What to know today

  • Tesla says it’ll make a cheaper model.
  • The Magnificent Seven prepare to ride.
  • General Motors is in high gear.
markets

Time for Tesla To Turn It Around

Management sounded wise on Tuesday.

Investors, traders, and speculators had already treated Tesla $TSLA well during Tuesday’s regular trading session, the stock rising 4.37 percent and surging into the close.

Perhaps it was an expression of a collective “what else could possibly go wrong?” hypothesis ahead of management’s first-quarter earnings conference call on Tuesday evening.

Well, Elon Musk can open his mouth, is what else.

This time, though, this time…

It looks like the mercurial visionary may have responded well to constructive criticism – the people who Barclays analyst Dan Levy may have had in mind when he divided TSLA bulls into the “rational” as opposed to the “exuberant.”

According to the slide deck prepared in advance of management’s conference call, TSLA will accelerate the launch of “new models ahead of our previously communicated start of production in the second half of 2025.”

“Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs,” management also noted. “While positive for our regulatory credits business, we prefer the industry to continue pushing EV adoption, which is in-line with our mission.”

Tesla $TSLA reported declines in both sales and earnings but the stock surged in after-hours trading when Elon Musk said it would accelerate plans to produce a cheaper EV.

And then Elon essentially confirmed, in his way, that TSLA will reorient its focus toward making EVs for people to drive and will introduce new models this year or early next year.

The guy has a way of shifting timelines, so we’ll see, but this is pleasing to shareholders so far, with TSLA up nearly 10 percent shortly after he started speaking and boosting its market cap by approximately $40 billion.

TSLA – the first of the “original” “Magnificent Seven” to report this season – posted a net-income decline of 55 percent to $1.1 billion on a sales contraction of 8.7 percent.

Safe to say, looking back on its 41.77 percent year-to-date decline, all of that and more was priced in to TSLA by 4:00 p.m. ET yesterday afternoon.

It’s a long way to the top. And it’s an even longer way back to the top.

TSLA has been in a drawdown for 896 days, the second-longest downturn since its IPO in 2010. Even accounting for the after-hours surge on Tuesday, it’s still about 64 percent below its November 2021 peak.

This is going to be a one-day-at-a-time process like no other before it in public markets.

And, by the way, according to Elon’s own X account on April 5, TSLA’s robotaxi unveiling is scheduled for August 8.

deep dive

What Went Up Did Come Down

So where do we go now…

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 Magnificent Seven are forecast to grow earnings by 38 percent in the first quarter.

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.

deep dive |
April 24, 2024

What Went Up Did Come Down

AUTOMAKERS

General Motors Proves It

And a good quarter could lead to more good quarters.

“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.

General Motors $GM surged on April 23, 2024, after management raised its guidance for full-year sales and net income.

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.

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