Tesla earnings, China’s economy, and Bitcoin’s gain

Hello Folks,

Today, we take a look at the recent earnings of Wall Street giants- Tesla and Netflix. We also try to analyze the reasons behind Bitcoin’s recent jump. So, let’s get into it.

Tesla’s Big Earnings Miss

Shares of electric vehicle manufacturer Tesla fell over 9% in a single trading session yesterday as the company missed Q3 earnings and revenue estimates for the first time 👀 since 2019.

Tesla reported automotive revenue of $19.63 billion, while its energy generation and storage business raked in $1.56 billion. Wall Street forecast revenue of $24.06 billion in Q2. Its net earnings stood at $0.66 per share, compared to estimates of $0.73 per share.

Tesla’s gross profits fell 22% year over year, and it ended Q3 with an operating margin of 7.6%, much lower than the 17.2% in the year-ago period. Further, the company warned its highly anticipated Cybertruck will drain cash 😅 flows and profit margins in its first 18 months since launch.

Tesla reported a free cash flow of $858 billion vs. estimates of $2.6 billion.

Netflix Investors Remain on Edge

Netflix investors might’ve been planning on a chill evening on Wednesday, but the company’s star-studded third-quarter earnings gave them a reason for an after-party.

Netflix shares surged 🚀 16% yesterday after it pulled in 8.8 million net new subscribers in Q2. That’s a couple of million more than estimates and a year-over-year growth of 11%. Netflix surpassed estimates despite the company reducing content costs, allowing it to end Q3 with a free cash flow of almost $2.5 billion 💰.

Netflix confirmed around 30% of new subscribers chose its ad-supported version, which suggests it should continue to gain market share. The streaming giant has increased its free cash flow forecast to $6.5 billion, up from earlier estimates of $5 billion.

China’s Economy on the Verge of Stabliziation

China’s 🇨🇳 been stuck in a rut ever since the pandemic: the country’s money-making exports are being blanked by the rest of the world, the housing market needs more than a lick of paint, and youth unemployment is scarily high. But at long last, the world’s second-biggest economy may be making progress.

China’s economy ticked ⬆️ up 4.9% last quarter from the same time last year, beating analysts’ prediction of 4.5%. And it pulled off a 1.3% uptick last month alone, mainly thanks to revitalized shoppers 💸 hitting the stores and giving retail sales their biggest bump since May.

However, Chinese stocks barely budged after the news, indicating investors are still wary of the country’s ailments. The long-suffering property sector 🏘 is the biggest concern: the debt-laden sector holds most of Chinese families’ wealth, deciding their levels of confidence and spending habits.

It checks out, then, that sales of stuff like furniture 🛏, building supplies, and home gadgets are pretty flat – plus, major developers are still teetering on the brink of debt defaults. And while the government has tried its best to support the struggling sector, key indicators – property investment, home sales, and construction data – are still slipping downward.

Bitcoin Surges 13% Since Late September

Bitcoin prices have increased 🚀 more than 23% in the last three and a half weeks as investors are optimistic about the SEC's approval of a spot Bitcoin ETF.

Several countries, including Canada, already have a spot Bitcoin ETF. So, what’s the fuss about? Well, the U.S. is the world’s largest economy, and a Bitcoin ETF might attract around $500 billion in investments once it’s approved.

Headlines You Can’t Miss!

10-year Treasury yield retreats after rising to 5%

PC demand is back, says Acer

Inflation still too high, says Jerome Powell

Coinbase confident of Bitcoin ETF

FTX general counsel had quit due to balance sheet troubles

Chart of the Day

While interest rates have surged 🚀 higher in the last 20 months, the U.S. economy enjoyed lower yields for most of the past decade, giving rise to a cluster of unprofitable publicly traded firms. Unprofitable companies now account for 50% of the publicly listed company landscape.

These companies account for 10% of the total revenue 💰 pie and 13% of total jobs, which is quite substantial. As the cost-of-funding thermometer heads north, a good chunk of these firms are likely to find themselves in a tight spot.

Goldman Sachs calculated a 50% rise in the number of firms ceasing to operate would slow down monthly job growth by 0.2 percentage points. A 100% rise in this number would see the slowdown in monthly job growth double.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.