Wall Street Breakfast
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Brace for impact
Slowing demand... Intense competition... Price cuts... Layoffs... Tesla (TSLA) has had it rough in the recent past, and shareholders are now preparing for what could be the automaker's worst results in around seven years. The earnings report due after the bell today follows a chaotic week for Tesla, which slashed prices in many of its major markets, following notable price cuts in the U.S. Its billionaire CEO Elon Musk also had to postpone a trip to India - where he'd planned to announce the company's entry into the market with a $2B-$3B investment - blaming "very heavy Tesla obligations."
Earnings preview: Tesla is expected to report Q1 revenue of $22.5B and EPS of $0.50. The biggest focus may be on the automotive gross margin line, with traders looking out for comments on AI initiatives, margin expectations, FSD take rates, as well as what the product roadmap looks like, including if the mass-market Model 2 is still part of the master plan. Deutsche Bank analyst Emmanuel Rosner said TSLA stock will need to undergo a potentially painful transition in ownership base, with investors previously focused on Tesla’s EV volume and cost advantage potentially throwing in the towel.
While Musk is likely to talk up the potential of the robotaxi business, Morgan Stanley warned investors to keep their hopes down. "The event should offer some important clues as to how Tesla approaches autonomy (gen AI, non-rules based) and why the company is seemingly rapidly stockpiling its computational horsepower. However, while we are prepared to see evidence of improved system efficacy, we ultimately believe the path to commercialization at scale for driverless cars is much further out than the market expects," warned analyst Adam Jonas. Options trading on Tesla implies a 10% share price swing after the report drops. To note, Tesla's (TSLA) stock has slid around 43% so far this year, and is among the worst performers in the S&P 500 (SP500).
SA commentary: SA analyst ValueAnalyst doesn't think it's all doom and gloom for Tesla investors, although they are staying on the sidelines for now. "I will be keeping my eye on actual data and material management guidance on the topics that matter to long-term investors, rather than drama. I highlight the recent slowdown in the pace of Tesla's resale value declines as a glimmer of hope." SA analyst Brendan O'Boyle said Tesla's discounted cash flow analysis suggests that the stock is becoming reasonably priced, despite the pessimism in the market. "Potential new products such as: Full Self-Driving, Cybertruck, and Advanced Battery Technology, new markets, and Tesla's Energy Division may drive the stock in years to come." (99 comments)
'Substantial' leak
UnitedHealth (UNH) said a preliminary review of data involved in February’s cyberattack on its Change Healthcare unit indicates that personal information was involved and that a "substantial proportion of people in America" could be impacted. The health insurer said around 80% of Change’s functionality has been restored, with full restoration expected in the coming weeks. The hackers behind the hack reportedly gained access to computer systems nine days before launching the ransomware attack using compromised credentials. UnitedHealth had paid a ransom to the hackers to protect patient data, although the amount has not been disclosed. (31 comments)
Chip reselling
Chinese research institutes have been able to buy Nvidia's (NVDA) high-end artificial intelligence chips through resellers, underscoring the challenges the U.S. faces in restricting chip exports to China. These advanced chips were embedded in server products made by Super Micro Computer (SMCI) and Dell Technologies (DELL), according to tenders fulfilled between November 20 and February 28. This was after the U.S. had widened chip export controls, although it's unclear if the chips had been acquired prior to this. An Nvidia spokesperson said the tenders show that the products were exported before U.S. restrictions and "are a negligible fraction of the products sold worldwide." (6 comments)
24/7 trade?
The New York Stock Exchange, owned by Intercontinental Exchange (ICE) has started polling market participants on their interest in and potential implications of an exchange that trades stocks 24/7. While the polling doesn't necessarily mean that NYSE is considering moving to round-the-clock trading, the move underscores growing interest in trading stocks in off-hours. The survey comes after 24 Exchange, backed by Steven Cohen's Point72, applied with the Securities and Exchange Commission to start the first 24-hour exchange. The prospect of 24-hour trading, which would likely lead to changes across the ecosystem, becomes a heavier lift for exchanges as they're supervised by the SEC. (53 comments)
Today's Markets
In Asia, Japan +0.3%. Hong Kong +1.9%. China -0.7%. India +0.1%.
In Europe, at midday, London +0.6%. Paris +0.6%. Frankfurt +1.1%.
Futures at 7:00, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude -0.2% to $81.70. Gold -1.2% to $2,318.30. Bitcoin flat at $66,067.
Ten-year Treasury Yield +2 bps to 4.63%.
Today's Economic Calendar
9:45 PMI Composite Flash
10:00 New Home Sales
10:00 Richmond Fed Mfg. Index
1:00 PM Results of $69B, 2-Year Note Auction
1:00 PM Money Supply
Companies reporting earnings today »
What else is happening...
WSB survey results: Rescheduling of cannabis unlikely this year.
Not in the bag: FTC sues to block $8.5B Capri (CPRI) sale to Tapestry.
California bill aims to ban Clear Secure (YOU) from airport security lines.
Exxon leads industry fight against UN talks on plastic production cap.
Matterport (MTTR) shares more than double on sale to CoStar (CSGP).
Ending dispute: Petrobras board endorses 50% payout of extra dividends.
Meta (META) opens up Quest headset OS in challenge to Apple (AAPL).
Albertsons (ACI), Kroger (KR) to sell more stores to clear way for merger.
Archer Daniels Midland (ADM) CFO to step down in wake of DOJ probe.
IEA sees strong EV sales, but affordability and charging roadblocks remain.
Wall Street Breakfast
Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. It is designed for easy readability on the site or by email (including mobile devices), and is published before 7:30 AM ET every market day. Wall Street Breakfast's readership of over 3.4 million includes many from the investment banking and fund management industries. Sign up here to receive the Wall Street Breakfast in your inbox every business day.Check out our Podcast RSS feed
