Tag: Ford Motor Company (F)

Can Tesla (TSLA) and Netflix (NFLX) Surpass Earnings Expectations?

Posted on by The INO.com Team

Tesla, Inc. (TSLA) , the undisputed leader in EVs, is scheduled to release its fiscal 2023 second-quarter results on July 19 after the closing bell. Analysts expect TSLA’s revenue to increase 45.7% year-over-year to $24.67 billion for the quarter that ended June 2023.

The consensus earnings per share (EPS) estimate of $0.82 for the about-to-be-reported quarter indicates an increase of 8.2% year-over-year. For the fiscal year ending December 2023, the EV maker’s revenue and EPS are expected to increase 24% and decrease 13.2% year-over-year to $100.98 billion and $3.53, respectively.

Streaming giant Netflix, Inc. (NFLX) is also set to report its second-quarter earnings after the market close on July 19, kicking off media earnings season. The company is expected to put light on its subscriber momentum, the progress of its cheaper advertising tier, and the impact of its password-sharing crackdown.

Analysts expect NFLX’s revenue for the fiscal second quarter (ended June 30, 2023) to increase 3.9% year-over-year to $8.26 billion. However, the consensus EPS estimate of $2.86 for the same quarter indicates a decline of 10.8% year-over-year.

In addition, the company’s revenue and EPS for fiscal year 2023 are expected to grow 7.7% and 13.5% year-over-year to $34.06 billion and $11.29, respectively.

Let’s analyze each stock and determine the chances of them surpassing analysts’ expectations:

TSLA designs, develops, manufactures, and sells electric vehicles (EVs) and energy generation and storage systems in the United States, China, and internationally. The company operates through two segments: Automotive; and Energy Generation and Storage.

TSLA recently released its second-quarter production and delivery numbers, easily beating estimates as the effects of the company’s price cuts, coupled with federal EV tax credits, boosted sales.

In April, the EV maker slashed prices of some of its Model Y and Model 3 EVs in the United States, the sixth time of lowering U.S. prices this year. TSLA’s Model Y “long range” and “performance” vehicles prices were cut by $3,000 each, and that of its Model 3 “rear-wheel drive” by $2,000 to $39,990.

Further, the Elon Musk-led company lowered prices in Europe, Israel, and Singapore along with Japan, Australia, and South Korea, expanding a discount drive it commenced in China in January to drive demand.

During the second quarter, TSLA produced approximately 480,000 vehicles and delivered nearly 466,000 vehicles. The delivery figures easily beat Wall Street consensus estimates of 448,599 units and the previous quarter’s total of 422,875. Both production and delivery figures for the second quarter were all-time records for the company.

Yet, TSLA, earlier in April, reported a 4% sequential increase in deliveries in the first quarter and a 17.8% sequential rise during the fourth quarter.

Furthermore, TSLA is rapidly expanding its Supercharger network with industry competitors. On July 7, German luxury giant Mercedes-Benz (MBG.DE) became the latest to join Tesla’s Supercharger network.
Beginning in 2024, Mercedes-Benz electric vehicle owners would get access to 12,000 Tesla Superchargers across North America via the use of an adapter.

In 2025, new Mercedes EVs in North America would have TSLA’s North American Charging Standard (NACS) port built into the cars for access to the Supercharger network. This deal with Mercedes is similar to TSLA’s other charging partnerships with other automakers, Ford Motor Company (F), General Motors Company (GM), Rivian Automotive, Inc. (RIVN), and Volvo ADR (VLVLY).

On May 26, TSLA and F announced a surprise deal on electric vehicle charging technology and infrastructure. Under the agreement, Ford owners will get access to more than 12,000 Tesla Superchargers across the U.S. and Canada starting early next year.

In addition, GM followed crosstown rival F in partnering with TSLA to use its North American charging network and technologies. Under this deal, GM owners will get access to Tesla’s 12,000 fast chargers using an adapter and its EV charging app beginning the following year.

Signing on additional partners to TSLA’s charging network is expected to be a boon for the EV maker’s top line. According to Piper Sandler analyst Alexander Potter, charging deals from partners could add upward of $3 billion in revenue by 2030 and up to $5.40 billion by 2032.

The company’s first-quarter revenue of $23.33 billion was slightly below Wall Street estimates of $23.35 billion. It reported a gross margin of 19.3%, compared to 29.1% in the same period in 2022, as the cost of several price cuts hit its profitability.

Furthermore, TSLA’s net income was $2.51 billion for the first quarter, a decline of 24% year-over-year, and its EPS decreased 23% year-over-year to $0.73. TSLA’s CEO, Elon Musk, also indicated that the company would prefer higher volumes to higher margins.

Analysts continue to ring warning bells on the company’s profit margins. Gary Black, co-founder and managing partner of Future Fund expects TSLA’s adjusted EPS for the second quarter to be around $0.87, higher than the prior quarter’s $0.85 and the year-ago quarter’s $0.76. The consensus estimate stands at $0.82 per share.

However, Gary Black predicts the company’s gross margin to contract as it had offered discounts on its vehicles to boost sales.

Another stock that gears for second-quarter earnings this week is NFLX. The company offers entertainment services. It provides TV series, feature films, documentaries, and mobile games across various genres and languages.

In May, after ignoring password sharing for many years, the streaming company expanded its crackdown on password sharing across the United States and more than 100 other countries, alerting users that their accounts cannot be shared for free outside their households. It also stated that an additional fee of $7.99 per month would be charged for shared passwords in the United States.

Since the company told its users they could no longer share accounts across multiple households, daily U.S. sign-ups for the streaming service climbed by the most in at least four and a half years.According to data from the analytics platform Antenna, between May 25-28, Netflix witnessed the four single-largest days for signing up of U.S. customers since the firm began tracking this data in 2019.

During that time, NFLX saw nearly 100,000 daily sign-ups on two of the days, based on the report from Antenna.

Furthermore, the streaming giant’s ad-supported tier began to show signs of life six months following its debut. NFLX revealed that its ad-supported tier garnered five million active users globally, with sign-ups having more than doubled since early this year. The company stated that more than a quarter of new signups opt for the ad-supported plan in countries where it is offered.

During the first quarter of 2023 that ended March 31, NFLX reported mixed first-quarter results, missing Wall Street subscriber estimates while surpassing analysts’ EPS estimates. The company reported an EPS of $2.88 compared to the consensus estimate of $2.86. While its revenues increased 3.7% year-over-year to $8.16 billion, it missed the consensus estimate of $8.18.

For the first quarter, NFLX added 1.75 million streaming subscribers, which fell short of the analyst estimate of 2.06 million additions. However, its average paid memberships increased 4% year over year, while the paid net adds were 1.75 million for the quarter compared to a negative 0.2 million in the prior-year quarter. Also, its non-GAAP free cash flow rose 164% from the year-ago value to $2.12 billion.

In recent days and weeks, several analysts have raised their price targets on NFLX’s stock. One central theme across Wallstreet is an expectation of optimistic updates on the progress of the company’s password-sharing crackdown and advertising tier rollout.

TD Cowen analyst John Blackledge said, “Netflix’s paid sharing coupled with the ad tier rollout should drive long-term revenue upside, and the launch of paid sharing in the second quarter of 2023 along with the ramping ad tier should help drive membership and revenue growth in the second half of 2023.”

The TD Cowen analyst forecasts net subscriber growth of 2.37 million during the second quarter, compared with a consensus estimate of around 1.70 million, and “revenue re-acceleration” in the second half of 2023. John Blackledge reiterated his “outperform” rating and $500 stock price target.

Also, UBS analyst John Hodulik increased his stock price target from $390 to $525 while maintaining his Buy rating.

Hodulik stated, “We continue to believe paid sharing will drive 5 percent-plus uplift to revenue and see the roll-out as key to driving scale in advertising with the growth in the ad-tier mix and better targeting. Netflix eliminated its basic ad-free tier in Canada (and de-emphasized in the U.S.), which we estimate could provide a 10 percent uplift to average revenue per user over time and should help scale the ad base faster than prior expectations.”

The UBS analyst raised his estimates and predicted second-quarter financials would surpass management’s guidance, adding that he and his team “still expect accelerating second-half growth.” Hodulik expects 3.60 million net subscriber gains in the about-to-be-reported quarter and 6.50 million in the third quarter.

Bottom Line

EV giant TSLA’s better-than-expected delivery and production figures for the second quarter will likely boost the company’s second-quarter earnings. However, concerns still revolve around the impact on margins due to discounts Tesla offered on its new vehicles across different regions. But vehicle prices stabilized in the second quarter after substantial reductions announced earlier in the year.

While streaming company NFLX took a hit after reporting its first subscriber loss in a decade last year and mixed financials in the first quarter of 2023, there are higher chances of beating analysts’ estimates for the second quarter, with rising expectations of positive updates on the company’s progress on the password-sharing crackdown and advertising tier rollout.

3 Auto Giants Caught in Recall Chaos: Stocks at Stake!

Posted on by The INO.com Team

Benjamin Franklin once said, “If you fail to plan, you plan to fail.” While the thought has stood the test of time, with time, businesses have also realized that planning for accidental (yet inevitable) failure is also a failure to plan.

The National Highway Traffic Safety Administration (NHTSA) recently issued multiple recalls, with three auto giants scrambling for cover and damage limitation.
Ford Motor Company (F) is recalling 979,797 of its vehicles for not having instructions on adjusting or removing certain head restraints in the owner's manual. These include certain 2018-2023 Expedition and Lincoln Navigator models that have third-row seating, 2019-2023 F-Super Duty F-250, F-350, F-450, F-550, and F-600 SuperCab vehicles along with three-passenger front bench seat regular cab models.

In addition, the company has also recalled 16,375 select 2022-2023 F-150 BEV vehicles for a rear lightbar issue in which the lightbar may have micro-cracks in its outer lens, allowing moisture to collect, which could result in out-of-order or flickering reverse lights.

Hyundai Motor Company (HYMTF) is recalling 322 of its 2023 Palisade vehicles for a potential issue in which the brake booster diaphragm may become misaligned and cause an internal vacuum leak in the vehicle, potentially leading to a loss of power brake assist.

Nissan Motor Co., Ltd. (NSANY) is recalling 230 2022 Sentra vehicles for a potential missing or improper seal in the driver's side cowl area. This can allow water to leak inside the vehicle and corrode electrical components, which could lead to the failure of electrical systems and increase the risk of a crash and an electrical short-circuit, potentially increasing the risk of a fire.

In all three cases mentioned above of oversight, corrective actions are being taken by the concerned companies through their dealer networks free of additional cost to the customer.

However, since resources that could have been utilized to meet planned business objectives need to be diverted to execute these unplanned corrections, let’s understand the ever-growing incidents of product recall and their impact on businesses and (by extension) their stock prices.

A product recall is a process of retrieving and replacing defective goods, with the concerned company or manufacturer assuming the responsibility and absorbing the cost of replacing and fixing defective products or reimbursing affected consumers, as per consumer protection laws.

With the spread of globalization, businesses expanded and diversified their supply chains globally through offshoring and outsourcing to remain cost competitive, although often at the cost of the reliability or quality of their end products or services.

Moreover, an offering, or a component of the same, must comply with the regulations of both the country of its origin and the market in which it is supposed to be distributed. Hence, even if a product passes regulations in China, it might not be under U.S. laws. It would, therefore, have to be recalled.

Government agencies, such as the NHTSA, are responsible for testing products and recognizing faulty ones before they reach the market. With the increasing complexity of global supply chains and the frequency of tests, product recalls have also increased in frequency.

Since brand equity is built on trust and confidence, recalls can tarnish a company's reputation, translating into financial losses and consequent erosion of market capitalization. Moreover, although insurance may cover a minimal amount to replace defective products, several recalls result in lawsuits that could further dent a company’s prospects.

4 Stocks Expected to Have the Fastest Growing Jobs in the Next 5 Years

Posted on by The INO.com Team

An apocryphal quote attributed to Charles Darwin observes that it is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.

Regardless of what the ideas and constructs that have shaped and perpetuated our civilization would want us to believe, there is hardly an aspect of our modern life that is immune to or exempted from the laws of nature. At least (and hopefully at most) metaphorically, we are either running for food or running from being food often without being able to tell the difference.

Consequently, in an era of ever-increasing automation, digitization, and decarbonization, individuals and institutions more prepared to accept and embrace change would thrive in the intraspecific struggle for economic existence at the expense of their more inertial peers.

According to the Future of Jobs Report 2023 by the World Economic Forum, in the next five years, almost a quarter of jobs (23%) are expected to change through growth of 10.2% and a decline of 12.3%. Employers anticipate 69 million new jobs to be created and 83 million eliminated, amounting to a net decrease of 14 million jobs, or 2% of current employment.

According to Moody’s Chief Economist, Mark Zandi, the macro trends driving the change present challenges, such as the displacement of the majority of the existing workforce while demanding significant adaptations from the talent that is being retained and disrupting business by lowering entry barriers and switching costs to creating a level playing field.

However, on the flip side, he also highlights the enormous opportunity for improvements in productivity and efficiency, which would be instrumental in ensuring economic growth while managing a general demographic decline.

With specialization, digitization, and sustainability driving demand for talent and reshaping the global world of work at an unprecedented rate, white-collar generic and repetitive jobs are being automated away. At the same time, businesses can’t find enough specialists to design and implement artificial intelligence-led automation and blue-collar workers to take care of work that is yet to be automated.

Consequently, autonomous and electric vehicle specialists top the list of fastest-growing jobs in 2023. Close behind, AI and machine learning specialists could see only slightly less job growth, followed by environmental protection professionals.

Among the non-technological roles, heavy truck and bus drivers, vocational education teachers, and mechanics and machinery repairers look set to see around 2 million new jobs each between 2023-2027.

At the other end of the spectrum, roles like bank tellers, cashiers, and data-entry clerks would be rendered obsolete and, hence, are set to witness the fastest rate of decline in the next five years.

In the context of this fundamental shift, the following businesses which have opted to disrupt themselves and their respective industries rather than being disrupted appear best placed to keep attracting talent in the foreseeable future.

NVIDIA Corporation (NVDA) recently made headlines when its stock got its moonshot due to the widespread public interest in AI. Post its earnings release on May 24; the Santa Clara-based graphics chip maker has stolen the thunder by becoming the first semiconductor company to hit a valuation of $1 trillion.
NVDA’s A100 chips, which are powering LLMs like ChatGPT, have become indispensable for Silicon Valley tech giants. To put things into context, the supercomputer behind OpenAI’s ChatGPT needed 10,000 of Nvidia’s famous chips. With each chip costing $10,000, a single algorithm that’s fast becoming ubiquitous is powered by semiconductors worth $100 million.

During a commencement speech on May 26 at National Taiwan University, NVDA CEO Jensen Huang’s message to his potential recruits was loud and clear, “You are at the beginning, at the starting line, of AI. Run. Don’t walk.”

Tesla, Inc. (TSLA)

The global e-mobility pioneer’s automotive segment includes the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits.

In the recent earnings call, TSLA’s maverick CEO Elon Musk signaled that the automaker will target larger volumes of sales versus higher margins but said he expects the company “over time will be able to generate significant profit through autonomy.”

The company recently scored a major victory as an infrastructure provider by striking a deal with two of its rival automotive manufacturers, Ford Motor Company (F) and General Motors Company (GM) , to grant their vehicles access to more than 12,000 Tesla Superchargers across the U.S. and Canada starting early next year.

Moreover, since TSLA’s energy generation and storage segment includes the design, manufacture, installation, sales, and leasing of solar energy generation and energy storage products such as the Solar Roof and Powerwall, the stock could also be an energy transition play.

AGCO Corporation (AGCO) manufactures and distributes agricultural equipment and related replacement parts worldwide. The company provides telemetry-based fleet management tools, including remote monitoring and diagnostics, which help farmers improve uptime, machine and yield optimization, mixed fleet optimization, and decision support.

AGCO’s Precision Planting, Headsight, and Intelligent Ag Solutions brands provide retrofit solutions to upgrade farmers’ existing equipment to improve their planting, liquid application, and harvest operations.

On May 4, AGCO announced a capital improvement project, dubbed “Planter Accelerate,” scheduled to begin in the second quarter of this year and continue through the first quarter of 2024. The project aims to increase production capacities for Massey Ferguson and Fendt Momentum planters at its Kansas facilities in Beloit and Cawker City.

Canadian Solar Inc. (CSIQ) is a designer, developer, manufacturer, and seller of solar ingots, wafers, cells, modules, and other solar power and battery storage products internationally. The company, headquartered in Guelph, Ontario, operates through two segments: Canadian Solar Inc. (CSI) Solar and Global Energy.

On June 15, marking its first foray in the United States, CSIQ announced establishing a solar PV module production facility in Mesquite, Texas, with an annual output of 5 GW, equivalent to approximately 20,000 high-power modules per day. This follows the company’s successful track record of production in Canada, China, Brazil, Thailand, and Vietnam.

The new facility, expected to commence production around the end of 2023, represents an investment of over $250 million and will create approximately 1,500 skilled jobs once fully ramped up.

Is Ford Motor (F) the New Tesla (TSLA)?

Posted on by The INO.com Team

More than a year has passed since an announcement on April 26, 2022, by Ford Motor Company (F) CEO Jim Farley, regarding the company’s intent to challenge Tesla, Inc. (T) as the global EV leader.

Since then, the Detroit automaker has made huge strides in the electric mobility space. It has pipped TSLA to the pickup segment by beginning production of its F-150 Lightning and benchmarked the Model Y for its Mustang Mach-E crossover. While TSLA is still the runaway leader, F notched 61,575 fully-electric vehicle sales to emerge as the challenger in the U.S., something the legacy automaker planned to achieve by mid-decade.

Since both rivals are expected to battle it out for a greater share of the electric-mobility pie, it is understandable why an unexpected announcement by the CEO of both companies to join hands to enlarge the pie took the industry and markets by pleasant surprise.

On Thursday, May 25, during a live audio discussion on Twitter Spaces, Jim Farley and Elon Musk announced an agreement on charging initiatives for Ford’s current and future electric vehicles. Under the agreement, current Ford owners will be granted access to more than 12,000 Tesla Superchargers across the U.S. and Canada starting early next year.

Moreover, the next generation of Ford EVs, expected by mid-decade, will include TSLA’s charging plug, enabling owners to charge their vehicles at Tesla Superchargers without an adapter while using Ford’s software.
A separate Ford spokesman later added that pricing for charging “will be competitive in the marketplace.” The companies will disclose further details closer to a launch date, anticipated in 2024.

Following this announcement, which makes F among the first automakers to explicitly tie into the TSLA network, the former’s stock rose by 6.2% on May 26, closing at $12.09 per share, while the latter’s shares also climbed by 4.7%, ending the week at $193.17.
In this article, we elaborate on why the optimism makes sense.

Firstly, as F is ramping up its production to double its EV capacity this year and looks on course to get to two million in a couple of years, with public charging of electric vehicles being a major concern for potential buyers, charging infrastructure is going to be critical for the company in order to ensure that it delivers a superior after-purchase experience to its customers.

TSLA is the only automaker that has successfully built out its own network of fast chargers, which gives the EV leader an edge over its competitors, whose partnerships with third-party companies have left much room for improvement in reliability and reach.
However, with the announcement, F has managed to more than double its existing capacity of 10,000 fast chargers with 12,000 well-located TSLA Superchargers. Moreover, leveraging TSLA’s superior NACS charging technology is F’s attempt to ensure that it is on what Elon Musk has described as “equal footing” in its completion with the incumbent.

Secondly, opening up 12,000 Superchargers in its network of currently 45,000 connectors worldwide at 4,947 Supercharger Stations could benefit TSLA in multiple ways.

White House officials announced in February that TSLA has committed to open up 7,500 of its charging stations by the end of 2024 to non-Tesla EV drivers. The agreement with F would help the company make progress on that front.

By diversifying from being a competitor to doubling up as an infrastructure provider, the EV leader has hedged its bets to benefit from the increasing presence of legacy automakers in the electric mobility space.

While the company is expected to dominate EV sales in the foreseeable future, the revenue from its Supercharging stations, which is included under the “services and other” segment, is also expected to witness remarkable growth due to increased network utilization by non-Tesla EV drivers.

Lastly, but perhaps most importantly, this partnership could be the initiation of the strategic masterstroke that impacts the entire EV ecosystem. As discussed earlier, while TSLA uses NACS charging technology, the rest of the industry has adopted relatively-slower CCS charging.

With two-leading EV manufacturers joining hands and F being ‘totally committed’ to a single U.S. charging protocol that includes the Tesla plug port, EV strategies of other auto manufacturers, such as GM and STLA, could come under increased pressure.

According to Jim Farley, the others “are going to have a big choice to make. Do they want to have fast charging for customers? Or do they want to stick to their standard and have less charging?”

In this context, it wouldn’t be surprising if Musk’s statement, “Working with Ford, and perhaps others, can make it the North American standard, I think that consumers will be all better for it,” turns out to be the beginning of yet another victory lap for the illustrious CEO.