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Musk Assures There Is No Demand Problem on Tesla’s Annual Shareholder Meeting

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Metaphors and Jokes Aside, Competitors Are Seriously Planning Their Automation Strategies

CEO Elon Musk spoke at Tesla’s (NASDAQ:TSLA) annual shareholder meeting in Mountain View, California on Tuesday. This annual shareholder meeting comes at a rather historic time for the troubled electric car maker. The past year has proven to be a roller coaster of all kinds for the company, with the company’s stock rising as high as $387.46 per share and falling to as low as $176.99 per share. Tesla stock jumped 6% ahead of its annual shareholders meeting but closed on Tuesday at $217.10, down about 36% since this time last year when it was trading near $342.
A lot has happened since a year ago when Musk faced Tesla’s shareholders in an official setting. Shareholders were surely eager to hear about Musk’s vision for the future of Tesla, especially when it comes to a new generation of products. Musk announced that it won’t be long before Tesla gets to have a 400-mile range car. Among other things, Musk expects Tesla to unveil its pickup truck this summer, and to determine a location this year for a European Gigafactory where it will make both cars and batteries.

Previous track record
Last August, Musk announced he was going to take the company private. But it soon turned out that he had not secured the funding to do so. Despite dropping these plans, he got in trouble with SEC for misleading shareholders which ended up in a $20 million fine. This boardroom drama cost him his chairman position but he managed to remain as CEO.

Model 3 did become the bestselling US luxury car and triggered the first profitable quarters in the company’s history. Tesla’s shares surged by as much as 6 percent Monday following analysts’ comments about the growing demand for Tesla electric vehicles (EVs), especially the Model 3 which is performing great in Europe as well. What a contrast for a company whose stock was once down almost 40 percent this year. But the loss of half of a tax credit for buyers also led to the biggest drop in sales in the company’s history and a much bigger than expected loss in the first quarter of this year.

Besides a few laughs and making photos (not selfies!) that entertained the audience who attended the conference, it is not possible forget about the company’s formidable production delays, intensifying competition and senior management firings as the carmaker laid off 7% of its staff in January. And we have the external factor of Trump’s trade war with China. Tesla stock has been climbing higher in recent days after favorable analyst reports and electric vehicle sales forecast from Morgan Stanley and other analysts. But the reality is Tesla had only two profitable quarters followed by a slowdown in the first quarter of 2019, when the company lost $700 million and was forced to raise cash.
Prospects

When asked about Tesla’s financial prospects for 2019, Musk said, “Profitability is always challenging if you’re a fast-growing company.” He said that Tesla is on target to grow its entire “fleet” by 60% to 80% this year, and consequently, “it’s hard to be profitable with that level of growth.” However, Musk expects that the company could be cash-flow positive while growing at that rate.
Tesla is also trying to make and sell more cars with fewer employees in the U.S., having laid off hundreds as part of its cost-cutting strategy earlier this year. At the same time, it is expanding operations internationally, with a new battery plant and car assembly, known as Gigafactory 3 that is under way in Shanghai. Musk also told shareholders that they should expect an unveiling of the Tesla pickup truck towards the end of the summer of 2019, and production of its larger electric Semi truck by the end of 2020.

No Demand Problem
Currently, Tesla’s problem remains driving demand for the Model 3, its newest and cheapest model, which is priced around $35,000. Sales of the car this year started slow but Musk said it is now the fourth-best-selling car in the U.S. by volume. In terms of revenue, Musk said the Model 3 tops the list as No.1. This is why Musk insists that there is not a demand problem as “Sales have far exceeded production, and production’s been pretty good.” The company blamed its wider than expected losses of the quarter and the striking difference in numbers on delays and obstacles to its efforts to increase deliveries of iModel 3 electric car in Europe and China.

Musk used a metaphor that buying a gasoline car is like “riding a horse and using a flip phone”, without insulting horses. Well, the road is leading in this direction for sure, but can Tesla be profitable in the long term is a question without such a certain answer. Musk was honest enough to say not to count on short-term profitability but not because of a drop in demand but on the contrary, because the company made as many cars last year as it made throughout its entire history.

Further Development
Regulations and policies are also on Musk and Tesla’s side as pollution is a global problem that is bound to result in more severe policies that will weigh heavily on its competitors. A pickup truck in development that is intended to compete with the bestselling Ford F-series (NYSE:F) is announced to have towing capacity that is “as good or better” as the F-150. Meanwhile, Ford is recalling 1.2 million Explorers over a problem with their suspensions. Along with 3 smaller recalls, Ford is also recalling 123,000 Ford F-150 pickups from 2013 with 6-speed automatic transmissions that could potentially downshift into first gear unintentionally. Ford said it will spend about $180 million to fix the problem.
Tesla also has an aquatic car design, which Musk compared to a model from “The Spy Who Loved Me,” with the prediction that the market for such a car would be small. But, Musk vowed that Model Y and Model 3 would be completely vegan, meaning leather free, by the time of next year’s shareholder meeting as currently, the steering wheel and seats of many models are covered with leather—which, as a PETA representative at the meeting pointed out, is an industry responsible for climate-warming emissions.

Competition
Speaking of automation, Volkswagen Group AG (OTC:VLKAF) has ended a partnership with Amazon-funded autonomy startup, Aurora Innovation, and opted for one backed by Ford. Aurora, founded by former Google (NASDAQ:GOOG) self-driving head Chris Urmson, and was supposed to provide Volkswagen with a full tech stack it calls the “Driver,” which would enable completely autonomous cars.
To keep its self-driving efforts moving forward, Volkswagen is reportedly pursuing a new deal with Ford-backed startup Argo AI. The idea behind Argo is to combine Ford’s autonomous vehicle development expertise with Argo AI’s experience in robotics and artificial intelligence software, to advance autonomous vehicles.

Volkswagen and Ford announced a “global alliance” in January that’s centered on trucks and vans, though both companies said collaborations on electric and autonomous vehicles were also possible.

But, the spurned startup, Aurora Innovation, which had VW as its first customer, just added Fiat Chrysler Automobiles (NYSE: FCAU) to its list. Fiat disclosed it will pay an undisclosed amount of money to use Aurora’s technology to power self-driving commercial vehicles. Hyundai Motor (NYSE:HYMLF) which recently launched its electric double-decker bus and EV startup Byton are also Aurora customers. In fact, the self-driving tech company successfully raised half a billion dollars earlier this year, mostly thanks to Amazon, so it has a significant advantage over Tesla when it comes to funding skills.

What is certain is that everyone is preparing for an automated and electric future very seriously. Even Toyota Motor Co. (NYSE:TM) set ambitious electric targets as it announced its partnership with battery producer Subaru (OTC:FUJHF) last Thursday, showing it is set to win the race to electric and autonomous cars. Toyota’s five year goal is for electrified vehicles to account for roughly half of the company’s sales. Tesla has a put quite a pressure on its competitors to face the profound transformation of the industry, but in order to keep up with this seriousness, Tesla still has a lot of work to do on improving its core business profitability.

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Earnings

Toyota’s News: Redesigned Corolla, New Investments and Partnerships

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Toyota Stock Market News

Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.

A new sturdy yet sporty Corolla

On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.

Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.

Hybrid strategy is actually paying off

Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.

New Investment – $391 Million Goes to Texas’ San Antonio Plant

This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.

Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo

Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.

Partnership

And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.

Inventing a car that will run forever?

According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.

 

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Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020

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Direct-to-consumer sales and digital momentum strategies did the trick for Nike

When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.

Nike managed to achieve a turnaround

The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.

Digital momentum is key

Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.

There are literally no weak spots for investors

Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.

Nike showed it can even handle the increased tariffs

Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.

Poor macroeconomic conditions are only masking Nike’s true power

The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.

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Market

Apple Will Be Making Its MacBook Pros in the US

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With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”

Macroeconomic climate is not favourable

The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.

New investments

Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.

Competitors

Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.

Apple is still facing impending import duties and innovation difficulties

Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.

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