- 3 Big Scoops
- Posts
- Wells Fargo Downgrades Tesla
Bulls, Bitcoin, & Beyond
Market Moves Yesterday
S&P 500 @ 5,165.31 ( ⬇️ 0.19%)
Nasdaq Composite @ 16,177.77 ( ⬇️ 0.54%)
Bitcoin @ $73,160.44 ( ⬇️ 0.2%)
Hey Scoopers,
It’s almost Friday! We have an exciting issue for you today:
👉 Tesla is under pressure
👉 Electric vehicle sales take a breather
👉 MicroStrategy bets big on BTC
So, let’s go 🚀
Market Wrap 📉
The S&P 500 pulled back from record levels on Wednesday as tech stocks cooled off from their red-hot rally.
It seems investors are booking profits in tech while remaining bullish on verticals such as artificial intelligence, data centers, and cloud computing.
Wall Street came off a winning session as major indices inched higher on Tuesday, following inflation data for February, which came in line with expectations.
Analysts remain vigilant about how the central bank will proceed with monetary policy at the next meeting on March 19.
Trending Stocks 🔥
DollarTree - Shares of the discount retailer plunged over 14% as it wrestled with weak consumer spending and inflation in Q4. It also disclosed plans to shut 600 stores in the first half of 2024.
Robinhood - Shares of the discount broker have surged over 10% in pre-market trading after it reported an uptick in assets under custody and trading volumes for February 2024.
Petco Health & Wellness - Shares of the pet retailer are up 3.5% after it reported revenue of $1.67 billion and earnings of $0.02 per share, in line with estimates.
Tesla Stock In Freefall
Shares of Tesla fell over 4% yesterday after Wells Fargo downgraded the EV stock. According to the investment bank, Tesla’s sales volume growth in 2024 will be marginal and might even dip in 2025.
Tesla stock currently trades over 60% from all-time highs, falling over 32% in 2024.
Despite the pullback, Tesla is priced at a lofty forward price-to-earnings multiple of 55x. However, the pace of expansion in its revenue and profit has slowed significantly in the last 12 months.
The market clearly believes Tesla does not command a premium valuation, following the company’s disappointing numbers from China, data from European countries, and a production disruption at its Berlin factory. All of these factors will lead to lower-than-expected delivery numbers in Q1.
While Tesla’s sales volumes were up 3% in the second half of 2023, prices fell by 5%. Moreover, Tesla has lowered vehicle prices several times since late 2022, sparking a price war among peers.
Last October, Elon Musk warned about a slowdown in vehicle demand and claimed growth will be notably lower in 2024.
Tesla's market cap has dropped by roughly $250 billion this year, pushing it off the list of the 10 biggest companies on the S&P 500.
Wells Fargo lowered Tesla’s earnings to $2 per share in 2024 from $2.40 per share, much lower than the consensus estimates of $3.03 per share.
The EV Industry Is Scaling Back
In recent years, the automotive industry has been in a state of EV euphoria, but the buzz is wearing off.
In 2021, several auto manufacturers unveiled optimistic sales forecasts for battery-powered models and announced ambitious expansion plans. Wall Street joined the bandwagon, boosting valuations for legacy automakers and start-up entrants.
As the demand for EVs cools, companies such as Ford Motor, General Motors, and Volkswagen are scaling back or delaying their electric vehicle plans.
Investors should note that while the EV market will remain under pressure in the near term, the future looks promising.
For instance, EV sales in the U.S. touched a record high of 1.2 million units in 2023, accounting for 7.6% of total automobile sales. By the end of 2030, EV sales might account for at least 30% of the total automobile market.
MicroStrategy Raises Debt to Buy Bitcoin
Earlier this week, MicroStrategy said it raised $782 million in a debt sale to acquire additional bitcoin.
The software company, which is now a Bitcoin proxy, holds 205,000 BTC worth over $15 billion as the digital asset trades near all-time highs. Since the start of 2024, MicroStrategy has purchased close to 16,000 Bitcoin.
MicroStrategy is an enterprise software and cloud-based services company. In 2020, it disclosed plans to invest in Bitcoin, tying its share price to the digital asset in the process.
MicroStrategy’s stock value is appreciating at a much faster clip than the BTC prices. According to Canaccord, an investment bank. MicroStrategy’s equity value premium over its BTC holdings was 86% last week, surging to 99% today.
In the last four years, MicroStrategy’s market cap has risen from $1 billion to $30 billion.
Headlines You Can't Miss!
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Asian currencies might remain under pressure, says JPMorgan
Ethereum completes the Dencun upgrade
Chart of The Day
Source: CNBC
The U.S. continues to grapple with inflation as the CPI or consumer price index rose over 3% year over year in February. Alternatively, inflation numbers are much lower than the 2022 peak, and prices are actually falling in certain categories.
The trend of falling commodity prices is termed deflation. At the top of the deflation list is the price of eggs, which fell by 17% in the last 12 months. Other categories that saw double-digit declines include health insurance, laundry equipment, and car and truck rentals.
Categories of goods and services that were popular amid COVID-19 also saw declines. These include televisions, airline fares, and hotel rates.
DISCLAIMER: None of this is financial advice. The 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.