This Was a Good Miss

It was their biggest collective market-cap contraction ever, “The Magnificent Seven” shedding approximately $950 billion last week.

Microsoft $MSFT, the biggest publicly traded company in the world by market cap, was down 5.39 percent for the week, its worst showing since January 2023.

Nvidia $NVDA, the most important stock in the world according to Goldman Sachs, lost 13.59 percent, including a tidy 10 percent on Friday, its worst day since March 2020.

And it already feels like ancient history after the first two days of price action this week.

The #MagSeven led the market last year and has, for the most part, continued to lead the market this year, with only Apple $AAPL, down 14.29 percent, and TSLA in negative territory so far in 2024.

Through April 19 MSFT was still up more than 6 percent year to date. And NVDA’s gain is still nearly 54 percent.

And the group’s dominance continues: Its average weighting in the S&P 500 as of April 17 was 29.7 percent according to Datatrek, up from 27.9 percent at the end of 2023. And they continue to drive earnings growth for the index.

According to Bloomberg Intelligence, Amazon.com $AMZN, Alphabet $GOOGL, AAPL, Meta Platforms $META, MSFT, NVDA, and TSLA are expected to post year-over year earnings growth of 38 percent in the first quarter compared to 2.4 percent for the S&P at large. Excluding NVDA, though, that growth rate shrinks to 23 percent.

META will report after the market closes today. MSFT and GOOGL will report after Thursday’s close. NVDA is scheduled to report fiscal 2025 first-quarter results on May 22.

“Our consumer has been remarkably resilient in this period of higher interest rates,” said General Motors $GM CFO Paul Jacobson during the company’s first-quarter earnings conference call.

“We think, in this environment, we can continue to perform.”

GM was up about 5 percent on Tuesday, extending its year-to-date gain to 25.55 percent, as management reported sales growth of 7.6 percent to $43.014 billion and net income growth of 24.4 percent to $2.980 billion.

Adjusted EBIT was up 1.8 percent to $3.871 billion, and earnings per share improved to $2.56 from $1.69 a year ago.

Management updated its guidance for net income to a range of $10.1 billion to $11.5 billion from a prior range of $9.8 billion to $11.2 billion. GM now expects adjusted EBIT of $12.5 billion to $14.5 billion, up from $12.0 billion to $14.0 billion.

And earnings per share will be $8.94 to $9.94 versus $8.50 to $9.50.

With a market cap of $52.394 billion, GM still trails TSLA by a significant margin. But the narrowing of that gap is a dynamic that looks fixed in place for the time being.

Consider this: GM has deemphasized EVs and doesn’t even report financial results for its efforts there. Gas-powered pickup trucks and SUVs drive its top and bottom lines, no question about it.

But GM did boost its EV production by 74 percent compared to the fourth quarter, management noting the easing of supply-chain snafus that impaired battery output, and forecast full-year production of 200,000 to 300,000 in North America.

That would represent a more than 10-fold increase compared to 2023.

Here’s something else to consider: In December, GM spent approximately $6.6 billion to buy back about 16 percent of its outstanding shares at $31.60 per share.

GM closed at $45.10 on Tuesday. And it still trades for just 4.7 times the midpoint of management’s full-year EPS guidance.

GM’s coverage isn’t as exciting and effusive as TSLA’s. This, however, is the stuff of pricing inefficiencies in a market made up of people making decisions for all kinds of reasons, exuberant as well as rational.

Wedbush Securities analyst Dan Ives is both impressed by GM and wanting to see more, reiterating his “buy” rating following what he described as a “major ‘prove me’ quarter” for the old-school automaker.

At the same time, as we learn in another dispatch From the Research Desk, Ives said “the long-awaited turnaround now appears to be underway.”

JPMorgan is another of the 20 Wall Street houses with “buy” ratings on GM – and it expressly favors it over US-based EV competitors TSLA and Rivian Automotive $RIVN.

CFRA Research is one of nine houses that rate GM a “hold,” citing the potential for the company to lose share because of its lack of competitive hybrid vehicles as well as its plan to invest heavily in the development of EVs and battery cells.