corporate

💸The rally fizzled🧮

Spread the love

As discussed in previous updates, the equity markets could not hold on to the gains, and Wednesday saw an end to the 2-day rally. In addition, the latest earnings reports could not keep pace with investors’ enthusiasm as the sharp rise in bond yields threatened the stocks’ valuation.

An interest rate hike often comes with a lag time; investors are cautious that the worst of corporate earnings may not be over as guidance may weaken further. This is already reflected in the rising bond yield, in which market participants hint at the role of the Fed having to continue the aggressive rate hike path in the upcoming meetings.

🚘Tesla: A decent earning that failed to send awe💣

Tesla’s third-quarter earnings result was moderately better than expected, but it was insufficient to tone down the worry of demand destruction. Even Elon Musk’s bullish comments could send the stocks higher.

Notably, an operating profit of about $3.7 billion is a record, smashing its prior high of $3.6 billion seen during 1Q2022. However, the bar was set higher at the $3.9 billion expectation. The key metric, gross profit margin, which excludes any sales of emission credits, came in at 26.7%, an improvement from 26.2%.

If we look at the gross profit per car, excluding any emission credits, it stands at $15,200, which is a decline from $16,000 but is considered a good result. The management sticks to its goal of having 50% growth annually, thus reaffirming Wall Street’s estimate.

While Elon Musk made a statement that Tesla has the potential to become an even more valuable company than the likes of Apple and ARAMCO combined in the future, investors were not excited.

In navigating the production shutdown in China and general inflation in auto parts, Tesla had come a long way. Pika World maintains exposure to Tesla stocks.