early October before profit-takers moved in ahead of the company’s earnings. An open today back above the psychological $8 level should help swing momentum back to the upside as bulls scramble to rejoin the recent uptrend. Active traders who buy here should look for a retest of a significant zone of resistance between $9.55 and $10.55 while protecting capital with a stop-loss order placed somewhere below $7.50.

Ford Motor Q3 China Sales Rise 25%, Biggest Jump Since 2016; Target Price $10 in Best Case

Ford Motor Co, an American multinational automaker, said its vehicle sales climbed 25% in the third quarter of this year, the biggest year-over-year increase since 2016, as demand gradually recovered from the COVID-19 pandemic slowdown in the world’s second-largest economy.

Ford and its joint ventures, Changan Ford, JMC and Ford Lio-Ho, sold 164,352 vehicles in Greater China in the third quarter. Sales of Ford, Lincoln and JMC brand vehicles achieved year-over-year growth of 12.5%, 64.8% and 38.3%, respectively, the company said.

Ford Motor shares closed 0.66% higher at $7.62 on Thursday; however, the stock is down about 20% so far this year.

Executive comments

“Ford is strengthening its sales momentum in China by building on growing consumer preference for our iconic brand and favourable product mix of luxury and near-premium utility vehicles,” said Anning Chen, president and CEO of Ford China.

“Our localization strategy to produce in China world-class Ford and Lincoln vehicles, including the newly launched Ford Explorer, Lincoln Corsair and Lincoln Aviator, has further enhanced our competitiveness in delivering the best products and services that Chinese consumers are looking for.”

Ford Motor stock forecast

Twelve analysts forecast the average price in 12 months at $8.03 with a high forecast of $10.00 and a low forecast of $4.90. The average price target represents a 5.38% increase from the last price of $7.62. From those 12 equity analysts, four rated “Buy”, seven rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $8 with a high of $12 under a bull scenario and $4 under the worst-case scenario. The investment bank gave the company an “overweight” rating. Deutsche Bank raised their stock price forecast to $9 from $8 and Benchmark introduces a price target of $10.

Several other analysts have also recently commented on the stock. Barclays lifted their price target on Ford Motor to $7 from $4 and gave the stock an “equal weight” rating in July. Nomura reiterated a “sell” rating in August. Citigroup increased their target price on shares of Ford Motor from $5.50 to $7.50 and gave the stock a “neutral” rating. At last, UBS Group increased their price target on Ford Motor to $6.70 from $4.30 and gave the stock a “neutral” rating.

Analyst view

“Auto market recovery in China – which happens to be Ford’s second-largest market- positions the firm well. The company’s efforts to strengthen product line-up, with more customer-centric products and focus on customer experiences are likely to have yielded results. These measures along with improving economic conditions in China are likely to continue the sales growth in the country, going forward,” noted equity analysts at Zacks Research.

“Ford’s focus on SUVs and trucks along with EV launches are likely to boost its long-term prospects. (But) Depressed demand for vehicles amid weak consumer confidence and elevated leverage is likely to dent Ford’s sales and earnings in the near future,” Zacks Research added.

Upside and Downside Risks

Upside: 1) More detail around restructuring actions. 2) Positive share gains in pickups, Ford’s strongest segment 3) Decomplexification actions. 4) Launch execution. 5) Further announcements around EVs or AVs – highlighted Morgan Stanley.

Downside: 1) US SAAR resiliency (2020 base case 14.0MM). 2) Further COVID-19 impacts. 3) The F-150 pickup truck loses market share. 4) Slowdown in key oil-dependent end markets. 5) Launch / Warranty issues continue to remain a problem.

Check out FX Empire’s earnings calendar

Ford Motor U.S. Auto Sales Recovered in Q3; Target Price $7.54

Ford Motor Co, an American multinational automaker, said on Friday that its third-quarter U.S. auto sales were up 27.2% as the industry recovered at a stronger than expected pace from the COVID-19 demand slowdown, sending its shares up over 2%.

The U.S. producer of cars and trucks said with the help of stronger retail sales and rapidly recovering commercial sales, Ford retail share of the industry grew by an estimated 0.2 percentage points, while Ford’s Q3 total share expanded by 0.8 percentage points. Excluding discontinued cars, Ford retail sales were up 1.3%.

Ford’s overall Q3 pickup sales of combined F-Series and Ranger totalled 249,997 pickups. This represents Ford’s best Q3 pickup sales since 2005, with combined sales up 4.0% over a year ago. F-Series Q3 retail sales up 10.1% over a year ago and are back above pre-coronavirus sales levels. Total F-Series sales of 221,647 for the quarter were up 3.5%, the company said.

The second-largest U.S. automaker, which announces its quarterly sales volumes a day later than the rest of the industry, said it sold 551,796 vehicles in the country in the quarter, down from 580,251 a year earlier. Its sales were, however, up 27.2% when compared with the preceding quarter, Reuters reported.

At the time of writing, Ford Motor’s shares traded over 2% higher at $6.89 on Friday; the stock is also down about 30% so far this year.

Executive comment

“Despite the challenging pandemic environment, our retail unit sales were down only 2% and we had our best third quarter of pickup truck sales since 2005. F-Series finished the quarter on a high note with September sales up 17.2% with over 76,000 F-Series pickups sold. This is a testament to our winning product portfolio and the performance of our great dealers,” said Mark LaNeve, Ford vice president, U.S. Marketing, Sales and Service.

Ford Motor stock forecast

Ten analysts forecast the average price in 12 months at $7.54 with a high forecast of $8.00 and a low forecast of $4.90. The average price target represents an 11.13% increase from the last price of $6.79. From those 10, three analysts rated ‘Buy’, six analysts rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $8 with a high of $12 under a bull scenario and $4 under the worst-case scenario. Evercore ISI raised the price target to $8 from $5; Citigroup upped their stock price objective to $7.5 from $5.5 and Ford Motor had its target price raised by Credit Suisse Group to $8 from $7. The brokerage currently has a neutral rating on the auto manufacturer’s stock.

A number of other equities research analysts have also recently issued reports on the stock. Barclays upped their price objective to $7 from $4 and gave the company an equal weight rating. Royal Bank of Canada dropped their price target to $5 from $6.50 and set a sector to perform rating.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst views

“We raise our 2020 Ford EPS forecast to ($0.90) vs. our prior forecast of ($1.30), while for 2021 and 2022 our EPS rises to positive $0.75 and $1.25 vs. our prior forecast of $0.30 and $0.80 respectively. On our revised price target of $8, Ford trades at just over 10x our 2021E EPS. Currently, the stock trades at just over 9x our revised 2021 EPS forecast,” Adam Jonas, equity analyst at Morgan Stanley noted in June.

“We raise our 3Q N. American Ford volume forecast to negative 12% Y/Y vs. down 15% previously. Our 4Q volume is revised to down 3% vs. down 5% previously. This slight upward adjustment reflects stronger than expected US SAAR, a rebound in used vehicle prices, and more supportive auto credit vs. our prior forecasts,” he added.

Upside and Downside Risks

Upside: 1) More detail around restructuring actions. 2) Positive share gains in pickups, Ford’s strongest segment. 3) Decomplexification actions. 4) Launch execution. 5) Further announcements around EVs or AVs- highlighted by Morgan Stanley.

Downside: 1) US SAAR resiliency (2020 base case 14.0MM). 2) Further COVID-19 impacts. 3) The F-150 pickup truck loses market share. 4) Slowdown in key oil-dependent end markets. 5) Launch / Warranty issues continue to remain a problem.

Ford Motors to Invest C$1.95 Billion in Canada Operations Under Unifor Union Deal

Ford Motors, an American multinational automaker, will invest 1.95 billion Canadian dollars in its Oakville and Windsor plants in Canada, Unifor union National President Jerry Dias said.

Unifor National President, Jerry Dias said: “I’m very pleased to announce that on behalf of the more than 6,000 members who work at Ford Motor Company, we have negotiated $1.95 billion of investments to retool the Oakville complex to build five models of electric vehicles and bring a new product to the engine plant in Windsor.”

“Today is an historic day. We are not only talking about solidifying the footprint of the auto industry in the short-term but for the long term. I think it’s fair to say that as an organization we hit a home run,” said Dias.

Dias added that up until today, of the $300 billion announced globally in EV investments as the auto industry transforms from combustible engines to battery-electric vehicles, not one nickel had been allocated Canada. But with today’s announcement, that changes.

Ford shares closed 1.31% lower at $6.78 on Tuesday; the stock is down about 30% so far this year.

Ford stock forecast

Eleven analysts forecast the average price in 12 months at $7.46 with a high forecast of $8.00 and a low forecast of $4.90. The average price target represents a 10.03% increase from the last price of $6.78. From those 11 equity analysts, three rated “Buy”, seven rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley target price is $8 with a high of $12 under a bull scenario and $4 under the worst-case scenario. Evercore ISI raised the price target to $8 from $5; Citigroup upped their stock price objective to $7.5 from $5.5 and Ford Motor had its target price raised by Credit Suisse Group to $8 from $7. The brokerage currently has a neutral rating on the auto manufacturer’s stock.

A number of other equities research analysts have also recently issued reports on the stock. Barclays upped their price objective to $7 from $4 and gave the company an equal weight rating. Royal Bank of Canada dropped their price target to $5 from $6.50 and set a sector to perform rating.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst views

“We raise our 2020 Ford EPS forecast to ($0.90) vs. our prior forecast of ($1.30), while for 2021 and 2022 our EPS rises to positive $0.75 and $1.25 vs. our prior forecast of $0.30 and $0.80 respectively. On our revised price target of $8, Ford trades at just over 10x our 2021E EPS. Currently, the stock trades at just over 9x our revised 2021 EPS forecast,” Adam Jonas, equity analyst at Morgan Stanley noted in June.

“We raise our 3Q N. American Ford volume forecast to negative 12% Y/Y vs. down 15% previously. Our 4Q volume is revised to down 3% vs. down 5% previously. This slight upward adjustment reflects stronger than expected US SAAR, a rebound in used vehicle prices, and more supportive auto credit vs. our prior forecasts,” he added.

Upside and Downside Risks

Upside: 1) More detail around restructuring actions. 2) Positive share gains in pickups, Ford’s strongest segment. 3) Decomplexification actions. 4) Launch execution. 5) Further announcements around EVs or AVs- highlighted by Morgan Stanley.

Downside: 1) US SAAR resiliency (2020 base case 14.0MM). 2) Further COVID-19 impacts. 3) The F-150 pickup truck loses market share. 4) Slowdown in key oil-dependent end markets. 5) Launch / Warranty issues continue to remain a problem.

Will Tesla Stock Price Crash?

Just today, Tesla surpassed Walmart’s market cap – how is that possible? Walmart has 534.66 billion in sales versus just 25.71 billion for Tesla.

TESLA DAILY CHART

The trend in TSLA is overbought. The MACD and the RSI (14) are diverging negatively, suggesting waning momentum. The stock is behaving like a commodity – not a business. I see the potential for a “buy the rumor sell the news” event after the stock splits. I think prices will correct at least 50%, and that is extremely conservative.

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Another way to measure Tesla’s ludicrous valuation is through total revenue – let me explain. Hypothetically speaking, let’s say a company paid 100% of its annual revenue to shareholders as a dividend. Of course, this is not possible, but it helps make my point. In the example below, we will measure how many calendar days it would take to recover your initial investment if each company paid 100% of their profits to shareholders at today’s stock price.

Time to recover initial investments:

Ford Motor Company (F) $6.66

Revenue 130.4 billion

Revenue Per Share $32.87

Time to recover initial investment 74-days

General Motors (GM) $28.56

Revenue 115.79 billion

Revenue Per Share $80.94

Time to recover initial investment 128-days

Walmart (WMT) $131.65

Revenue 534.66 billion

Revenue Per Share $188.23

Time to recover initial investment 255-days

Tesla (TSLA) $2042.41

Revenue 25.72 billion

Revenue Per Share $141.64

Time to recover initial investment 5263-days or over 14-years.

Lastly, the combined market cap of Ford, GM, and Fiat Chrysler (the big three) is 90-billion, and in 2019 they produced 7,470,370 vehicles. Tesla’s market cap is 300% greater than all three (307 billion), and they delivered only 195,000 vehicles – ASTONISHING.

What goes up – must come down. Will Tesla prices crash soon? Maybe – it is hard to say. Whatever the case, I think we will get a generational buying opportunity in TSLA next year or early 2022.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

Ford Motor’s China Vehicle Sales Rebound 3% in June Quarter as Coronavirus Restrictions Ease

Ford Motor Co, an American multinational automaker, said that its vehicle sales in mainland China rebounded in the June quarter, growing 3% from the same period last year, driven by strong demand following the lifting of COVID-19 pandemic restrictions.

That would be the first time in nearly three years, the automaker has registered a rise in quarterly sales. Total of 158,589 vehicles were sold during the second quarter, representing a 3% growth year-over-year and 78.7% sales increase compared to the first quarter of 2020.

Transit commercial vehicles experienced solid y/y growth of 60.9%, as did Lincoln luxury vehicles on gains of 12.0%, the company said. In the U.S., where business has been hit hard by the coronavirus pandemic, Ford’s sales fell more than 30% during the quarter.

On the other hand, Ford’s rival, General Motors’ sales declined 5.3% during the quarter in the world’s second-largest economy. Ford’s sales plunged 26% in 2019 and 37% in 2018.

Ford outlook and price target

Eleven analysts forecast the average price in 12 months at $6.24 with a high forecast of $8.00 and a low forecast of $3.50. The average price target represents a 2.46% increase from the last price of $6.09. From that eleven, three analysts rated ‘Buy’, six rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $8 with a high of $12 under a bull scenario and $4 under the worst-case scenario. Ford Motor had its price target lifted by UBS Group from $4.30 to $6.70. UBS Group currently has a neutral rating on the auto manufacturer’s stock. JP Morgan raised the target price to $7 from $6. Ford Motor was given a $7.50 price target by analysts at Jefferies Financial Group Inc. The firm currently has a buy rating on the stock.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst view

“We raise our 2020 Ford EPS forecast to ($0.90) vs. our prior forecast of ($1.30), while for 2021 and 2022 our EPS rises to positive $0.75 and $1.25 vs. our prior forecast of $0.30 and $0.80 respectively. On our revised price target of $8, Ford trades at just over 10x our 2021E EPS. Currently, the stock trades at just over 9x our revised 2021 EPS forecast,” Adam Jonas, equity analyst at Morgan Stanley noted in June.

“We raise our 3Q N. American Ford volume forecast to negative 12% Y/Y vs. down 15% previously. Our 4Q volume is revised to down 3% vs. down 5% previously. This slight upward adjustment reflects stronger than expected US SAAR, a rebound in used vehicle prices, and more supportive auto credit vs. our prior forecasts,” he added.

Stock Pick Update: July 1 – July 7, 2020

The broad stock market has extended its short-term consolidation in the last five trading days (June 24 – June 30). More than three months ago on March 23, the S&P 500 index sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears have erased more than a third of the broad stock market value. Then we saw huge come-back rally, as the index got back above 3,200 mark. In the first half of June the broad stock market has broken below its short-term upward trend line. Since then it has been trading within a consolidation following bouncing off 3,000 mark.

The S&P 500 index has lost 0.45% since last Wednesday’s open. In the same period of time our five long and five short stock picks have lost just 0.04%. Stock picks were relatively slightly stronger than the broad stock market last week. Our long stock picks have lost 0.23% and short stock picks have resulted in a gain of 0.16%. The overall results remain relatively better than the S&P 500 index over last months.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • June 30, 2020
    Long Picks (June 24 open – June 30 close % change): WY (+0.36%), CTSH (+3.76%), HIG (-0.57%), BSX (-2.39%), COP (-2.28%)
    Short Picks (June 24 open – June 30 close % change): EW (-1.51%), WMB (0.00%), ETR (-0.27%), CCI (+2.04%), ADBE (-1.07%)Average long result: -0.23%, average short result: +0.16%
    Total profit (average): -0.04%
  • June 23, 2020
    Long Picks (June 17 open – June 23 close % change): BA (-3.41%), DLR (-0.81%), WLTW (+1.27%), BMY (+2.05%), HSY (-2.03%)
    Short Picks (June 17 open – June 23 close % change): DHR (-0.23%), CLX (+1.76%), AEP (-1.58%), MMM (-1.47%), PLD (-6.67%)Average long result: -0.58%, average short result: +1.64%
    Total profit (average): +0.53%
  • June 16, 2020
    Long Picks (June 10 open – June 16 close % change): SLB (-11.06%), IEX (-4.63%), L (-10.45%), BSX (-4.33%), KR (-1.69%)
    Short Picks (June 10 open – June 16 close % change): ABBV (-0.96%), COST (-1.67%), ADBE (+3.02%), VLO (-7.62%), NOC (-4.84%)Average long result: -6.43%, average short result: +2.41%
    Total profit (average): -2.01%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, July 1 – Tuesday, July 7 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (July 1) and sold or bought back on the closing of the next Tuesday’s trading session (July 7).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Technology, 1 x Consumer Discretionary, 1 x Materials
  • sells: 1 x Utilities, 1 x Financials, 1 x Energy

Contrarian approach (betting against the recent trend):

  • buys: 1 x Utilities, 1 x Financials
  • sells: 1 x Technology, 1 x Consumer Discretionary

Trend-following approach

Top 3 Buy Candidates

INTC Intel Corp. – Technology

  • Stock broke above month-long downward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $61-65 (initial upside profit target level)

F Ford Motor Co. – Consumer Discretionary

  • Stock is above its June downward trend line
  • The resistance level and upside profit target level at $65
  • The support level is at $5.75

PPG PPG Industries, Inc. – Materials

  • Potential advance after breaking above downward trend line
  • The resistance level of $115 (short-term upside profit target)
  • The support level is at $100

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Technology, Consumer Discretionary and Materials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Ford Motor Join Hands With Vodafone for 5G Network in The UK

Ford Motor Company, an American multinational automaker that has its main headquarters in Michigan, has signed a deal with Vodafone Group Plc to install a fifth-generation technology network at its electrified powertrain facility in Essex, both the companies said in a joint statement on Thursday.

This will be the part of a 65-million-pounds or around 80-million-dollar investment in the fifth-generation technology network (5G) supported by the British government. This deal will replace current Wi-Fi networks to quicken the production of electric vehicles.

Chris White, Ford’s 5GEM project lead said: “Connecting today’s shop floor requires significant time and investment. Present technology can be the limiting factor in reconfiguring and deploying next-gen manufacturing systems. 5G presents the opportunity to transform the speed of launch and flexibility of present manufacturing facilities, moving us towards tomorrow’s plants connected to remote expert support and artificial intelligence.”

Vinod Kumar, CEO of Vodafone Business, said: “5G mobile private networks act as a springboard for organisations, allowing them to rethink the way they do business. In this case, MPN technology makes the factory of the future possible. It allows machines and computing power to coordinate in real-time, improving precision, efficiency and safety. We’re excited to help Ford plan for the future of its business.”

Ford outlook and price target

Eleven analysts forecast the average price in 12 months at $6.19 with a high forecast of $8.00 and a low forecast of $3.50. The average price target represents a 4.03% increase from the last price of $5.95, according to Tipranks. From that eleven, three analysts rated ‘Buy’, six rated ‘Hold’ and two rated ‘Sell’.

Morgan Stanley raised price target to $8 from $7. Ford Motor was given a $7.50 price target by analysts at Jefferies Financial Group Inc. The firm currently has a buy rating on the stock. JP Morgan raises target price to $7 from $6. Goldman Sachs raises target price to $7. Evercore ISI raises price target to $5 from $3.5.

On the other hand, it is good to sell at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

Analysts’ comments

“We have marked-to-market our Ford earnings assumptions to account for what we expect to be a surprising level of pricing and mix for the remainder of 2020, driving an early EPS upgrade and our target to $8. Reiterate Overweight,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Longer term, we remain extremely focused on the VW partnership, as we view this evolving relationship as arguably the #1 driver of Ford’s ability to improve efficiency, reduce waste and successfully pivot from ICE to EV. While investors may not see deep significance here, we believe these three areas are defining vectors of innovation and competitive strength as the industry transitions to Auto 2.0 and can make the difference between Ford having a cost of capital of greater than 20% or <10%,” he added.

John Butters, senior earnings analyst at FactSet in his June 19 note wrote, “despite the decline in expected earnings, this sector has witnessed the second-largest increase in price (+31.7%) of all eleven sectors since March 31.”

“However, Ford Motor (to -$1.25 from -$0.31), Amazon.com (to $1.39 from $6.14), General Motors, and Carnival have been the largest contributors to the decrease in expected earnings for this sector since March 31.”

USD/JPY Price Forecast – US Dollar Continues To Grind Against Japanese Yen

The US dollar has rallied a bit during the trading session on Friday, breaking above the ¥110 level but has also given back quite a bit of the gains. This being the case, the market is sluggish and probably pulls back a bit to try to find some type of momentum. Quite frankly, it looks as if the market is overextended and doesn’t have anywhere to be, and now that we have gotten past the US/China trade situation, there isn’t much to move the markets. Volatility is completely dead, and market simply aren’t moving.

USD/JPY Video 20.01.20

If that’s going to be the case, this pair won’t be any different either. If we do pull back it’s very likely that the ¥109.50 level offer support, and probably brings in more buyers to try to push this market to the upside. Ultimately, we make yet another high, the market probably stalls and doesn’t have anywhere to be either. At one point, it looked as if the market was going to make a huge move but perhaps it has ruined the possibility of breaking out with any strength due to the fact that about so hard into this new high. That being said, I don’t have any interest in shorting but I do think that picking up value on dips probably works but you have to keep your expectations realistic here, the markets are doing anything so we are seeing the average true Range dropped drastically around the world. Eventually things will change, but right now there isn’t much going on.

Please let us know what you think in the comments below

Stock Market: The Earnings of Microsoft, Amazon And More

Ford Motor

EPS forecast: $0.26

Revenue forecast: $36.73B

Ford has been going through a hard time during the past few years as the demand for its cars, particularly sedans, fell. Now one of America’s largest automakers is undertaking an $11 billion restructuring plan which implies layoffs, closing factories overseas, and building capacity to manufacture electric and driverless cars. As a result, investors will want to see what progress the company made in these areas.

The stock has been within the general downtrend since 2014. In the first half of 2019, the price tried to recover but met resistance around $10.50, formed a double top and turned lower. In October, Ford managed to show a bullish correction recovering from $8.45 to the 200-day MA at $9.30. Last week the stock closed above the 50-week MA ($9.214). All in all, if the financial results are decent enough, there’s technical potential for an extension to $9.64 (September high) and $10.00 (resistance line, 200-week MA). This area, in turn, will be a great obstacle for buyers. Support lies at $8.70 and $8.45.

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Microsoft

EPS forecast: $1.24

Revenue forecast: $32.14B

According to analysts’ forecasts, Microsoft’s earnings will rise by 9%, while revenue will increase by 10.5% y/y. Noticed that during previous quarters, the company tended to beat expectations. Microsoft has a variety of products that generate solid income. Pay special attention to the dynamics of Azure, its cloud computing service – the figures should once again be pretty impressive as the tech giant added new capabilities to its product.

The stock has been trading sideways between $142 and $131 since the end of June. The price consolidated after a long-term uptrend. Currently, it’s in the $137 area, near the middle of the horizontal range. Its edges, mentioned earlier, are the initial targets.

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Tesla

EPS forecast: $-0.45

Revenue forecast: $6.47B

Tesla is expected to show the third unprofitable quarter in a row despite selling a record number of cars. At this point, bad figures will be a surprise to no one, so investors, on the contrary, will look for glimpses of light: a forecast for future profit, a positive free cash flow, evidence that demand remains solid. If the electric vehicle maker doesn’t provide these sources of hope, the negative pressure on the stock will mount.

After the selloff in the first half of the year, Tesla bottomed in June and then managed to stabilize. Most recently, the price met the resistance of the July high ($266). On the upside, there are also obstacles at $268 and $273.6 (50- and 200-period MAs) ahead of $278 (50% Fibo retracement of the 2018-2019 decline). Support lies at $235 and $231 (daily MAs) as well as $225 (support line).

Tesla.png

eBay

EPS forecast: $0.64

Revenue forecast: $2.65B

Analysts have positive expectations about eBay’s financial results. The company’s putting a lot of effort into the technological enhancement of its core e-commerce business. On the downside, the increased investment may hurt earnings. In addition, notice that the competition with Amazon and Wal-Mart is a big challenge for eBay. Investors will also look for the news regarding the potential sale of StubHub or eBay Classifieds, a contentious issue for the company that provoked the departure of its CEO last month.

The stock has been on the rise since the end of 2018. However, at the end of September, the price slipped below $39 – this level tends to be an important border for eBay during the whole year. A return above $39.50 (100- and 50-day MAs) is needed to open the way up to $41 and 42.50 (78.6% Fibo retracement of the 2018 decline). Support is at 37.65 (200-day MA), $36.50 and $35.50.

ebay.png

Thursday, October 24

Amazon.com

EPS forecast: $4.59

Revenue forecast: $68.82B

According to Wall Street, Amazon’s adjusted earnings will decline by about 20% y/y showing the first decline in nine quarters. The company’s revenue, however, is seen increasing by 22%. During the last few months, Amazon was pressured by lower-than-expected earnings, volatile equity markets, political criticism, and antitrust allegations. In this report, investors will look at the numbers for Amazon Web Services (the company’s cloud segment), the signs that the Prime delivery speed increase is boosting sales growth in North America as well as Amazon’s guidance for the next quarter.

Although Amazon remains one of the best long-term performers among both tech and consumer goods stocks, it is behind other the other so-called FAANG stocks during the past year. In August, the stock violated the uptrend from the end of 2018. The price then started trading below $1,835/50, limited by the 100- and the 50-day MAs. The most recent attempt of the price to get higher ran into an obstacle just below $1,800, near the 200-day MA. All the mentioned levels will act as resistance. Below $1,740 support is at $1,700 and $1,670 (June low).

Amazon daily.png

Intel

EPS forecast: $1.23

Revenue forecast: $18.02B

During the previous quarter, Intel benefited from rising demand for personal computers and sales of higher-priced server chips. Investors will want to see whether the positive trend continues and what the semiconductor producer projects for the rest of the year. So far, the stock has been resilient enough despite the trade war between the United States and China, an important market for the chipmaker, although the threat of higher tariffs has obviously limited its upside.

The stock of Intel is trading within an ascending triangle. The resistance that has been keeping the price from getting higher lies at $53.20 (61.8% Fibo retracement of the April-May decline). The break above this obstacle will open the way up to $55 and $56 (78.6% Fibo). Support lies at $50 (200-day MA, support line) and $49.20/00. The loss of 48.50 will make the price vulnerable for a decline to $46.75.

Intel.png

Visa

EPS forecast: $1.43

Revenue forecast: $6.08B

For years, Visa’s stock has been slowly but surely appreciating – a reflection of the fact that digital payment is replacing cash. This tendency has all the chances to continue pushing the price higher, although there may be corrections on the way. This time, Wall Street sees Visa earnings rising by 18% y/y and revenue grows at 12%. Notice that Visa has a tendency to beat forecasts during the earnings releases.

Visa’s long-term uptrend ran in September into the resistance at $187.00. Since then, the price has consolidated around $175.00. The further resistance is at $190 and $200. On the downside, support lies at $169.00 and $163.80 (200-day MA). The fall below $160 will question the uptrend.

Visa.png

4th Quarter GDP Numbers and the FED Put the Dollar in the Spotlight

Earlier in the Day:

Economic data released through the Asian session includes December retail sales figures out of Japan and 4th quarter inflation numbers out of Australia.

For the Japanese Yen, retail sales rose by 1.3% year-on-year in December, following on from a 1.4% rise in November, and coming in ahead of a forecasted 0.9% rise.

The Japanese Yen moved from ¥109.401 to ¥109.402 against the Dollar upon release of the figures, before rising to ¥109.34 at the time of writing, up 0.05% for the session.

For the Aussie Dollar, consumer prices rose by 1.8% in the 4th quarter, year-on-year, with the rate of inflation easing marginally from the 3rd quarter 1.9%, whilst coming in ahead of a forecasted 1.7%.

According to figures released by the ABS, the consumer price index rose by 0.5% in the December quarter of 2018, picking up from a forecasted and 0.4% rise in the 3rd quarter.

  • The largest contribution came from a 9.45 rise in prices for tobacco, a 6.2% rise in prices for domestic holiday travel and a 5% rise in prices for fruit.
  • Dragging on inflation included a 2.5% fall in prices for automotive fuel, a 3.3% fall in prices for audiovisual and computer equipment, a 1.9% fall in prices for wine and a 1.5% fall in prices for telecom equipment and services.
  • There was significant volatility in the prices for automotive fuel, which had risen by 3.3% in October, before sliding by 10.8% in November and then by the 5th in December to end the quarter down by 2.5%.

The Aussie Dollar moved from $0.71518 to $0.71811 upon release of the figures, before rising to $0.7193 at the time of writing, a gain of 0.53% for the session.

Elsewhere, the Kiwi Dollar was up by 0.13% to $0.6843, the gains coming in spite of a bearish start to the day in the equity markets.

The Day Ahead:

For the EUR, economic data scheduled for release through the day include French 1st estimate GDP numbers for the 4th quarter and December consumer spending figures and German’s January inflation numbers and February consumer confidence numbers.

On the stats, we will expect France’s GDP numbers and consumer confidence figures out of Germany to have the greatest influence, which is forecasted to be EUR negative.

Outside the stats, it’s a big day for the global financial markets, with the U.S – China trade talks set to resume and the FED to deliver its first monetary policy decision of the year.

Added to sentiment through the day will be the market response to the Brexit Plan B Parliamentary vote.

At the time of writing, the EUR was up 0.05% to $1.1439.

For the Pound, a quiet day on the economic calendar continues to leave the Pound in the hands of Brexit chatter.

Tuesday’s Parliamentary vote gives the British PM another journey to Brussels in order to make amendments to the Irish backstop, which has been the Brexit bugbear since negotiations began. The Pound took a hit, giving up $1.31 levels in reaction to the vote, though whether Britain will leave without a deal remains to be seen. Assuming the EU doesn’t budge on the Irish backstop, an extension, and a possible 2nd referendum could be on the cards.

At the time of writing, the Pound was up 0.21% to $1.3094, with the markets continuing to respond to the Parliamentary vote, early support coming on the expectation that a no-deal scenario is not an option for Parliament.

Across the Pond, it’s a busy day ahead for the Dollar. On the data front, key stats scheduled for release include January ADP nonfarm employment change figures, 1st estimate GDP numbers for the 4th quarter and December pending home sales.

Outside of the numbers, a resumption of trade talks between the U.S and China could provide further direction should updates be forthcoming, with the FED’s first monetary policy decision of the year also in focus.

The uncertainty will be whether there will be sufficient progress on trade talks to support market risk appetite through the week. Of greater certainty, but far from assured, is that the FED will continue drumming the more dovish drum beat. Softer growth in the 4th quarter would most likely give the doves the upper hand at the start of the year.

At the time of writing, the Dollar Spot Index was down 0.06% to 95.767.

For the Loonie, yet another quiet day on the data front will leave the Loonie in the hands of market risk sentiment and, in particular, any updates from the heavily anticipated trade talks between the U.S and China.

Positive updates would provide support to crude oil prices, which would be Loonie positive though, with many differences to be ironed out, there’s unlikely to be an agreed way forward within the 1st day of talks.

The Loonie was up 0.05% to C$1.3263, against the U.S Dollar, at the time of writing, supported by Tuesday’s bounce in crude oil prices.

Growth Worry Weighs On Asia, Merkel To Step Aside, US Equities Up On Earnings

Asian markets were mixed at the close of their Monday session. The Shang Hai Composite led decliners with a loss greater than -2.0% followed the Kospi with a loss near -1.50% and the Nikkei with a loss near -0.15% but not all indices moved lower. The Australian ASX rebound more than 1.0% as election woe subsides and the Hong Kong Heng Seng posted a small gain near 0.40%.

News released after the close of the Asian session may have the region moving higher tomorrow. According to a report in Bloomberg, China is contemplating a reduction in the car tax from 10% to 5%. The move was requested by the China Automobile Dealer Association in an attempt to spur stronger car sales. The news had an effect on automakers around the world who are all having a hard time growing sales in China. Shares of GM (GM), Ford (F) advanced near 5% in the pre-market session while Tesla (TSLA) rose a more tepid 1.0%.

EU Market Up On Earnings, Merkel To Step Aside

EU markets were up in the early half of the day on earnings and edged higher on the news from China. Shares of Daimler and BMW were both up about 5.0% and leading the market on positive sentiment. Not only will lower car tax in China stimulate sales of vehicles around the world, but it may also aid with US trade frictions which is the largest fear underlying the market at this time.

In Germany, Angela Merkel’s coalition government saw heavy losses in a recent election. The results were so poor Merkel has decided to step aside as party leader come the December conference less than two months away. Germany’s Chancellor says she wants to remain the country’s leader until the next federal elections in 2021 but that may not happen if she can’t maintain the support of her party. The EUR/USD held steady on the news and traded within a very tight range as traders are more focused on this week deluge of data than they are German politics.

In the EU traders will be watching for the first read on third-quarter GDP as well as the all-important Consumer Price Index. Consumer prices are expected to hold steady from the last month at 1.0%, 2.0% YOY, a miss could have the EUR/USD moving lower. Also on tap for the EU is a meeting of the BoE. The bank is not expected to alter rates but could indicate a change of position regarding the outlook.

US Equities Up On Earnings 

The US futures indicated a positive open for the equities market on Monday morning. The broad market S&P 500 was indicated to open with a gain near 1.0% with automakers leading the way. While the peak of earnings season has passed there are still about 50% of the S&P 500 to report over the next few weeks. So far the reports have been better than expected. The blended rate of earnings growth is now 22.%, up to a full percent over the last week, and likely to continue expanding into the end of the season. There are 139 companies reporting this week, 27.8% of the index.

USD/JPY Fundamental Daily Forecast – Stock Market Weakness Making Yen Attractive Safe-Haven Asset

The Dollar/Yen is trading lower on Friday with the selling being fueled by safe-haven buying of the Japanese Yen in reaction to sharply lower U.S. equity markets. Stocks are under pressure again after shares of Amazon fell in the aftermarket session due to misses on revenue and guidance in its quarterly earnings report.

The weaker stock market is also driving the carry trade whereby investors sell stocks to raise the money to pay back ultra-cheap loans from Japanese banks. This means they are selling dollars and buying Yen.

Furthermore, flight-to-safety buying into Treasurys is driving down yields. This is tightening the spread between U.S. Government bonds and Japanese Government bonds, making the Yen a more attractive investment.

At 1020 GMT, the USD/JPY is trading 111.974, down 0.423 or -0.37%.

Heightened volatility in the stock market on Friday is likely to keep the pressure on the Dollar/Yen throughout the session. Additional resistance is being provided by political and economic uncertainties including tensions between Saudi Arabia and the West, uncertainty surrounding Italy’s budget, and Brexit.

In U.S. economic news on Thursday, Core Durable Goods Orders came in lower than expected at 0.1%, missing the 0.5% forecast. Durable Goods Orders, however, beat the -1.3% forecast with a 0.8% reading.

The Goods Trade Balance rose to -76.0 Billion. This was worse than the -74.9 Billion forecast. Preliminary Wholesale Inventories rose 0.3%, better than the 0.5% estimate. The previous reading was revised higher to 1.0%.

Weekly Unemployment Claims were 215K, slightly above the 214K forecast. Pending Home Sales improved nicely by 0.5%. This beat the -0.1% forecast.

In Fed news, Federal Reserve Vice Chairman Richard Clarida, in his first major policy speech since being seated at the central bank, said more interest rate increases are likely warranted as the economy continues to gather strength. In assessing current conditions, Clarida said growth broadly and with the job market in particular has surprised him.

In Japan, Tokyo Core CPI came in at 1.0% as expected.

Forecast

While the primary focus will be on the volatility and direction of the stock market, traders will get a chance to reaction to a couple of key U.S. reports. Advance GDP is expected to come in at 3.3%, down from the previously reported 4.2%. The Advance GDP Price Index is forecast at 2.1%, down from 3.0%.

Revised University of Consumer Sentiment is expected to dip slightly to 98.9 from 99.0.

There are three downside levels to watch on the USD/JPY chart. The first is 111.984. This is followed by a main bottom at 111.622 and a retracement level at 111.607. The daily chart indicates there is plenty of room to the downside under 111.607 so be prepared for a potential acceleration to the downside.

The Driverless CopyPortfolio Investment Strategy is Your Chance to Invest in the Future of the Automobile Industry

The “smart” revolution is all around us, as a growing number of common items are becoming highly technological. It happened with the telephone, it happened with TV, it happened in numerous fields of industry – and now it’s happening in the automotive industry. Self-driving cars are very much a reality, and we will be seeing them in rising numbers on the road within the next few years. This evolution of the personal car, which over the years incorporated more and more technology into it, has resulted in a vehicle that no longer needs a human driver – and the financial potential is incredible.

The driverless car will be one of the most tech-heavy products available to consumers, and as such, will combine numerous components from both automakers and high-tech companies. To learn more about the different aspects of the autonomous car industry, projected to become a $7 trillion market(1) eventually, read this blog post.

Being such an innovative field on the one hand, yet being developed by some of the world’s largest, and most recognizable, companies on the other, the driverless car industry presents an interesting thematic investment opportunity. However, since it involves companies from different industries, operating in various markets around the world, building a thematic investment portfolio to track the industry can be challenging. That is why, here at eToro, we are launching the Driverless investment strategy, through which the members of the eToro community can invest in this sector.

The Driverless CopyPortfolio: Composition

This managed portfolio strategy contains an array of global companies, ranging from automakers, through hardware manufacturers, to software companies developing computer vision, navigation systems and other solutions relevant to the sector. The companies span several industries and have an overall impressive global presence – and are all part of the trend that will make driverless cars a common part of our daily lives in the coming years:

Car Manufacturers

  • Tesla (TSLA) – Elon Musk’s electric car company has established itself as one of the most intriguing players in both the tech and automotive industries in the US. The company is developing driverless cars and trucks and is one of the pioneers in automotive innovation.
  • Fiat Chrysler (FCA.MI) – One of the largest automotive corporation in the world, Fiat Chrysler has a strong presence in both the North American and European automobile markets, and is working on its own self-driving car.
  • Toyota (TM) – The world’s largest automakers, Japanese Toyota is known to be a highly reliable carmaker, have a strong international presence, and pioneering innovative technologies, such as one of the world’s first mass-produced hybrid personal cars.
  • Honda (HMC) – Another Japanese carmaker, Honda’s name has also become synonymous with quality, for both family cars and high-end sports cars and luxury sedans. Honda is also working on a driverless car, declaring 2025 as the target year for a nearly fully-autonomous vehicle.
  • Ford (F) – The world’s first automotive company is still one of the most influential carmakers out there. The company has announced plans for robot cars for ride-hailing and delivery purposes and will be testing them in Miami in the near future.
  • Renault (RNO.PA) – The French car giant has taken great strides in the autonomous car department: Its Symbioz concept model has generated positive reviews, both for its extremely advanced artificial-intelligence-assisted driving and its innovative approach of including the smart car as an integral part of the smart home of the future, positioning it as a notable player in the industry.
  • BMW (BMW.DE) – The German luxury car maker is a prominent player in driver-assistance technology, such as self-parking systems, which exist in some of its high-end brands. Therefore, it is no wonder that the company has been very public about its plans for creating a completely autonomous vehicle in the future.
  • Volkswagen (VOW3.DE) – Pledging to add electric motors to all of its models by 2030(2), this German giant is also researching completely autonomous cars. The VW I.D. Vizzion concept model unveiled by the company is a fully self-driving car, that doesn’t even have a steering wheel or pedals – it is designed to do all of the driving for the passenger.
  • General Motors (GM) – The largest car manufacturer in the US, GM is no stranger to innovation. In the early 1990s, GM completed the development of the world’s first serial electric car, the EV1. Despite later being pulled from production, GM has proved that it is ready for big changes in serial manufacturing – a quality that will serve it well when the market tilts towards the driverless.
  • Tata Motors (TTM) – India’s largest car manufacturer, which is part of a $151 billion conglomerate, is actively testing autonomous micro-cars. According to Tata, it might be one of the first companies to roll out mass-produced self-driving cars.
  • Caterpillar (CAT) – One of the largest heavy industry vehicle manufacturers in the world, Caterpillar is developing driverless trucks that could revolutionize many industries. In fact, the company is no stranger to automation, as several of its products already include self-driving trucks and other heavy vehicles, used by mining and construction companies around the world.
  • Delphi (DLPH) – This auto parts company is one of the world leaders when it comes to electrical systems and software for vehicles. Its products could play an instrumental part in the linking of cars to advanced computer system required for autonomous driving.
  • Ferrari (RACE) – The Italian supercar’s name is synonymous with luxury and speed. While it has distanced itself from the autonomous car space, it did declare that it is working on a fully electric supercar, which will rival the likes of Tesla.
  • Volvo (VOLV-A.ST) – Swedish carmaker Volvo already has high-tech driver-assistance solutions in some of its models, which is a significant step in the direction of a fully autonomous vehicle.

Software Companies

  • Alphabet (GOOG) – Google’s parent company is also the owner of Waymo, a company who already has self-driving cars roaming the streets of Silicon Valley. Unlike some other tech companies, who’ve kept their progress under wraps, Waymo has been very public with its driverless car prototypes and their performance.
  • Alibaba (BABA) – The Chinese retail giant is known for its massive interest in technological innovation. Therefore, it is no wonder that the company has confirmed that it is also in the race for developing a self-driving car, alongside other tech companies.
  • Baidu (BIDU) – Perhaps one of the strongest competitors in the race of launching the first road-ready autonomous car, Baidu has enjoyed the support of the Chinese government and is manufacturing and testing autonomous cars and buses. According to the company’s Apollo project timeline, Baidu will have a fully autonomous car ready for mass production by 2021.
  • Microsoft (MSFT) – One of the largest tech corporations in the world, Microsoft is also heavily involved in implementing its technology in driverless cars. Some of the cars that use Microsoft’s technology are already being tested in several locations around the world.
  • Blackberry (BBRY) – The former smartphone giant has pivoted into other areas in recent years, including software development. Blackberry is developing software that will be used in the autonomous car industry and has a partnership in place with Chinese giant Baidu.
  • Intel (INTC) – According to the company, Intel has a chip in virtually every self-driving car that is being tested today. Moreover, the company strengthened its grip on the market by acquiring Mobileye, a startup which develops computer vision driver-assisting technology, for a whopping $15 billion.

Hardware Manufacturers

  • Apple (AAPL) – The world’s largest company has a strong presence in numerous fields of technology – and autonomous driving is no exception. Apple has been quite secretive about its driverless plans, but reports suggest the company is developing a brand new self-driving car of its own.
  • Nvidia (NVDA) – Since an autonomous car requires great computing power, it is in need of strong processors. Nvidia is one of the world’s leading manufacturers of processors for some of the most performance-based computer functions, such as the real-time rendering of graphics-heavy computer games. Therefore, it is only natural that the company will also be taking part in making processors for self-driving cars.
  • STMicroElectronics (STM.MI) – Europe’s largest semiconductor manufacturer, ST is also one of the companies taking part in creating the computerised “brains” that will steer the cars of the future.
  • Infineon (IFX.DE) – This German chipmaker is developing semiconductors used in both driver-assistance systems and driverless cars. Teaming up with leading car makers, such as German luxury brand Audi, Infineon could serve a major role in the future of the automotive industry.
  • Texas Instruments (TXN) – Developing semiconductors and various sensors for more than 80 years, Texas Instruments is making its way into the autonomous driving realm. In 2017, the company unveiled a new array of sensors that can be used for autonomous cars, drones and more(3).
  • Advanced Micro Devices Inc (AMD) – A power player in the microchip industry, AMD is known for offering computing solutions that are more affordable than its main competitors, without compromising on performance. The company started hiring personnel for its AMD automotive department, which strongly suggests it is venturing into the field.
  • Dialog Semiconductor (DLG.DE) – This German semiconductor manufacturer has reportedly been involved in the early stages of Apple’s self-driving cars. While currently it seems that Apple chose to go another way, Dialog does have the capability to become a leading developer of hardware for autonomous vehicles.
  • MaxLinear (MXL) – Developing hardware such as semiconductors and radio transmitters, this American company is directing some of its efforts into developing components to serve the self-driving car industry.
  • NXP Semiconductors (NXPI) – This Dutch semiconductor manufacturer already has a strong foothold in the autonomous car industry, as it is one of the companies chosen by Chinese Baidu to help construct its driverless cars.
  • Skyworks (SWKS) – Based in the US, Skyworks Solutions has manufactured some wireless transmitters that are being used for autonomous features in current cars. The company’s experience in the field could serve as a strong foundation for its future business in the driverless car space.
  • HELLA (HLE.DE) – A well-known supplier of parts and subsystems for the automotive industry, HELLA has announced that it is strategically entering the driverless space in 2018(4).
  • EnerSys (ENS) – This battery producer has its products powering numerous cars and aerospace vehicles. As the automobile market shifts towards being driverless and electric, EnerSys could be a dominant player, producing the batteries powering these vehicles.
  • Visteon (VC) – This car electronics and computing company spun off from Ford in the year 2000. Visteon has developed a unique platform for driverless cars, which enables the car’s computer to decipher its surroundings and drive itself.

Each stock within the investment strategy’s composition is given equal allocation, and it is rebalanced by the eToro Investment Committee periodically. The minimum investment using the Driverless investment strategy is $5,000.

Investing in the self-driving car industry

It is obvious that there are numerous players and various companies operating in the driverless car space. In coming years, it is likely that more companies, both existing and new, will join the industry, while the autonomous car becomes a mass-produced, global phenomenon. As the industry takes form, eToro enables you to become part of the first wave of investors to take part in this exciting new automotive/technology sector. Using the Driverless CopyPortfolio, you can access a fully allocated, managed investment portfolio and gain exposure to the autonomous car industry.

Major Institutional Investor Says Tesla Stock Price Could Hit $4000 in 5 Years

An institutional investor with a $164 million stake in Tesla (TSLA), held through 158,000 of the electric car manufacturer’s Nasdaq-listed shares, has publically pleaded with CEO Elon Musk to re-think his move to privatize the company.

Representatives of ARK Investment Management, the investor in question, have urged the reassessment through an open letter to Musk, on the grounds that they believe that Tesla’s stock price has the potential to reach $4000 within 5 years. On that basis, ARK argues that Musk’s stated intent to take the company private at a valuation of $420 a share.

Why Did Musk Want to Take Tesla Private?

Elon Musk has grown frustrated in recent months with what he considers the short-termism of capital markets. The entrepreneur, who first rose to prominence as co-founder of the online payments platform PayPal, has never quite fit the mold of a Wall Street CEO. Breaking that mold has been a huge part of his success in managing to sell his grand vision for Tesla to investors and achieving a capitalization and resources far beyond what the company’s revenue would suggest should be possible.

Tesla’s lofty valuation, higher than both traditional auto manufacturers Ford and GM with a fraction of their revenues and none of their profits, has been achieved to a large extent through the force of Musk’s personality and his ability to sell a long-term vision. However, despite the fact that the Tesla stock price (TSLA) has for years marched to a different tune than that of companies many analysts argue should be considered its peers (auto manufacturers rather than tech companies), capital markets still have their demands. Patience with Tesla continuingly missing Musk’s usually overambitious targets and timelines, and the amount of cash the company burns through, has recently grown thin. Tensions recently surfaced when Musk refused to answer fairly standard financial questions put to him by an analyst at a recent quarterly earnings report, dismissing them as ‘boring’.

While subsequently apologizing for what Wall Street media described as a ‘meltdown’, the event seems to have crystallized Musk’s growing suspicion that being a public company might not be the most conducive way for Tesla to reach its goals. Capital markets demand quarterly improvement in specific growth metrics and Musk’s argument for taking the company private is that this creates a short-term mentality that is hindering achieving longer-term ambitions.

The Argument Against Tesla (TSLA) Going Private

ARK’s representatives argue that being a public company provides Tesla with more advantages than disadvantages. The public letter signed by the investment firm’s founder and chief executive, Cathie Wood lists these as:

  • More ‘rapid’ ability to capitalize on competitive advantages – argued as key to network effects and natural geographic monopolies that will characterize autonomous taxi and truck networks.
  • Increased public profile – argued as key to launching an autonomous taxi network.

The investor also believes that the proposed buy-back of Tesla (TSLA) stock at $420, with a $100 a share premium on current price, denies investors who have backed the company the opportunity of realizing huge future returns. The ambitious $4000 a share target ARK argues Tesla can achieve within 5 years, is built on the high-margin future business model of Tesla offering driverless taxi and truck services.

It has been reported that Musk has hired Morgan Stanley to manage the reprivatization process of Tesla. However, as much as the idea to privatize Tesla was appealing, Musk and the Tesla’a management realized that “the better path is for Tesla to remain public”. Tesla shares dropped and did not yet recover after Musk’s decision to keep the electric car maker public.

This article was written by eToro