GM Profit Shrugs Off Chip Shortage with High-Priced Pickups, SUVs

By Nick Carey and Ben Klayman

The Detroit automaker, whose shares were up 3.3% in early trading, also said its full-year pre-tax profit would come in at the high end of its forecast.

“The speed and agility of our team are front and center as we move from managing through a pandemic to managing the global semiconductor shortage,” Chief Executive Mary Barra said in a letter to shareholders. “This remains a challenging period.”

Barra added the No. 1 U.S. automaker was focused on “maximizing production of high-demand and capacity-constrained vehicles” like the full-sized Chevrolet Silverado pickup, and GMC Yukon, Chevy Suburban and Cadillac Escalade SUVs.

Barra told reporters the chip shortage will worsen in the second quarter before improving in the second half of the year.

“Every region in the world has been dealing with the supply and demand imbalance for semiconductors, and we have been working through some significant disruptions to production,” she said.

GM reiterated its full-year 2021 earnings guidance and said “based on what we know today,” its results will be at the upper end of the $10 billion to $11 billion adjusted pre-tax profit it has previously forecast. Morgan Stanley analyst Adam Jonas said GM’s profit and full-year forecast were a relief after Ford Motor Co’s warning last week about the expected chip hit.

GM stuck to earlier forecasts the chip shortage could shave $1.5 billion to $2 billion from this year’s profits.

Carmakers across the world have had to curb output, hampering their attempts to recover from the COVID-19 pandemic, due to a shortage of vital chips used in everything from computer management of engines to driver assistance systems.

Stellantis, created from the merger of PSA and Fiat Chrysler, on Wednesday said it expects the shortage to take a bigger bite out of second-quarter production and warned the disruption could last into 2022.

Ford said last week it expects second-quarter vehicle output to be halved by the shortage.

Evercore ISI analyst Chris McNally asked in a research note why Ford was potentially expecting a bigger second-quarter production hit than GM, which he joked stood for “Good Morning” after the strong results.

Thanks to high consumer demand that has pushed up prices, focusing on those high-margin models contributed $3.2 billion to GM’s first-quarter pre-tax profit.

While GM has continued to build its highest-profit vehicles, it has hoarded supplies of chips by idling other factories. Last week, it extended downtime for plants in Kansas and Ontario into early July and late June, respectively, curtailing output of the Cadillac XT4 and Chevy Equinox SUVs, and the Chevy Malibu sedan.

GM posted a first-quarter net profit of $3 billion, or $2.03 per share, up from $294 million or 17 cents per share, a year earlier. Excluding items, it earned $2.25 per share, well above analyst expectations of $1.04.

GM said its capital spending budget this year will be $9 billion to $10 billion, and Barra said about $7 billion of that would be focused on electric and autonomous vehicle development.

(Reporting by Nick Carey, editing by Nick Zieminski and Steve Orlofsky)

Earnings to Watch Next Week: ON Semiconductor, Ferrari, General Motors and Moderna in Focus

Earnings Calendar For The Week Of May 3

Monday (May 3)

IN THE SPOTLIGHT: ON SEMICONDUCTOR

ON Semiconductor, a semiconductors supplier company, is expected to report its first-quarter earnings of $0.34 per share, which represents year-over-year growth of over 240% from $0.10 per share seen in the same quarter a year ago.

The Phoenix, Arizona-based company’s revenue would grow over 14% to $1.4 billion.

“The company is the only one in our coverage to see weaker gross margins cycle to cycle. Notably, this is happening despite an improvement in end-market mix toward industrial and autos and away from consumer and computing, where ON has become more selective in recent quarters,” noted Craig Hettenbach, equity analyst at Morgan Stanley.

“We like the message from the new CEO of improving mix of the business but think this has already been reflected in meaningful multiple expansion in the stock. Another thing to consider is the potential for lost revenue as the company deemphasizes some products.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 3

Ticker Company EPS Forecast
ENBL Enable Midstream Partners $0.17
EL Estée Lauder $1.28
WEC Wisconsin Energy $1.47
EPD Enterprise Products Partners $0.50
ON ON Semiconductor $0.34
ITRI Itron $0.40
ALXN Alexion Pharmaceuticals $3.08
L Loews $0.95
CNA CNA Financial $0.95
EPRT Essential Properties Realty Trust Inc $0.29
VRNS Varonis Systems -$0.13
QGEN Qiagen $0.63
RMBS Rambus $0.28
WWD Woodward $0.82
REGI Renewable Energy $0.20
IRBT Irobot $0.06
SCI Service International $0.98
ITUB Itau Unibanco $0.12
FN Fabrinet $1.15
CAR Avis Budget -$2.38
JKHY Jack Henry Associates $0.86
O Realty Ome $0.85
BRX Brixmor Property $0.40
UE Urban Edge Properties $0.22
AWK American Water Works $0.73
NSP Insperity $1.56
APO Apollo Global Management $0.59
RBC Regal Beloit Corporation $1.68
ADC Agree Realty $0.83
CR Crane $1.31
OGS One Gas $1.78
CHGG Chegg $0.31
CVI CVR Energy -$1.23
OHI Omega Healthcare Investors $0.82
XPO XPO Logistics $0.93
FLS Flowserve $0.20
CBT Cabot $0.97
LEG Leggett & Platt $0.41
FANG Diamondback Energy $1.89
SHO Sunstone Hotel Investors -$0.15
KMT Kennametal $0.21
SEDG Solaredge Technologies Inc $1.01
VNO Vornado Realty $0.63
WMB Williams Companies $0.28
AWR American States Water $0.48
MWA Mueller Water Products $0.14
MOS Mosaic $0.50
CC Chemours Co $0.68
LGND Ligand Pharmaceuticals $1.05
CORT Corcept Therapeutics $0.21
CIB Bancolombia $0.34
SANM Sanmina $0.82
EGOV NIC $0.24
AMG Affiliated Managers $4.24

Tuesday (May 4)

IN THE SPOTLIGHT: FERRARI

Ferrari, an Italian luxury sports car manufacturer, is expected to report its first-quarter earnings of $1.26 per share, which represents year-over-year growth of over 27% from $0.99 per share seen in the same quarter a year ago.

The company which is known for its prancing horse logo would post revenue growth of more than 24% to around $1.27 billion

“We find the long-term stability of Ferrari’s revenue, addressable market growth, expansive profit margin, and solid returns on invested capital throughout economic cycles to be compelling reasons to invest at the right price,” noted Richard Hilgert, senior equity analyst at Morningstar.

“Because of its exclusive clientele of high-net-worth individuals, we believe the company will show resiliency during periods of economic uncertainty, such is currently the case with the coronavirus pandemic. While we are not entirely averse to paying up for stocks like Ferrari that possess a wide economic moat and stable economic profits through business cycles, we think Ferrari stock will regularly trade at rich, luxury goods valuation multiples.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 4

Ticker Company EPS Forecast
ARNC Arconic Inc $0.29
CMI Cummins $3.46
CVS CVS Health $1.71
MPLX MPLX $0.61
PFE Pfizer $0.79
SYY Sysco $0.20
TRI Thomson Reuters USA $0.40
MPC Marathon Petroleum -$0.72
NS NuStar Energy $0.28
BR Broadridge Financial Solutions $1.67
ETRN Equitrans Midstream Corp $0.19
DD DuPont $0.77
LDOS Leidos $1.49
D Dominion Resources $1.08
EXPD Expeditors International Of Washington $1.00
RACE Ferrari $1.26
LPX Louisiana Pacific $2.67
CVLT Commvault Systems $0.49
ZBH ZIMMER BIOMET HDG. $1.51
UAA Under Armour Inc $0.04
XYL Xylem $0.37
UA Under Armour C share $0.04
INGR Ingredion $1.62
SEE Sealed Air $0.71
INCY YTE $0.65
BERY Berry Plastics $1.31
LGIH LGI Homes $2.37
BG Bunge $1.55
PCRX Pacira $0.58
RGEN Repligen $0.43
VSH Vishay Intertechnology $0.45
LANC Lancaster Colony $1.26
CTLT Catalent $0.76
KKR KKR & Co LP $0.62
CWH Camping World Holdings $0.54
RHP Ryman Hospitality Properties -$0.78
AME Ametek $1.02
WLK Westlake Chemical $1.56
IAA IAA Inc $0.46
VMC Vulcan Materials $0.41
GPN Global Payments $1.77
IPGP IPG Photonics $1.07
HSIC Henry Schein $0.83
IT Gartner $1.01
CRL Charles River Laboratories $2.19
HEP Holly Energy Partners $0.48
NXST Nexstar Broadcasting $3.11
MLM Martin Marietta Materials $0.51
LAMR Lamar Advertising $1.17
IDXX Idexx Laboratories $1.72
FSS Federal Signal $0.33
MIC Macquarie Infrastructure $0.48
NNN National Retail Properties $0.64
SABR Sabre -$0.51
MYGN Myriad Genetics -$0.10
BEN Franklin Resources $0.74
ZBRA Zebra Technologies $4.41
COP ConocoPhillips $0.57
ETN Eaton $1.25
HI Hillenbrand $0.92
CMP Compass Minerals International $0.72
VRSK Verisk Analytics $1.25
JBGS JBG SMITH Properties $0.31
LYFT Lyft Inc -$0.54
AMCR Amcor PLC $0.18
LSI LIFE STORAGE $1.01
STAG STAG Industrial $0.48
XP XP Inc $0.20
RPAI Retail Properties Of America $0.20
OUT Outfront Media -$0.17
MANT ManTech International $0.83
MED Medifast $2.72
PAYC Paycom Software $1.42
AKAM Akamai $1.30
LSCC Lattice Semiconductor $0.19
ARWR Arrowhead Research $0.34
AFG American Financial $1.74
TTEC TeleTech $1.00
ANET Arista Networks $2.38
GMED Globus Medical $0.36
INSP Inspire Medical Systems Inc -$0.65
ENLC EnLink Midstream -$0.02
IOSP Innospec $1.02
PVG Pretium Resources $0.21
HLF Herbalife $1.06
RDN Radian $0.67
TMUS T-Mobile Us $0.53
ESE ESCO Technologies $0.55
HST Host Hotels & Resorts -$0.15
PKI PerkinElmer $3.03
BKH Black Hills $1.60
ATVI Activision Blizzard $0.69
XLNX Xilinx $0.75
WTS Watts Water Technologies $0.98
AMRC Ameresco $0.10
CZR Caesars Entertainment -$1.77
MCY Mercury General $1.25
MRCY Mercury Systems $0.63
CPK Chesapeake Utilities $1.83
AIZ Assurant $1.96
LPSN LivePerson -$0.14
DOOR Masonite International $1.78
PXD Pioneer Natural Resources $1.82
EQC Equity Commonwealth $0.01
PEAK Healthpeak Properties Inc $0.39
DVN Devon Energy $0.35
RNG RingCentral $0.25
EPAY Bottomline Technologies $0.27
MTCH Match Group $0.46
JAZZ Jazz Pharmaceuticals $3.69
PRU Prudential Financial $2.68
NMIH NMI $0.59
DLB Dolby Laboratories $0.67
HASI Hannon Armstrong Sustnbl Infrstr Cap $0.40
MPWR Monolithic Power Systems $1.33
H Hyatt Hotels -$1.33
WU Western Union $0.45
DEI Douglas Emmett $0.43
EXAS Exact Sciences -$1.04
ALGT Allegiant Travel -$2.59
PTCT PTC Therapeutics -$1.59
Z Zillow $0.26
NRZ New Residential Investment $0.34
LITE Lumentum Holdings Inc $1.42
SU Suncor Energy USA $0.44
MELI MercadoLibre $0.40
HAE Haemonetics $0.67
TDG TransDigm $2.52
IOVA Iovance Biotherapeutics -$0.48
QTRX Quanterix -$0.32
VST Victory Square Tech -$2.04
GRFS Grifolsbarcelona $0.23
BBD Banco Bradesco $0.11
CHT Chunghwa Telecom $0.33

Wednesday (May 5)

IN THE SPOTLIGHT: GENERAL MOTORS

The auto manufacturer is expected to report its first-quarter earnings of $1.02 per share, which represents year-over-year growth of over 64% from $0.62 per share seen in the same quarter a year ago. The Detroit, Michigan-based company would post revenue growth of about 2% to around $33.3 billion.

“We are Overweight based on GM’s diversified portfolio, with multiple ways for GM to enhance shareholder value, through: EVs, ICE and Autonomy. GM also has leading North American margins, generates strong cash flow, and has a robust balance sheet,” noted Adam Jonas, equity analyst at Morgan Stanley.

“We believe that the market is underestimating the SOTP of the GM enterprise via: 1) Legacy ICE, 2) GM EV, 3) GM’s Ultium Battery business, 4) China JVs, 5) GM Finco, 6) GM Cruise, 7) hidden franchise value in brands such as Corvette and 8) GM Connected Services. GM management has a proven track record to allocate capital away from structurally challenged areas towards re-positioning the business model.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 5

Ticker Company EPS Forecast
UTHR United Therapeutics $2.60
HLT Hilton Worldwide $0.05
PNW Pinnacle West Capital $0.28
CERN Cerner $0.74
HFC HollyFrontier -$0.45
ODP Office Depot $1.02
AEIS Advanced Energy Industries $1.27
OMI Owens Minor $0.97
DNB Dun & Bradstreet $0.21
SMG Scotts Miracle-Gro $5.51
DOC Physicians Realty $0.27
WRK WESTROCK $0.62
GOLD Randgold Resources $0.26
TT Trane Technologies PLC $0.62
CIM Chimera Investment $0.31
SRE Sempra Energy $2.60
NYT New York Times $0.15
AVA Avista $0.85
ROCK Gibraltar Industries $0.61
SPR Spirit AeroSystems -$0.93
PEG Public Service $1.12
BWA Borgwarner $0.92
GM General Motors $1.02
JLL Jones Lang LaSalle $0.58
SBGI Sinclair -$2.18
EMR Emerson Electric $0.90
NI NiSource $0.77
ABC AmerisourceBergen $2.50
BRKR Bruker $0.32
FUN Cedar Fair -$1.89
IONS Ionis Pharmaceuticals -$0.47
EXC Exelon $0.42
WAT Waters $1.57
CDW CDW $1.54
CRTO Criteo $0.50
CLH Clean Harbors $0.26
HZNP Horizon Pharma $0.19
SPWR SunPower $0.00
FLEX Flextronics International $0.36
BKNG Booking Holdings Inc -$7.26
QLYS Qualys $0.69
ATO Atmos Energy $2.05
ALL Allstate $3.85
GIL Gildan Activewear USA $0.20
KLIC Kulicke And Soffa Industries $1.20
PTVE Pactiv Evergreen $0.03
LNC Lincoln National $1.48
TTGT TechTarget $0.37
RLJ RLJ Lodging -$0.26
ADPT Adeptus Health -$0.41
PRI Primerica $2.38
ZNGA Zynga $0.09
UNM Unum $1.01
HPP Hudson Pacific Properties $0.46
RUN Sunrun Inc -$0.03
WTRG Essential Utilities Inc $0.66
EPR EPR Properties $0.44
FLT Fleetcor Technologies $2.70
QRVO Qorvo $2.44
UGI UGI $1.72
CDAY Ceridian HCM Holding Inc $0.09
CW Curtiss-Wright $1.30
FMC FMC $1.52
CTSH Cognizant Technology Solutions $0.94
SIMO Silicon Motion Technology $0.94
AEL American Equity Investment Life $0.59
ANSS Ansys $0.85
MET MetLife $1.48
XEC Cimarex Energy $1.70
VAC Marriottacations Worldwide -$0.29
SRC Spirit Realty Capital New $0.73
TNDM Tandem Diabetes Care -$0.15
SJI South Jersey Industries $1.19
EQT EQT $0.28
ETSY ETSY Inc $0.84
MFC Manulife Financial USA $0.59
NBIX Neurocrine Biosciences $0.46
CCMP Cabot Microelectronics $1.94
EQH AXA Equitable Holdings Inc $1.23
MRO Marathon Oil $0.14
CF CF Industries $0.57
STN Stantec USA $0.42
RYN Rayonier $0.08
RSG Republic Services $0.86
FRT Federal Realty Investment $1.02
PDCE PDC Energy $0.83
PYPL PayPal $1.01
BFAM Bright Horizons Family Solutions $0.10
BE Bloom Energy Corp -$0.08
LBTYA Liberty Global Class A Ordinary Shares $0.09
HR Healthcare Realty $0.42
MTG MGIC Investment $0.42
NUVA NuVasive $0.33
ALB Albemarle $0.79
STAA STAAR Surgical $0.02
CPA Copa -$2.21
NUS Nu Skin Enterprises $0.72
TWO Two Harbors Investment $0.21
ACAD Acadia Pharmaceuticals -$0.54
RCII Rent-A-Center $1.11
LOPE Grand Canyon Education $1.67
ORA Ormat Technologies $0.40
KW Kennedy Wilson $0.27
LHCG LHC $1.26
SLF Sun Life Financial USA $1.08
FOXA Twenty-First Century Fox $0.57
FNV Franco Nevada $0.79
QTWO Q2 $0.07
UBER Uber -$0.56
SBRA Sabra Health Care Reit $0.40
RKT Rocket Cos. Inc. $0.89
MDU MDU Resources $0.20
TRMB Trimble Navigation $0.56
GDOT Green Dot $0.93
APA Apache $0.69
HUBG HUB $0.46
KAI Kadant $1.36
SBH Sally Beauty $0.16
BCH Banco De Chile $0.40
DAR Darling Ingredients $0.56
RARE Ultragenyx Pharmaceutical -$1.25
TRNO Terreno Realty $0.39
CCU Compania Cervecerias Unidas $0.32
CENTA Central Garden Pet $1.08
RCKT Rocket Pharma -$0.77
CUB Cubic $0.41
AVNS Avanos Medical Inc $0.18
FMS Fresenius Medical Care $0.45
UGP Ultrapar Participacoes $0.04
ELP Companhia Paranaense De Energia $0.03
LBTYK LIBERTY GLOBAL $0.09
FOX Twenty First Century Fox $0.58
NVO Novo Nordisk A Fs $0.79
BAK Braskem $1.38
AEBZY Anadolu Efes ADR $0.01
OMVJF OMV $0.97
SRPT Sarepta Therapeutics -$2.01
VIV Telefonica Brasil $0.13
ES Eversource Energy $1.10
GBT BMTC Group -$1.02

Thursday (May 6)

IN THE SPOTLIGHT: MODERNA

Moderna Inc, an American biotech company focused on drug discovery, is expected to report its first-quarter earnings of $2.36 per share, up about 700% from the same quarter a year ago. The Massachusetts-based biotechnology company’s revenue would surge to $1.97 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA-based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 6

Ticker Company EPS Forecast
PZZA Papa John’s International $0.55
AY Atlantica Yield -$0.13
SUN Sunoco $0.69
TECH Bio Techne $1.50
ZTS Zoetis $1.04
EPAM EPAM Systems $1.69
APTV Aptiv PLC $0.77
MGA Magna International USA $1.59
VER VEREIT $0.78
WCC Wesco International $0.76
BUD Anheuser-Busch $0.48
IRM Iron Mountain $0.64
LIN Linde PLC $2.26
BDX Becton, Dickinson and Co. $3.04
AES AES $0.31
BLD TopBuild Corp $1.93
HWM Howmet Aerospace Inc $0.20
BIP Brookfield Infrastructure $0.87
PENN Penn National Gaming $0.28
K Kellogg $0.95
PWR Quanta Services $0.74
BLL Ball $0.67
STWD Starwood Property $0.51
SEAS SeaWorld Entertainment -$0.83
CNP CenterPoint Energy $0.50
ALE Allete $1.11
WD Walker & Dunlop $2.01
COMM CommScope $0.31
PRLB Proto Labs $0.37
VG Vonage $0.05
AMRS Amyris -$0.16
BKI Black Iron Inc. $0.51
PBH Prestige Brands $0.79
W Wayfair Inc. $0.27
REGN Regeneron Pharmaceuticals $8.79
NSIT Insights $1.44
FIS Fidelity National Information Services $1.25
TRGP Targa Resources $0.15
EVOP EVO Payments Inc $0.12
CNQ Canadian Natural Resource USA $0.67
MUR Murphy Oil -$0.16
XRAY Dentsply International $0.55
IDCC InterDigital -$0.01
EVRG Evergy Inc $0.47
CAH Cardinal Health $1.57
EPC Edgewell Personal Care $0.62
THS TreeHouse Foods $0.35
STOR STORE Capital Corp $0.45
HAIN Hain Celestial $0.38
ADNT Adient PLC $0.59
MT Arcelormittal $1.57
OGE OGE Energy $0.18
NJR New Jersey Resources $1.17
MRNA Moderna Inc $2.36
BCRX BioCryst Pharmaceuticals -$0.26
FOCS Focus Financial Partners Inc $0.86
HII Huntington Ingalls Industries $2.52
IIVI Ii Vi $0.88
TPR Tapestry Inc $0.30
ARW Arrow Electronics $2.27
BLDR Builders Firstsource $0.81
INSM Insmed -$1.02
BECN Beacon Roofing Supply $0.01
NWSA News Corp $0.06
XLRN Acceleron Pharma -$0.83
QDEL Quidel $4.87
IHRT Iheartmedia -$0.44
AL Air Lease $1.01
Y Alleghany $4.65
AVLR Avalara Inc -$0.11
ALTR ALTAIR ENGINEERING $0.20
SEM Select Medical $0.65
CGNX Cognex $0.35
LYV Live Nation Entertainment -$1.77
TDC Teradata $0.46
CABO Cable One Inc $10.22
KWR Quaker Chemical $1.51
APLE Apple Hospitality $0.03
CLNE Clean Energy Fuels $0.01
ICUI ICU Medical $1.53
MCHP Microchip Technology $1.74
MTX Minerals Technologies $1.07
PTON Peloton Interactive, Inc. -$0.11
ANGI Angie’s List -$0.04
ENV Envestnet $0.61
CDK Cdk Global $0.68
REG Regency Centers $0.75
AIG AIG $0.99
SQ Square $0.16
MSI Motorola Solutions Msi $1.62
RVLV Revolve $0.13
SFM Sprouts Farmers Market $0.62
OLED Universal Display $0.67
PODD Insulet $0.06
AMH American Homes 4 Rent $0.31
PK Park Hotels & Resorts Inc -$0.55
EXPE Expedia -$2.52
TRIP TripAdvisor -$0.31
LNT Alliant Energy $0.67
FOXF Fox Factory $0.82
HTA Healthcare Of America $0.43
EXEL Exelixis $0.05
POST Post $0.55
CSOD Cornerstone OnDemand $0.42
SYNA Synaptics $1.87
ED Consolidated Edison $1.36
DBX Dropbox $0.30
IRTC iRhythm Tech -$0.87
DRH DiamondRock Hospitality -$0.14
MCK McKesson $5.01
YELP Yelp -$0.26
DIOD Diodes $0.78
CWK Cushman & Wakefield plc -$0.04
RGA Reinsurance Of America $0.07
STMP Stamps $1.63
EOG EOG Resources $1.50
BAP Credicorp USA $2.37
AAON AAON $0.24
MTD Mettler Toledo International $5.65
PCTY Paylocity $0.66
BCC Boise Cascade $2.50
NFG National Fuel Gas $1.21
MTZ MasTec $0.77
TPL Texas Pacific Land $5.77
FNF Fidelity National Financial $1.28
PHI Philippine Long Distance Telephone $0.61
NWS News $0.05
CYRX Cryoport Inc -$0.21
PPL PPL $0.61
NRG NRG Energy $1.64
NKTR Nektar Therapeutics -$0.75
GLUU Glu Mobile $0.07
PLUG Plug Power -$0.08
MNST Monster Beverage $0.61
NTLA Intellia Therapeutics Inc -$0.66
CTRE CareTrust REIT $0.36
ADT ADT $0.15
ARNA Arena Pharmaceuticals -$2.19
SWX Southwest Gas $1.83
MIDD Middleby $1.63
MRTX Mirati Therapeutics -$2.13
JOBS 51job $0.43
PFSI Pennymac Financial Services $5.79
KRTX Karuna Therapeutics -$1.06
MGEE Mge Energy $0.81
ITCI Intra Cellular Therapies -$0.81
XNCR Xencor -$0.77
SATS EchoStar -$0.02
DRNA Dicerna Pharmaceuticals -$0.28
IGMS IGM Biosciences -$0.98
RVNC Revance Therapeutics -$1.19
PAR Par Technology -$0.37
ACIW ACI Worldwide -$0.12
AG First Majestic Silver $0.07
ING Ing Groep $0.23
GFI Gold Fields $0.64
ABEV Ambev $0.03
AGO Assured Guaranty $0.56
MMS Maximus $0.82

Friday (May 7)

Ticker Company EPS Forecast
CI Cigna $4.37
VTR Ventas $0.02
LEA Lear $2.95
MD Mednax $0.16
AMCX AMC Networks $2.01
ENB Enbridge USA $0.57
CCJ Cameco USA -$0.08
TRP Transcanada USA $0.87
LBRDK Liberty Broadband Lbrdk $1.10
SPB Spectrum Brands $0.99
LBRDA Liberty Broadband $0.85
ITT ITT $0.87
FLR Fluor New $0.04
ESNT Essent $1.22
UNVR Univar Solutions Inc $0.32
HE Hawaiian Electric Industries $0.36
RICOY Ricoh Company -$0.08
IBP Installed Building Products $1.04
TU Telus USA $0.23
SSUMY Sumitomo ADR -$0.02
CNK Cinemark -$1.47
CVE Cenovus Energy USA -$0.02
LXP Lexington Realty $0.03

 

Capitalizing on IPO Mania: Will Stripe’s IPO Become The Biggest of All-Time?

Boosted by huge demand for technology and sustainability stocks, as well as a frenzied rush from blank-check SPAC companies, the volume of IPOs in the US doubled to 494 – raising a collective $174 billion. Now, with the news of payments giants Stripe intending to go public, we may see the biggest initial public offering yet.

According to FactSet, high profile IPOs from Snowflake, Airbnb and Rocket Companies were well received by investors, contributing to 150% year-on-year growth for money raised through offerings.

However, one company that’s seemingly been at the centre of speculation throughout 2020 without pulling the trigger on an IPO was Stripe. In August last year, Stripe sparked a furore when the company announced that it had recruited CFO Dhivya Suryadevara from General Motors to assume the same role at the startup. At the time, it was anticipated that the company was in the final stages of preparing to go public. But instead, the company opted to raise an additional $600 million in new equity from private investors at a seismic valuation of $95 billion.

At a valuation of $95bn, Stripe has become the most valuable US startup, pushing past huge industry players like Elon Musk’s SpaceX and grocery delivery service Instacart. However, the latest fundraising effort could lead the company to the biggest IPO ever.

Entering The IPO Frenzy

Stripe’s push towards an IPO comes at a time when a global IPO frenzy is in full swing. At the end of Q1 in 2021, global dealmaking stood at $1.4 trillion thanks to blank-check SPACs and newfound excitement for tech initial public offerings.

These figures represent a 103% increase in the same period last year, and a faster start to a year in over two decades – according to preliminary data from Dealogic. There’s no sign of the furore simmering down, either.

One of the key reasons behind such astronomical figures stems from the boom in special-purpose acquisition companies (SPACs), which offer private companies a faster route into public markets. SPACs have helped to push equity capital market fees up by almost 340% compared to the same period in 2020 to a total of $13.1 billion – more than double the revenues in any first quarter over the past 20 years.

(Image: Financial Times)

As the data above shows, IPO proceeds already soared to levels that haven’t been seen since the financial crisis of 2008 by the end of last year. Driven largely by unprecedented volumes of SPACs entering the market, more businesses feel emboldened to embrace the huge boom in IPO popularity.

Will Stripe Become the World’s Biggest IPO?

So, will Stripe use the current investment landscape to launch the biggest IPO ever? There are a few things to consider before we can gain a clearer idea of just how seismic the company’s arrival on the New York Stock Exchange will be. Firstly, it’s important to note that these metrics are largely determined by total deal size, rather than the company’s market capitalization. The current biggest IPO belongs to that of Saudi Aramco, which raised $29.4 billion through a home-country listing. Meanwhile, the biggest US-based initial public offering was the 2014 debut of Alibaba, which ultimately raised a total of $25 billion.

Weighing in with a $95 billion valuation means that Stripe has the potential for a huge IPO, but it remains to be seen that the company will beat the aforementioned records at its current valuation. Companies typically avoid releasing too many shares during an IPO as they can pursue follow-on offerings for insiders once the lockup period is over – which tends to be around 90 to 180 days after the initial public offering date.

Although holding the record for the largest IPO will no doubt hold plenty of appeal for the company, it’s unlikely that Stripe would willingly sell almost one-third of its shares for the sake of beating the existing stock market record – but this doesn’t mean that the company should be discounted. Stripe appears to be investing on a global scale and is producing results that have captured the imagination of institutional investors that have been willing to pay way over the odds for admission just one year on from the company’s last fundraising effort. With palpable excitement for both Stripe and the IPO market as a whole, all bets are off when it comes to anticipating the sheer scale of the upcoming floatation.

Buying Stripe’s IPO

With speculation rife about the ultimate size of Stripe’s IPO, many retail investors will likely find the notion of investing in the payments company a tantalizing one to say the least. However, the process of investing in initial public offerings can be tricky for individuals to buy into. This is because many companies choose to sell their shares to institutional investors who are capable of buying huge volumes of their IPO in one single transaction.

Maxim Manturov, Head of Investment Research at Freedom Finance Europe, says that: “Historically, institutional investors get around 90% of all shares, with only around 10% left for retail trades. This is where allocation comes from: when the demand is high, the broker will have to reduce order amounts so as to at least partially fill all of them. The allocation ratio, meanwhile, depends on the investor trading activity and volume.”

That said, there’s still a way for the general public to participate in IPOs – there’re online brokers that allow retail investors to take part in IPOs. However, there’s generally a vetting process to go through and a financial threshold to meet.

However, retail investors can still get in on the action when trading eventually begins on the New York Stock Exchange. In an IPO landscape that’s filled with huge levels of investor confidence, we may yet see Stripe’s initial public offering break plenty of records upon its arrival.

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. 

General Motors Rallies to All-Time High

General Motors Co. (GM) is trading at an all-time high in Thursday’s pre-market after China reported that automobile sales increased over 300% in February. The news eased concerns about reduced revenue as a result of worldwide chip shortages that have forced some manufacturers to close down assembly lines. The rally is set to confirm a breakout above a 10-year trendline, potentially setting the stage for even more prolific gains in coming months.

Investors Shake Off Bearish Guidance

The stock sold off in February despite beating Q4 2020 top and bottom line estimates. A 2021 profit warning fueled the downside, with the manufacturer warning that chip shortages would lower earnings-per-share (EPS) by at least 14%. Investors have now discounted the bearish guidance, buoyed by Biden administration intervention, the rapidly improving economic outlook, and growing cooperation with China on the semiconductor supply chain.

GM benefited from Tesla Inc.’s (TSLA) historic 2020 share gains, with a new generation of investors raising industry valuations in reaction to the accelerating transition into electric vehicles. CEO Mary Barra has responded to the challenge better than her predecessors, committing billions of dollars to establish thehighest EV market share in North America with 30 fully-electric vehicles in production by 2025.

Wall Street and Technical Outlook

Wall Street consensus continues to brighten, with a ‘Buy’ rating now based upon 17 ‘Buy’, 1 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $50 to a Street-high $85 while the stock is set to open Thursday’s session about $8 below the median $65 target. Given the potential breakout, this is a perfect setup for a rapid advance into the mid-60s.

The stock carved three nominally higher highs after coming public in 2010, generating rising trendline resistance in the 40s. It finally broke out in January 2021, lifting to 57 and pulling back into an extended test of new support. It bounced at that level three times into early March and turned higher, posting an all-time high in Thursday’s pre-market. If sustained, this price action will confirm the breakout, raising odds for another strong rally wave.

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. 

GM Sharply Lower After Profit Warning

General Motors Co. (GM) has sold off nearly 6% in Wednesday’s session after beating Q4 2020 top and bottom-line estimates while lowering 2021 earnings-per-share guidance. The automaker earned $1.93 per-share in the quarter, $0.32 better than estimates, while revenue grew 21.7% to $37.5 billion, beating consensus by more than $1 billion. 2021 EPS is now expected to range between $4.25 and $5.25, about 20% below previous guidance, due to a global semiconductor shortage.

Quantum Leap Into Electric Vehicles

The company warned about the chip shortage on Feb. 3 but the bearish guidance still caught market watchers off-guard, contributing to an aggressive ‘sell-the-news’ reaction. Rally momentum had kept GM trading near all-time highs in the last three weeks but bears could now reload aggressive short sales. However, downside in general has gotten harder to predict, with hedge funds under the gun and piles of stimulus money sloshing around the equity markets.

General Motors has benefited from that capital flood, which triggered a quantum leap into the electric vehicle era on the heels of Tesla Inc.’s (TSLA) historic uptrend. GM spent years and billions of dollars defending its gas guzzlers but has now gotten religion and is investing $27 billion in EV products through 2025, when it expects to have 30 fully electric vehicles in production. In turn, the automaker could capture the highest EV market share in North America.

Wall Street and Technical Outlook

Wall Street consensus has risen to a ‘Buy’ rating in the last year, based upon 15 ‘Buy’, 1 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $48 to a Street-high $80 while the stock opened Wednesday’s session about $5 below the median $60 target. The warning may not do too much technical damage, given this humble placement.

General Motors struggled to overcome resistance in the 40s for almost a decade, reversing in that price zone in 2011, 2014, and 2017. Slightly higher highs during those peaks generated a rising highs trendline that was mounted on heavy volume in January 2021. Breakout support could get tested several times this year. potentially offering low risk buying opportunities in the upper 40s and low 50s while a breakdown ends the uptrend that started at the March 2020 low.

For a look at this week’s economic events, check out our economic calendar.

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

General Motors Shares Dive As Company Warns About Chip Shortage

General Motors Video 10.02.21.

General Motors’ Operating Profit Will Be Cut By Up To $2 Billion Due To Global Chip Shortage

General Motors has recently provided its fourth-quarter earnings report. The company reported revenue of $37.52 billion and GAAP earnings of $1.93 per share, beating analyst estimates on both earnings and revenue.

The company enjoyed solid performance as the pickup truck market remained strong. Fourth-quarter unit sales increased by 5% in the U.S. and grew by as much as 14% in China which continued to enjoy strong economic rebound after the blow dealt by the coronavirus pandemic.

General Motors stated that it expected to report earnings of $4.50 – $5.25 per share in 2021 which was below analyst estimates. The global chip shortage is expected to cut operating profit by $1.5 billion – $2 billion, and the negative impact of the global chip shortage was not baked in analyst estimates.

The rapid growth of the electric vehicle market together with the increased digitalization of all cars increased demand for chips at a time when chip producers suffered shutdowns and delays due to the coronavirus pandemic. At this point, it looks like automakers will have to deal with chip shortages for the full 2021.

What’s Next For General Motors?

Shares of General Motors were trading near yearly highs before the release of the earnings report, and the news about the negative impact of the global chip shortage caused a sell-off.

It remains to be seen whether the current pullback will continue as the market has recently became more enthusiastic about the fate of established producers like General Motors or Ford. Tesla shares have become very expensive after the recent rally, and some traders look ready to try alternative bets on the future of the auto industry at a time when established producers are trying to catch up with the latest developments in the electric vehicle space.

In this light, shares of General Motors will likely need additional negative catalysts to move below current levels.

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

U.S. Market Wrap and Forecast for Tuesday

Major benchmarks popped up to new highs at the start of Monday’s U.S. session but conviction was low, yielding a slow motion downtick that got bought over the noon hour. SP-500 Volatility Index (VIX) gained about 2% despite higher equity prices, signaling nervousness about the endless uptick. Even so, the U.S. government is about to send citizens another barrel of greenbacks, just in time to reload slumping Robinhood accounts.

No Love For FAANG Stocks

Amazon.com Inc. (AMZN) failed a symmetrical triangle breakout last week and is consolidating near the February low, about to enter the eighth month of dead sideways action. There’s a lot of ‘dead’ money hanging around big tech stocks these days, with more aggressive capital rotating into fintech, EV plays, and SPACs. The GameStop ‘event’ hasn’t helped traditional buying interest, unnerving many risk-adverse bulls.

Other tech stocks gained ground on Monday, lifting shares of NVIDIA Corp. (NVDA), International Business Machines Corp. (IBM), and Advanced Micro Devices Inc. (AMD). However, PHLX Semiconductor Index (SOX) looks like its grinding through a corrective pattern that could roll over and test the January low at any time. Twitter Inc. (TWTR), General Motors Co. (GM), and Walt Disney Co. (DIS) posted strong upside as well, which is more bearish than bullish headed into their mid-week reports.

Looking Ahead to Mid-Week

Partisan politics could control price action through mid-week, with an impeachment trial and its foregone conclusion feeling like a waste of time during stimulus negotiations. In addition, the rally is getting ‘long in the tooth’, raising odds for a multiweek reversal that ‘sticks’. The Nasdaq-100 index tested or crossed the 200-day EMA five times in 2019 but just once in 2020 and it’s now been 10 months since that instrument shook out weak hands.

This week’s economic calendar is light as a feather, with the CPI report on Wednesday and UMich Sentiment on Friday. Neither is likely to move bond or equity markets, allowing macro influences to control the ticker tape. The upcoming holiday weekend in the United States could impact trading later in thes week, with a well-documented positive bias likely to support higher prices. Even so, a contrarian would say that clear blue skies foretell ominous dark clouds.

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

Earnings to Watch Next Week: Twitter, General Motors, Coca-Cola, PepsiCo and Walt Disney in Focus

Earnings Calendar For The Week Of February 8

Monday (February 8)

IN THE SPOTLIGHT: KKR & Co.

KKR & Co Inc, an American global investment company that manages multiple alternative asset classes, is expected to post earnings of $0.41 per share for last quarter of 2020 with revenue of around $983.08 million. The U.S. private equity firm reported EPS of $0.44 per shares with revenue of $962.07 million in the same period a year ago.

“While we see an attractive organic asset growth trajectory, we also see a recessionary backdrop that raises risk to KKR‘s fee-related earnings growth story if fundraising slows, transaction fees stall, and costs don’t flex as performance fees and investment income decline,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Recessionary backdrop raises risk of balance sheet marks and limited book value growth that could dampen prior ROE generation of mid-teens to 20%+. C-corp structure (as of July 1, 2018 ) with no K-1s should help expand the investor base over time.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

Ticker Company EPS Forecast
GPN Global Payments $1.77
RCL Royal Caribbean Cruises -$5.04
SAIA Saia $1.29
ENR Energizer $0.89
HAS Hasbro $1.14
L Loews $0.74
CNA CNA Financial $0.99
DNB Dun & Bradstreet $0.26
AMG Affiliated Managers $3.68
CUB Cubic -$0.01
RAMP Liveramp Holdings Inc $0.07
BECN Beacon Roofing Supply $0.60
JKHY Jack Henry Associates $0.87
KKR KKR & Co LP $0.41
RE Everest Re $0.46
ACM AECOM $0.57
RGA Reinsurance Of America $1.10
OMF OneMain Holdings $1.98
VRNS Varonis Systems $0.12
LEG Leggett & Platt $0.70
SSD Simpson Manufacturing $0.66
AMKR Amkor Technology $0.35
BLKB Blackbaud $0.71
ESE ESCO Technologies $0.49
TTWO Take Two Interactive Software $0.94
NUAN Nuance Communications $0.19
CHGG Chegg $0.49
BAP Credicorp USA $1.60
HQY Healthequity Inc $0.31
CDK Cdk Global $0.68
CORT Corcept Therapeutics $0.17
SPG Simon Property Group $0.90
YALA Yalla $0.12
IX Orix $1.97
RBC Regal Beloit Corporation $1.58
TYOYY Taiyo Yuden ADR $2.47
MAURY Marui ADR $0.98
MELI MercadoLibre $0.39
OSH Oak Street Health -$0.23

 

Tuesday (February 9)

IN THE SPOTLIGHT: TWITTER

Twitter, an online social networking service that enables users to send and read short 140-character messages called “tweets”, is expected to report a profit of $0.25 in the fourth quarter, which represents year-over-year growth of 16% from the same quarter last year when the company reported $0.25 per share.

The social media company will report revenue of $1.19 billion, up over 17% from the year-ago quarter.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for TWTR given 1) continued turnaround progress and 2) platform scarcity,” said Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

Ticker Company EPS Forecast
GT Goodyear Tire & Rubber $0.22
HBI Hanesbrands $0.29
WCC Wesco International $1.37
HAIN Hain Celestial $0.30
ARMK Aramark -$0.41
CNC Centene $0.47
GRA W.R. Grace $0.86
MAS Masco $0.74
SEE Sealed Air $0.78
INCY YTE $0.53
SPGI S&P Global Inc $2.54
JLL Jones Lang LaSalle $3.93
FOXA Twenty-First Century Fox -$0.06
IIVI Ii Vi $0.90
J Jacobs Engineering Group Inc $1.27
MLM Martin Marietta Materials $2.28
FIS Fidelity National Information Services $1.57
WLTW Willis $5.03
NVT nVent Electric PLC $0.42
AVNT Avient Corp $0.45
VSH Vishay Intertechnology $0.28
TDG TransDigm $1.99
IT Gartner $0.82
DD DuPont $0.85
CARR Carrier Global Corp $0.36
NRZ New Residential Investment $0.32
CVE Cenovus Energy USA -$0.06
ENPH Enphase Energy $0.41
AKAM Akamai $1.31
CCK Crown $1.27
THC Tenet Healthcare $1.79
NCR NCR $0.59
OI Owens-Illinois $0.34
HIW Highwoods Properties $0.47
EGP EastGroup Properties $0.61
FISV Fiserv $1.29
WELL Welltower Inc $0.13
UDR UDR $0.09
ACGL Arch Capital $0.38
TWTR Twitter $0.29
FMC FMC $1.47
BKH Black Hills $1.15
CNO CNO Financial Group $0.59
AIZ Assurant $2.07
DEI Douglas Emmett $0.01
PEAK Healthpeak Properties Inc $0.05
G Genpact $0.49
PRI Primerica $2.50
VOYA Voya Financial $1.45
YELP Yelp $0.00
CDAY Ceridian HCM Holding Inc $0.07
LYFT Lyft Inc -$0.72
CSCO Cisco Systems $0.76
MAT Mattel $0.23
QGEN Qiagen $0.65
EXC Exelon $0.73
EXAS Exact Sciences -$0.19
OMC Omnicom $1.63
AMX America Movil Sab De Cv Amx $0.40
VERX Vertex Inc. Cl A $0.07
OJIPY Oji ADR $1.62
RANJY Randstad Holdings $0.49
FOX Twenty First Century Fox -$0.06
KT KT $0.18
SHCAY Sharp ADR $0.08
COTY Coty $0.07

 

Wednesday (February 10)

IN THE SPOTLIGHT: GENERAL MOTORS, COCA-COLA

GENERAL MOTORS: the world’s largest auto manufacturers which ranked number 18 on the Fortune 500 rankings of the largest United States corporations by total revenue is expected to report a profit of $1.64 in the fourth quarter of 2020, which represents year-over-year growth of over 3000% from the same quarter last year when the company reported $0.05 per share.

The auto manufacturer will report revenue of $36.9 billion, up about 20% from the year-ago quarter.

“We are Overweight based on General Motors’ (GM) diversified portfolio, with multiple ways for GM to enhance shareholder value, through: EVs, ICE and Autonomy. GM also has leading North American margins, generates strong cash flow, and has a robust balance sheet,” wrote Joseph Moore, equity analyst at Morgan Stanley.

“We believe that the market is underestimating the SOTP of the GM enterprise via: 1) Legacy ICE, 2) GM EV, 3) GM‘s Ultium Battery business, 4) China JVs, 5) GM Finco, 6) GM Cruise, 7) hidden franchise value in brands such as Corvette and 8) GM Connected Services. GM management has a proven track record to allocate capital away from structurally challenged areas towards re-positioning the business model.”

COCA-COLA: The largest manufacturer, distributor and marketer of soft drink concentrates and syrups in the world is expected to report a profit of $0.42 in the fourth quarter of 2020, which represents a year-over-year decline of over 4.5% from the same quarter last year when the company reported $0.44 per share.

The auto manufacturer will report revenue of $8.74 billion, up about 4% from the year-ago quarter.

“We are Overweight on Coca-Cola (KO) after significant stock underperformance given COVID-19 impacts on KO‘s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID impacts drove a large -26% organic sales decline in 2Q20, but trends improved to -MSD% in July/August and -LSD% in September/October. We forecast a recovery to ~8% organic growth in 2021/2022 with a post-COVID recovery in away-from-home,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe Coke‘s LT top-line growth outlook is above peers, with strong pricing power, and favourable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

Ticker Company EPS Forecast
BDC Belden $0.77
PAG Penske Automotive $2.13
TMHC Taylor Morrison Home $0.82
CDW CDW $1.50
IPG Interpublic Of Companies $0.80
UAA Under Armour Inc -$0.07
CIM Chimera Investment $0.31
TEVA Teva Pharmaceutical Industries $0.63
GM General Motors $1.64
IQV IQVIA Holdings Inc $2.00
KO Coca-Cola $0.42
EEFT Euronet Worldwide $0.73
BG Bunge $1.77
CME CME $1.37
BXMT Blackstone Mortgage $0.60
CCJ Cameco USA -$0.04
HCSG Healthcare Services $0.29
AEIS Advanced Energy Industries $1.34
EFX Equifax $1.82
TRMB Trimble Navigation $0.51
EQC Equity Commonwealth $0.02
IRBT Irobot $0.20
ELY Callaway Golf -$0.21
EQIX Equinix $1.49
PACB Pacific Biosciences Of California $0.42
UBER Uber -$0.53
HP Helmerich & Payne -$0.79
TYL Tyler Technologies $1.42
KGC Kinross Gold USA $0.22
PAYC Paycom Software $0.79
WTS Watts Water Technologies $1.01
HR Healthcare Realty $0.04
QLYS Qualys $0.70
TTGT TechTarget $0.41
SLF Sun Life Financial USA $1.08
XPO XPO Logistics $0.68
EXEL Exelixis $0.05
BHF Brighthouse Financial Inc $2.65
AVLR Avalara Inc -$0.06
STAG STAG Industrial $0.08
IFF International Flavors Fragrances $1.19
MFC Manulife Financial USA $0.56
CPA Copa -$2.09
SONO Sonos Inc $0.85
NGVT Ingevity Corp $0.78
REXR Rexford Industrial Realty $0.07
FR First Industrial Realty $0.18
RUSHA Rush Enterprises $0.54
MC Moelis & Company $1.29
CINF Cincinnati Financial $1.19
EQR Equity Residential $0.25
SSNC SS&C Technologies $1.05
CERN Cerner $0.78
NLY Annaly Capital Management $0.29
MOH Molina Healthcare $1.14
AIN Albany International $0.66
WU Western Union $0.42
PDM Piedmont Office Realty $0.05
BE Bloom Energy Corp $0.00
MGM MGM Resorts International -$0.95
ZNGA Zynga $0.09
ASGN On Assignment $1.15
ORLY O’Reilly Automotive $5.09
WH Wyndham Hotels & Resorts Inc $0.04
SAVE Spirit Airlines -$1.43
COHR Coherent $0.78
PVG Pretium Resources $0.08
PRSP Perspecta Inc $0.52
GOCO Gocompare.Com $0.46
PS Pluralsight Inc -$0.02
PTVE Pactiv Evergreen $0.26
AMAT Applied Materials $1.27
NTAP NetApp $1.01
CF CF Industries $0.08
SPWR SunPower $0.10
UA Under Armour C share -$0.07
Z Zillow $0.28

 

Thursday (February 11)

IN THE SPOTLIGHT: PEPSICO, WALT DISNEY

PEPSICO: The company which holds approximately a 32% share of the U.S. soft drink industry is expected to report a profit of $1.45 in the fourth quarter of 2020. According to Zacks Research, analysts expect that PepsiCo will report full-year 2022 earnings of $5.51 per share, with EPS estimates ranging from $5.50 to $5.55.

The company also recently announced a quarterly dividend, which was paid on Thursday, January 7th.

“We are Overweight on PepsiCo (PEP). We forecast Pepsi will post superior topline growth relative to peers driven by exposure to the higher growth/higher margin snacks category (2/3 of PEP‘s profit). Snacks is a higher growth category given: (1) shift to snacking vs. sit-down meals; (2) less pressure from health/wellness vs. beverages, and (3) PEP’s leading share in snacks vs. fragmented competition, driving share gains, and higher margins/ROIC,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We also see more structural Pepsi market share benefits post COVID-19, as PEP uses its DSD distribution advantage, to gain shelf space and share in snacks, and in beverages, where PEP is advantaged vs competition with much lower mix in away-from-home.”

Walt Disney, a family entertainment company will post EPS of -$0.33 per share in the fiscal quarter.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 11

Ticker Company EPS Forecast
NNN National Retail Properties $0.65
MT Arcelormittal -$0.02
HII Huntington Ingalls Industries $4.56
TSN Tyson Foods $1.52
IRDM Iridium Communications -$0.08
PPC Pilgrim’s Pride $0.32
BWA Borgwarner $0.89
ZBRA Zebra Technologies $3.81
AZN Astrazeneca $0.55
PEP PepsiCo $1.45
FAF First American Financial $1.66
TAP Molson Coors Brewing $0.77
DUK Duke Energy $1.03
BAM Brookfield Asset Management USA $0.60
K Kellogg $0.89
NUS Nu Skin Enterprises $1.19
MAC Macerich -$0.12
THS TreeHouse Foods $1.07
KIM Kimco Realty $0.10
SON Sonoco Products $0.77
POOL Pool $0.76
LH Laboratory Of America $7.83
SSTK Shutterstock $0.52
GNRC Generac $1.97
R Ryder System $0.94
TPX Tempur Sealy International $0.51
KHC Kraft Heinz $0.73
NSIT Insights $1.50
SAFE 3 Sixty Risk $0.29
ALNY Alnylam Pharmaceuticals -$1.93
WSO Watsco $1.01
ILMN Illumina $1.10
NSP Insperity $0.30
ENS Enersys $1.19
MHK Mohawk Industries $2.87
DXCM Dexcom $0.93
TEX Terex $0.02
SPSC SPS Commerce $0.34
AEM Agnico Eagle Mines USA $0.64
CGNX Cognex $0.29
CUZ Cousins Properties $0.19
BIO Bio-Rad Laboratories $3.30
DLR Digital Realty $0.18
FWRD Forward Air $0.72
SGEN Seattle Genetics $0.89
DVA DaVita Healthcare Partners $1.91
CC Chemours Co $0.42
EXPE Expedia -$1.95
BRX Brixmor Property $0.05
SHO Sunstone Hotel Investors -$0.37
FRT Federal Realty Investment $0.28
REG Regency Centers $0.20
DIS Walt Disney -$0.33
VRSN Verisign $1.35
JCOM J2 Global $2.80
TWOU 2U -$0.09
RARE Ultragenyx Pharmaceutical -$1.06
NWE Northwestern $1.35
FLO Flowers Foods $0.24
TU Telus USA $0.19
NCMGY Newcrest Mining Ltd PK $0.59
CX Cemex Sab De Cv $0.02
SBGSY Schneider Electric SA $0.63
AEG Aegon $0.13
NVDA Nvidia $2.80
BCS Barclays $0.20
NICE Nice Systems $1.54
BFAM Bright Horizons Family Solutions -$0.24
AGIO Agios Pharmaceuticals -$1.41
ALKS ALKERMES $0.07
WST West Pharmaceutical Services $1.13
HTA Healthcare Of America $0.43
LPSN LivePerson -$0.01
DAVA Endava Ltd $0.35
JAMF Jamf $0.01
ALXO Alx Oncology Holdings Inc. -$0.39
OMAB Grupo Aeroportuario Del Centro Nort $0.23

 

Friday (February 12)

Ticker Company EPS Forecast
D Dominion Resources $0.76
HUN Huntsman $0.45
SXT Sensient Technologies $0.62
AIMC Altra Industrial Motion $0.69
LECO Lincoln Electric $1.06
PRLB Proto Labs $0.51
MCO Moody’s $1.94
NWL Newell Rubbermaid $0.48
WPC W. P. Carey $0.49
ENB Enbridge USA $0.46
AUY Yamana Gold USA $0.10
YMZBY Yamazaki Baking ADR $0.40

 

Three Top Earnings Plays This Week

U.S. markets wrap up fourth quarter earnings season in style this week, with three trading favorites posting results and guidance. Twitter Inc. (TWTR) kicks things off after Tuesday’s closing bell, followed by General Motors Co. (GM) on Wednesday, and Walt Disney Co. (DIS) on Thursday. All these stocks are currently situated at or near new highs, sporting high valuations that add considerable downside risk.

Major benchmarks posted all-time highs heading into Friday’s close, highlighting broad optimism about the Biden administration’s massive stimulus bill, now working its way through Congress. Meanwhile, fourth and fifth COVID-19 vaccines are headed toward approval and distribution, keeping the economic world on track for a strong recovery in the second half of the year. Those catalysts could keep bulls in charge of the ticker tape into the second quarter.

Twitter

Twitter is expected to post a profit of $0.31 per-share on $1.19 billion in revenue. The stock broke out above the December high at 56.11 last week and is finally closing in on 2014’s all-time high at 74.73, posted less than two months after the 2013 IPO. The company is releasing a new advertising platform that should benefit from a cyclical ad recovery in coming months, encouraging analysts to factor in 20%+ annual revenue growth in coming years.

General Motors

General Motors should report a profit of $1.66 per-share, much higher than the $0.05 earned in the same quarter last year, while revenue rises to $36.34 billion.   The company has benefited from EV-driven revaluation of major auto manufacturers following rival Tesla Inc. (TSLA) historic uptrend. GM expects to have 30 fully-electric vehicles in production by 2025 and is seeking to establish the highest EV market share in North America.

Walt Disney

At first glance, there’s no reason for Walt Disney to be trading just below January’s all-time high heading into this week’s report. The entertainment giant is expected to lose $0.38 per-share on $15.85 billion as a result of empty movie theaters, cruise ships in dry dock, and socially-distanced theme parks. However, the Disney+ streaming service is growing at a phenomenal rate and should pass Netflix Inc. (NFLX) in worldwide subscribers in the next two years.

For a look at all of this week’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.

General Motors Nears All-Time High

General Motors Co. (GM) rallied within five cents of 2017’s all-time high at 46.76 on Tuesday, at the tail end of a spectacular uptrend off March 2020’s all-time low at 14.32. The uptick translates into a 325% advance in the middle of a pandemic that’s threatened to upend the world economy. GM CEO Mary Barra can thank Elon Musk for a good part of the upside, with Tesla Inc.’s (TSLA) historic uptrend setting off sympathetic rallies throughout the EV space.

GM Raises EV Commitment

The automotive giant is increasing its financial commitment to EVs from $25 billion to $27 billion and expects to offer 30 all-electric models globally by the middle of the decade. Barra also chose to stick with a winner this week, abandoning President Trump’s lawsuit to challenge California emission standards and throwing her hat into Joe Biden’s ring, with a commitment to adhere to more climate-sensitive policies.

Executive VP Doug Parks outlined the initiatives at a Nov. 19 conference, confirming 30 EVs at all price points, with more than two-thirds available in North America. To complete the task, the company is hiring 3,000 electrical system, infotainment software, and controls engineers, plus developers for Java, Android, iOS, and other platforms. GM will also look at third-party licensing for its Ultium EV architecture, batteries, and propulsion systems, along with its Hydrotec fuel cell technology developed with Honda.

Wall Street And Technical Outlook

Wall Street consensus has tracked the rise in share prices, with a ‘Strong Buy’ rating based upon 11 ‘Buy’ and 1 ‘Hold’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets range from a low of $20 to a Street-high $65 while the stock opened Wednesday’s session at the median $45 target. This placement suggests GM is fully-valued, with earnings likely to drive future price action rather than long-term initiatives.

This is General Motor’s fourth trip into this price zone since coming public in 2010. Heavy selling pressure emerged during 2011, 2013 and 2017 advances so it’s best to remain skeptical because the rally has now reached 2017 resistance. In addition, the 8-month uptrend has carved just one consolidation pattern, with support now centered in the mid-30s. As a result, the reward-to-risk profile won’t be favorable until overbought technical readings work out of the system.

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.

 

General Motors Shares Jump Over 6% After Earnings Beat Estimates; Target Price $46

General Motors, an American multinational corporation that was the world’s largest motor-vehicle manufacturer in the 20th century, reported a better-than-expected profit in the third quarter as demand bounced back in the two economic giants, U.S. and China – sending its shares up over 6% in pre-market trading on Thursday.

The auto manufacturer reported net income of $4 billion, or $2.78 a share, compared with $2.35 billion, or $1.60 a share, a year earlier. Excluding one-time items, it earned $2.83 a share, higher than the market expectations of $1.38 a share.

General Motors reported an EBIT-adjusted margin of 14.9% driven by a strong product lineup, disciplined pricing and cost actions. Strong automotive liquidity of $37.8 billion; expect to repay revolver balance by year-end.

“Strong headline beat in Q3 with FCF $9.1bn fully reversing the Q2 cash flow drain. NA EBIT flattish y-o-y adjusted for UAW strike last year but impressive 15% margin. Low inventories support further balance sheet repair in Q4,” said Philippe Houchois, equity analyst at Jefferies.

General Motors shares climbed 6.07% higher to $37.38 in pre-market trading on Thursday; however, the stock is down about 4% so far this year.

Executive Comments

“Sales in the U.S. and China are recovering faster than many people expected, and GM is benefiting from robust customer demand for our new vehicles and services, especially our full-size pickups and SUVs. These strong fundamentals and the positive impact of our transformation and austerity measures are helping us to deliver solid earnings, generate significant cash and quickly repay the debt we incurred during the early days of the pandemic,” said John Stapleton, Interim CFO.

General Motors Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $42.69 with a high forecast of $65.00 and a low forecast of $20.00. The average price target represents a 21.14% increase from the last price of $35.24. From those 13 analysts, 11 rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $46 with a high of $68 under a bull-case scenario and $15 under the worst-case scenario. The firm currently has an “Overweight” rating on the motor-vehicle manufacturer’s stock. General Motors had its price objective hoisted by equities researchers at Barclays to $40 from $39. The brokerage presently has an “overweight” rating on the auto manufacturer’s stock.

Several other analysts have also recently commented on the stock. Zacks Investment Research lowered shares of General Motors from a “buy” rating to a “hold” rating and set a $32 price objective for the company. Bank of America increased their target price on General Motors from $60 to $65 and gave the company a “buy” rating. Royal Bank of Canada raised their price objective to $44 from $39 and gave the stock an “outperform” rating. UBS Group boosted their target price to $34 from $27 and gave the company a “buy” rating.

We think it is good to buy at the current level with a target of $46 as 100-day Moving Average and 100-200-day MACD Oscillator signal a buying opportunity.

Analyst Comments

“We are ‘Overweight’ based on its strong portfolio diversification across: General Motors  (GM) brands, as well as EVs, ICE and AVs. It also has leading North American margins, generates strong cash flow, and has a strong balance sheet. We believe the market is underestimating the SOTP of the GM enterprise via: 1) Legacy ICE, 2) GM EV, 3) GM’s Ultrium Battery business, 4) China JVs, 5) GM Finco, 6) GM Cruise, and 7) hidden franchise value in brands such as Corvette,” said Adam Jonas, equity analyst at Morgan Stanley.

“GM management has a proven track record to allocate capital away from structurally challenged areas towards re-positioning the business model.”

Check out FX Empire’s earnings calendar

General Motors Acquire 11% Stake in Nikola; Buy with Target Price of $46

General Motors, an American multinational corporation that was the world’s largest motor-vehicle manufacturer in the 20th century, said it would acquire 11% stake in U.S. electric trucking startup Nikola for $2 billion, sending both shares higher in pre-market trading on Tuesday.

The auto manufacturer will also receive the right to nominate one director. General Motors seizes growth opportunity with Nikola to boldly move into broader markets with Hydrotec fuel cell and Ultium battery systems, the company said in the statement.

Following this release, General Motors’ shares rose about 6% to $31.66 in pre-market trading on Tuesday, but the stock is down about 17% so far this year.

In addition, Nikola shares climbed over 30% to $45.68 in pre-market trading. Also, the stock is up over 240% so far this year.

Executives’ comments

“By joining together, we get access to their validated parts for all of our programs, General Motors’ Ultium battery technology and a multi-billion dollar fuel cell program ready for production. Nikola immediately gets decades of supplier and manufacturing knowledge, validated and tested production-ready EV propulsion, world-class engineering and investor confidence,” said Nikola Founder and Executive Chairman Trevor Milton.

“Most importantly, General Motors has a vested interest to see Nikola succeed. We made three promises to our stakeholders and have now fulfilled two out of three promises ahead of schedule. What an exciting announcement,” Milton added.

“We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability. In addition, applying General Motors’ electrified technology solutions to the heavy-duty class of commercial vehicles is another important step in fulfilling our vision of a zero-emissions future,” said General Motors Chairman and CEO Mary Barra.

General Motors stock forecast

Fourteen analysts forecast the average price in 12 months at $33.46 with a high forecast of $46.00 and a low forecast of $15.00. The average price target represents an 11.53% increase from the last price of $30.00. From those 14 analysts, ten rated “Buy”, three rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $46 with a high of $68 under a bull-case scenario and $15 under the worst-case scenario. General Motors stock price forecast was raised by Citigroup to $54 from $53.

Other equity analysts also recently updated their stock outlook. General Motors had its price objective upped by Deutsche Bank to $33 from $30. Deutsche Bank currently has a buy rating on the auto manufacturer’s stock. UBS Group raised their price target to $34 from $27.00 and gave the company a buy rating.

Analyst views

“We are Overweight (OW) based on its strong portfolio diversification across: General Motors (GM) brands, as well as EVs, ICE and AVs. It also has leading North American margins, generates strong cash flow, and has a strong balance sheet,” said Adam Jonas, equity analyst at Morgan Stanley.

“We believe the market is underestimating the SOTP of the GM enterprise via: 1) Legacy ICE, 2) GM EV, 3) GM’s Ultium Battery business, 4) China JVs, 5) GM Finco, 6) GM Cruise, and 7) hidden franchise value in brands such as Corvette. GM management have a proven track record to allocate capital away from structurally challenged areas towards re-positioning the business model,” he added.

Upside and Downside risks

Upside: 1) Ramp of HD Truck and Full-Size SUV Platform. 2) Strategic Optionality, similar to exit of Europe. 3) Liquidity / Cash Management. 4) Spin-off of EV Business or GM Cruise – highlighted Morgan Stanley.

Downside: 1) Used Vehicle Prices. 2) China Profitability. 3) SAAR remains depressed. 4) GM Financial Losses.

Check out FX Empire’s earnings calendar

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.

A close up of a map Description automatically generated

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.

General Motors Trading Higher Despite Horrific Quarter

General Motors Co. (GM) is trading higher ahead of Wednesday’s U.S. opening bell after posting a loss of $0.50 per-share, beating estimates by an impressive $1.26. Revenues matched expectations at $16.8 billion, which marked a stomach-churning 53.4% year-over-year decline.  U.S. sales fell 34% compared to the same quarter in 2019 but improved sequentially between April and June, rising from a 35% to 20% decline at quarter’s end.

General Motors Cyclical Downturn

Traditional auto manufacturers were under pressure prior to the COVID-19 pandemic, with slumping comparative sales raising fears of a cyclical downturn. The outbreak has confirmed those suspicions, with most automakers reporting steep declines. Tesla Inc. (TSLA) has been a notable exception in this equation, but the EV upstart could face similar headwinds when mass production ramps up in coming years.

Chief Financial Officer Dhivya Suryadevara pointed out strong demand for trucks in a post-release interview, noting tight inventories in this successful product line. He stated the automaker should be able to repay some debt in the second half of the year, lowering anxiety about liquidity that’s taken a hit in the crisis. The CFO also pointed out the sequential improvement but wrapped up his comments by warning the ‘situation with COVID-19 is very fluid”.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Moderate Buy’, based upon 8 ‘Buy’, 3 ‘Hold’, and 1 ‘Sell’ recommendations. Price targets currently range from a low of $15 to a street-high $39 while the stock will open this morning’s session about $3 below the median $30 target. Upside appears limited despite the ‘buy-the-news’ reaction because short covering is probably driving this uptick, rather than investors coming off the sidelines in reaction to a more bullish outlook.

General Motors has underperformed broad benchmarks since posting an all-time high in the 40s in October 2017, caught in a decline that broke 2015 support in the first quarter downdraft. The stock remounted that level in May and stalled out, entering a testing process that’s still in progress, despite this morning’s uptick. It will now take about 5 upside points to confirm support and set the stage for another rally wave.  That seems unlikely without much stronger quarterly revenues.

U.S. Stocks To Watch Today

General Motors

General Motors is set to provide its earnings report today before the market open. Analysts expect that the company will report revenue of $31.37 billion and profit of $0.34 per share.

The main intrigue is how the company plans to deal with the current crisis. The coronavirus containment measures dealt a heavy blow to the auto industry, and it’s not surprising that General Motors shares lost more than 40% of their value since the beginning of this year.

Recent reports suggest that General Motors wants to raise an additional $2 billion via a loan to boost its liquidity, but this has not yet been confirmed by the company. In all likelihood, General Motors will provide an update on liquidity measures during the upcoming earnings call.

The sales guidance is also of outmost importance as traders and investors try to guesstimate how much actual damage was done during the recent months and whether the company can mitigate this damage via increased sales after the end of virus containment measures.

Shopify

Shopify is one of the stocks that rallied due to the pandemic as consumers switched to online shopping options as brick-and-mortar stores were unavailable.

The company will provide its quarterly report today before the market open. The analyst consensus calls for revenue of $443 million and loss of $0.17 per share.

In all likelihood, the market will ignore the profitability metric and focus on the top line growth. However, the expectations are high as Shopify shares are up more than 70% year-to-date and have reached their all-time highs during the most recent trading session.

In case Shopify results fail to meet expectations, I’d expect a rapid sell-off as the stock’s valuation implies flawless execution.

Activision Blizzard

Activision Blizzard provided its quarterly results yesterday after the market close. The company reported revenue of $1.79 billion and profit of $0.65 per share, beating analyst estimates.

Activision Blizzard benefited from stay-at-home orders and success of the new Call of Duty which was released in March. As the lockdowns continued in April, the positive business environment remained intact.

The company expects that the strong momentum will continue and raises the outlook for revenue and earnings per share for the full year.

Before the earnings report, Activision Blizzard shares were up about 15% year-to-date. The market has positively reacted to the news, and the stock gained ground during the after-hours trading session. This trend may continue in the regular trading session.

Asia Mixed On Monday Woe, EU Market Surges On Trade News, Autos Lead The US Higher

Asian Markets Were Mixed On Tuesday

Asian markets closed mixed on Tuesday following Monday’s wild ride in US equities. The index moves were small in most cases but no two performed quite the same. The Australian ASX led advancing markets with a gain of 0.42% led by the banking sector while the Japanese Nikkei led declining indices with a loss near -0.35%. In China, the Shang Hai led with a gain of 0.37% compared to a 0.07% advance for the Hong Kong-based Heng Seng.

Traders were wary following Monday’s bag of news. In the US, a major market rebound signals a possible bottom to the October/November correction while developments in the UK and India add confusion to an already uncertain marketplace. In the UK, Prime Minister Theresa May has delayed a crucial vote on her Brexit deal with the EU. The delay is not unexpected but adds another element of uncertainty to the Brexit process. The Brexit deadline is only a few months away, failing to reach an agreement could lead to a hard-Brexit, Brexit without a trade deal, and that will make big waves in global financial circles.

In Japan, shares of tech-conglomerate Softbank surged nearly 2.5%. The move was sparked by news the IPO of Softbank’s mobile unit had been priced at $13.25 per share. The pricing is above market expectation and sign appetite for IPO’s is still alive and well.

EU Market Up On Trade News

Indices in the EU were up an average 1.75% in early Tuesday trading on word that trade talks between the US and China were progressing as expected. The news out of Beijing is that talks between the US and China are confirmed, news contrary to fears that have emerged since the G-20 meeting earlier this month.  Chinese Vice Premier Liu is cited as the source of the news.

Regarding the indices, the German DAX led with a gain of 1.95% while the French CAC and UK FTSE 100 were not far behind with gains of 1.90% and 1.55% respectively. All sectors and major bourses were positive in early trading, led by the miners. Shares of Antofagasta, Rio Tinto, and Anglo American were all up more than 3%.

Autos Lead Markets In The US

The trade news from China helped lift US indices in early Tuesday trading. The broad market SPX, blue-chip Dow Industrials, and tech-heavy NASDAQ Composite were all looking at 1.0% gains in early pre-market futures trading. The move was led by the auto sector and details on trade talks reported by Bloomberg. According to the news agency, China is moving toward lowering tariffs on autos imported from the US.

Chinese tariffs on autos were raised to 40% in August in retaliation for the US tariffs on Chinese imports. US President Trump Tweeted after the G-20 meeting China had agreed to lower these tariffs, this is the first sign that such an agreement is in place and happening. The auto sector has been under immense pressure since the trade-war began because it is closely linked with international trade at all levels. Shares of GM led with a gain near 2.4% followed by a 2.25% advance for Ford and a 2.0% gain for Tesla. Traders will be watching for more news on trade this week, as well as a policy statement from the ECB which is due out on Thursday.

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.

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