Last Thursday, the all-mighty Chinese multinational technology company missed revenue and earnings expectations for the September quarter. Moreover, Alibaba Group Holdings Limited (NYSE: BABA) warned of weaker growth this year as China’s economy slows and Beijing continues its regulatory crackdown with the latest fine hitting the company over the weekend.
Fiscal second quarter figures
For the quarter ended in September, the company’s earnings per share declined 38% YoY as it earned 11.20 yuan per share, below the estimated 12.36 yuan. Its EBITDA fell 27% YoY to 34.84 billion, but this is largely due to investments into new businesses.
But overall revenue grew 29% YoY, as it amounted to 200.69 billion yuan which translates to $31.4 billion) but still below the estimated 204.93 billion yuan.
The revenue of its core commerce business expanded 31% YoY but also missed expectations as the segment generated 171.17 billion yuan. Cloud computing, one of its most important assets that the company is building its future upon, grew 33% YoY to 20 billion yuan with adjusted EBITA for the segment amounting to 396 million yuan. This is a great improvement from 567 million yuan loss it made in last year’s comparable quarter.
However, the largest portion of the company’s sales comes from customer management revenue (CMR) and that segment grew only 3% YoY due to slow growth of sales on its platform. As China’s economy slowed down, so did consumption. Besides the slowing market conditions, Alibaba is also facing an increasingly crowded e-commerce market in China.
An increasingly crowded market
JD.com Inc (NASDAQ: JD) hasn’t been the only one giving it a headache, as newer players such as Pinduoduo Inc (NASDAQ: PDD) and even TikTok-owner ByteDance are putting up a good fight. Both Alibaba and JD.com achieved record sales on Singles Day record but this will be reflected in the undergoing quarter’s report. Both companies also touted their commitment to a more sustainable future during the event, but it seems that this wasn’t enough for Beijing.
Beijing is determined to teach the country’s largest tech firms to behave with a slew of new regulations. Alibaba, Tencent (OTC: TCEHY) and Baidu (NASDAQ: BIDU) were among the corporations who were all slapped with fines over the weekend for violating antitrust laws. Alibaba was already fined $2.8 billion back in in April as part of an anti-monopoly probe.
The company slashed its current fiscal year revenue guidance from expecting revenue to amount 930 billion yuan, which would have been about 29.5% YoY growth to now expecting only 20% and 23% YoY growth.
The CEO Daniel Zhang emphasized that Alibaba continues to firmly invest into its three strategic pillars to establish solid foundations for long-term sustainable growth. Alibaba is betting on domestic consumption, globalization, and cloud computing to create firm grounds for a more sustainable future, but regulatory action threatens to derail its growth prospects. Only time will tell if the e-commerce tech giant can rise from these unfavourable circumstances.
HP and Dell Rejoice as Offices Reopen
As companies continue commiting funds to lure employees back into offices by improving their experience, PC demand keeps on going strong.
During Tuesday’s extended trading, HP Inc’s (NYSE: HPQ) shares jumped 8% after the computer hardware maker reported better-than-expected quarterly results and provided strong guidance for the undergoing quarter. Dell Technologies Inc (NASDAQ: DELL) also posted strong results, aided by commercial PCs and sales of high-end consumer devices, pulling its stock up 0.6% in after-hours trading.
HP’s quarter results
The PC and printer maker generated sales of $16.68 billion exceeding the expected $15.4 billion, according to Refinitiv. Sales increased 9.3% from the year-ago period. It made $3.1 billion in net income, including a one-time $1.78 billion legal settlement, also exceeding Wall Street estimates. It made $0.94 in adjusted earnings, exceeding the expected $0.88.
Although consumer PC sales dropped 3% compared to last year’s lofty figure, commercial PC revenue expanded 25%. However, total PC unit sales were down 9%. Personal systems net revenue rose 13% YoY as it came in at $11.8 billion.
Printing business saw its revenue grow 1% YoY as it generated sales of $4.9 billion. Commercial printing revenue was up 19% YoY while consumer printing revenue fell 6%.
According to HP CEO Enrique Lores, in an environment shaped by supply constraints, the company is prioritizing its commercial clients due to better margins.
The (mixed) pandemic effect
HP’s PC business boomed and the sale of home printers also increased, but the shutdown of offices across the globe weighed on its ability to revitalize its important print-services business. Fortunately, this is no longer the case as offices have started reopening.
According to IDC, HP ranked second in world-wide PC shipments over the latest quarter. It is close behind Lenovo Group Ltd. (OTC: LNVGY) but it managed to beat Apple Inc (NASDAQ: AAPL) and Dell. However, its shipments were down almost 6% in reference to last year’s comparable figure year while nearly all of the other top companies’ shipments increased YoY. Mr. Lores did state that the strong results are owed in part by emphasizing shipments of more-lucrative models.
HP expects strong demand for its personal computers to linger for the foreseeable future. For the undergoing quarter, it expects to earn $0.92 to $0.98 per share and for the full fiscal year that is due to end on October 31st, 2022, it expects them to be in the range between $3.86 to $4.06, with both forecasts beating Wall Street expectations.
The PC maker reported its strongest-ever third quarter due to strong growth of commercial PC and high-end consumer devices. Dell generated sales of $26.4 billion that resulted in $3.9 billion in profit. It also topped expectations as it expects revenue of the undergoing quarter to increase at least 12% from the year-ago period and reach $27 billion to $28 billion. Chief Financial Officer Tom Sweet expects growth to continue next year.
Despite chip supply shortages and port congestions causing delays, the holiday quarter seems promising. According to International Data Corp, the global PC market has grown for six consecutive quarters and these challenges have stopped sales from taking off even more. Therefore, HP and Dell seem to be covered as they are making the best of the situation in an environment defined by mess COVID-19 created across global supply chains.
Ford Is Doing Whatever It Takes To Overthrown Tesla
The legendary Blue Oval has its eyes set to become the biggest US-based EV manufacturer. To pull that off, Ford Motor (NYSE: F) needs to greatly ramp up its production so it doesn’t come as a surprise that the company is now expecting to produce 600,000 EVs per year globally by end of 2023, which is double compared to the original plan. According to Automotive News, this figure will be made by Mustang Mach-E, F-150 Lightning and E-Transit. Moreover, Jim Farley Tweeted this will happen before Blue Oval City and other EV sites come online.
Ford is now feeling much more confident
Ford is enjoying much stronger EV demand than expected. The Mustang Mach-E is being sold on three continents. Since it was unveiled, the Ford F-150 Lightning has been as popular as it gets by receiving 100,000 reservations within the first three weeks, after which they increased to 160,000. Due to the high demand for America’s bestselling vehicle, the F-150 pickup, Ford previously decided to invest $250 million to boost its production, creating 450 new jobs to help it make 80,000 trucks a year but it remains to be seen how will that change considering it doubled its manufacturing goal.
Bonus points for dropping joint vehicle with Rivian
A large, legacy manufacturer tying up with a new startup that has the right technology and specs to make an electric version of an American favorite — the SUV, sounded as a match made in heaven. Although the companies remain linked as Ford still holds a 12% stake in Rivian Automotive (NASDAQ: RIVN) with shares now worth billions of dollars, the two companies canceled their plans to jointly develop an electric vehicle publicly on November 19th .
Rivian’s successful public debut
Since its IPO on November 10th, Rivian’s market capitalization skyrocketed to mindblowing $110 billion, leaving Ford behind at $78.2 billion. The start-up became the third most valuable automaker behind Tesla Inc (NASDAQ: TSLA) and Toyota Motor (NYSE: TM), pushing Volkswagen (OTC: VWAGY) to fourth place with only two models in its portfolio- the R1T being produced and its R1S production postponed with earliest deliveries pushed back from January 2022 to March-April 2022 due to supply chain disruptions no carmaker is immune to. But, the interest for its vehicles is there.
Ford doesn’t need Rivian anymore
Several points indicate Farley may be right about Ford not needing Rivian any longer. Reservations for Ford’s electric pickup truck, the F-150 Lightning, surpassed 150,000 units in September as the model appears designed to benefit from immense and lasting popularity of US’ best selling pickup – the Ford F-150, emulating much of its utility. The Lightning is also more of a “workhorse truck” than the Rivian R1T that is being marketed mainly for recreation.
Ford also announced an $11.4 billion joint investment with a South Korean battery maker, SK Innovation, so it clearly has a bigger picture in mind. Rivian helped the legacy automaker gain courage and ground while it was making its first EV steps.
Ford potentially gained a major boost for its EV plans by separating from the EV start-up.
According to CNBC, Ford accumulated approximately 102 million shares in all, spending a total of $820 million in the process for its current 12% stake that is now worth approximately $13 billion. By selling these shares, which it now no longer needs since it is not partnering with Rivian on any future projects, Ford has cash at its disposal to boost and accelerate its EV plans.
There is the risk of Rivian’s shares dropping after the initial IPO euphoria, resulting in a greatly reduced cash windfall for Ford who would still make immense gains above the initial average $8.04 it paid. Whatever the case, Ford has the near-future option to enhance its liquidity with billions of additional dollars if it sells its Rivian shares. These gains would be taxed, but they wouldn’t be burdening the company’s balance sheet with debt.
However, Ford hasn’t given any indications of doing that and it will presumably have to wait for the lockup post-IPO period to expire.
Competitors aren’t standing still
Before it achieves its ultimate goal as the US-based leader, Ford first needs to become the second largest behind Tesla. It remains to be seen whether it can achieve that with 600,000-a-year production target. Meanwhile, its long-time Detroit rival General Motors (NYSE: GM) is expecting to sell 1 million electric vehicles by 2025 across the globe so it is also ramping up production. Then there are many other start-ups such as Atlis Motor Vehicles and Hercules Electric Vehicles whose electric pickups are scheduled to hit the roads next year, with both of their models being equipped with ground-breaking solar technology by Worksport Ltd’s (NASDAQ: WKSP) subsidiary TerraVis Energy.
In Farley’s words, the legacy automakers’ approach was reflected when it built ventilators and personal protective equipment to contribute to the battle against COVID-19. Whatever it takes, Ford finds a way- and its strategy seems to be working.
With its aggressive investments such as its massive Blue Oval City EV, fast-moving construction of cutting-edge facilities such as battery factories, and strong progress on the Lightning, Ford seems to be on track with its electrifications plans. Along with the addition of a reserve of cash accessible by liquidating its Rivian shares, Ford now has more flexibility and greater resources to support the production of its EV lineup.
GM’s Hummer Is Coming
Although General Motors (NYSE: GM) brought nothing to the LA Motor Show, it will begin its GMC Hummer deliveries just in time for Christmas. The brand’s chef said on November 23rd that deliveries will begin in December. Also, the automaker revealed that President Joe Biden’s last week visit to the company’s Factory Zero plant pickup contributed to reservations for the above mentioned truck increasing sevenfold compared to an average day.
What is known about the Hummer
The global head of the GMC, Duncan Aldred, didn’t disclose the exact number of reservations which require a refundable deposit of $100. He did say that the President’s actions led to this month seeing the highest amount of reservations for the vehicle, including its SUV version, outside of the time of their separate debuts. Traffic to the brand’s website increased by about 230%. He also mentioned that 125,000 “hand raisers” have requested information about the vehicle on its website and he expects most of them will be converted into buyers. Biden taking the Hummer for a ride and calling it it “one hell of a vehicle” fits perfectly in the promotion of the Infrastructure Investment, Jobs Act and Build Back Better Act that includes incentives to boost EV demand.
The world’s first super truck is right on schedule
Roughly $113,000 of special “Edition 1” version of the vehicle is on track to be delivered by mid-December. Respecting that timeframe would imply that the Detroit automaker achieved deliveries of the new flagship truck that was unveiled in October 2020 on time.
It’s the fastest program General Motors has even done and besides being a monumental effort, it also represents the achievement of bringing the world’s first super truck to life.
However, the model will have a slightly lower electric range than initially anticipated, more precisely 6% lower at 329 miles compared to the announced 350 miles.
The competitive front
With Rivian Automotive Inc (NASDAQ: RIVN) already producing R1T, it should have had the space to focus on bringing the R1S SUV to life as production was set to commence in December. First deliveries that were previously confirmed for January 2022 have now been postponed to May–June 2022.
Xpeng Inc (NYSE: XPEV) just unveiled the G9. The new electric SUV is scheduled to launch it in the third quarter of 2022 in China. It will be competing directly with Tesla Inc’s (NASDAQ: TSLA) Model Y, Nio Inc’s (NYSE: NIO) ES6 and Li Auto Inc’s (NASDAQ : LI) Li One.
Speaking of trucks entering the EV race, Atlis Motor Vehicles will release Atlis XT which promises to be the most advanced tech vehicle out there and Hercules Electric Vehicles is committed to delivering the world’s first luxurious electric pickup, Hercules Alpha. Both vehicles due to debut next year will be equipped with Worksport Ltd’ (NASDAQ: WKSP) game-changing solar technology TerraVis. In other words, just because GM is among the first ones to deliver the electric pickup truck does not mean it will be among the few for a long time as the space is getting crowded at a quick pace.
GM’s EV promise
In 2017, GM announced that it would release 20 new EVs by 2023. Exactly one year ago, they raised their ambitions to 30 new EVs to be released by 2025. Yet, the legendary automaker didn’t bring anything to its booth at the LA Auto Show with BMW (OTC: BMWYY), Audi, Mercedes, and Honda Motor Co (NYSE: HMC) being absent (except at a dealer booth in the back corner) due to strict pandemic regulations in the city. After years of “National Parks”-themed booth full of nature-destroying gas cars for years now, the famously anti-EV Toyota Motor (NYSE: TM) brought its bZ4X and Subaru, as well as showcased the new Solterra. If anything, greenwashing was certainly there but GMC with the Hummer EV and Cadillac with the Lyriq were not. But those are still only two new cars out of the promised 30 and neither car is yet on the road, although both sold out immediately when reservations were opened).
It sure will be exciting to see its yet-to-come EVs and they’re going to need a lot of floorspace at the following few LA Auto Shows to showcase them all.
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