🚕 Tesla's Shock To Markets

Tesla’s revenue dropped this quarter… but their stock spiked?! April 24, 2024 | Peel #695 Silver Banana goes to... [Delta. ]( In this issue of the Peel: - 🏠New Home Sales increased 8.8% month-over-month in March. - 🛩 JetBlue’s losses nearly quadrupled against last-year’s quarter… - 🚗 Tesla’s revenue dropped this quarter… but their stock spiked?! Market Snapshot 📸 Banana Bits 🍌 - Despite missing on sales and EPS, Tesla shares boom [13.2% after-hours]() - There’s been a lot of noise around the TikTok ban, but [this WSJ article]( actually makes it make sense - Large-cap U.S. equity ETFs are [dominating fund flows]() - As important as Q1 earnings are, [Q2 is apparently all the rage]() - Every minute you go without joining our Discord server, my heart breaks more and more. Hurry up and [join here today](=) How Many Assets Do You Track? Do you hold crypto or stocks? There's one indispensable tool you need: a robust price tracker. We're a big fan of what Delta Investment Tracker has to offer. Delta offers comprehensive tracking of crypto, stocks, ETFs, and commodities – all at the unbeatable price of zero, nothing. It's top-tier financial tracking, entirely free. [Go give it a spin]( Macro Monkey Says 🐒 Pouring The Foundation Just as we were about to officially launch The Daily Peel Home Building Corps., it seems like these companies are finally starting to listen to us. There are few greater joys in life than complaining. And lately, we’ve been doing a whole lot of complaining about anything and everything housing. But the Luck of the Irish must’ve changed the minds of home builders from the Redwood forest to the Gulf Stream waters in March. We know this land was made for you and me, but now, this house might be made for… just me. Let’s get into it. What Happened? Yesterday, we finally received from the Pony Express—or whatever other lost-in-time data provider—the latest numbers on New Home Sales here in the United States. [Source](=) That little uptick on the far right side represents one thing for the idiots like me looking to buy a house in the next ever—hope. New Home Sales increased 8.8% month-over-month in March. In total, March saw an annualized rate of 693k homes sold, 8.3% above the same period in 2023. The good news is that at this level, New Home Sales are normalizing not to pre-pandemic levels, but to pre-GFC levels. Housing tends to be more of a leading indicator, so this bodes well not only for a housing normalization, but a rate normalization too. We’ve been told our whole lives that anything is possible and, if this really is a sign that consumers can get used to +7% mortgage rates, maybe that’s actually true. [Source]() It’s not only on an absolute basis that New Home Sales are getting the buyers among us hyped up again. Housing supply, which measures the number of homes currently listed for sale divided by the average number of sales per month, is gaining as well. As we can see in the above chart, generally, housing supply fluctuates between 5.5 and 7 months. Over 8 can often be a sign of bad times to come, but let’s just take the good news while we can for now… Currently, we’re sitting on 8.3 months’ worth of housing supply, according to that reading. At the same time, the median sales price of a new home jumped 7.5% to $430.7k, [Source](=) Once again, the good news is that the median sale price remains more than 13.3% below the recent peak in October 2022. But the bad news is that prices also remain nearly 30% above pre-pandemic levels. So, increasing supply has (so far) coincided with slight declines in home prices. Further, this coincides with expectations for rates to remain even higher for even longer, meaning that the economics of housing are, in fact, economic-ing. [Source](=) The Takeaway? Unfortunately, one month of solid New Home Sales data isn’t going to move the needle in favor of homebuyers. But as always, the direction is more important than the absolute level. Homebuyers have at least some reason to be optimistic, which is more than we’ve been able to say in a long time. The foundation is officially being laid. So, fingers crossed that we’ll be able to move in soon. What's Ripe 🤩 Spotify (SPOT) 📈11.4% - The hottest thing to come out of Sweden since dynamite and saunas, Spotify cranked up the volume yesterday on a banger of a Q1 report. - The music streamer skipped past estimates, delivering $1.04/sh on $3.9bn in sales vs the $0.70/sh on $3.86bn. Total users jumped to 615mn too. - Cost cutting has worked out for the firm, with guidance for further gross margin expansion coming while premium sub-growth remains healthy at 239mn. General Motors (GM) 📈4.4% - GM got a much-needed GG last quarter, beating estimates across the board by reporting a 24% jump in net income, a raised guidance, and more. - The automaker sped past estimates as, despite the Sahara-desert-dry demand for EVs, GM makes cars that work even when it’s cold outside. - Demand for non-Cybertruck pickups, SUVs, and other more “luxury” brands led the way. Combined with recent cost cuts, it was easy for GM to beat. What's Rotten 🤮 JetBlue (JBLU) 📉18.8% - Like ghosting someone hotter than you, JetBlue thought they were cool by ditching plans to merge with Spirit. But, it’s tough to look cool down 19%. - Losses nearly quadrupled from the year-ago quarter, losing $716mn (or $2.11/sh) vs the $0.53/sh loss expected. Sales beat slightly at $2.21bn. - Weak guidance driven by consolidation drove the selloff, partially caused by Boeing and P&W, but mostly because they’re not United, Delta, or American. PepsiCo (PEP) 📉2.9% - Investors had to ditch their Pepsi yesterday (both shares and the bev) and go right for the Jack & Cokes with guidance like this. - EPS of $1.61/sh on $18.3bn in revenue beat the $1.52/sh on $18.1 expected. But, sales still rose only 2.3% as volume shrinks on continued price hikes. - We’re gonna have a very dehydrated populous if Gatorade sales stay this low, but despite the headwinds, guidance walked away unscathed. Thought Banana 🤔 Earnings Spotlight: Tesla, Inc. It’s time for my parents to come pick me up… as long as it’s not in a Tesla. Because after this earnings report, I’m scared. Just about a month after we dropped our research report on Tesla ([go sign up for Alpha](), the company reported its largest annual drop in revenue in over a decade. But despite my fear and newly soiled pants, shares are ripping after hours. Not sure if these traders read the same report I did, but let’s see what’s going on. The Numbers [Source]() Revenue fell 9% compared to Q1 of 2023. Usually, falling revenue indicates that either prices or demand have been too low. For Tesla, it’s been both. But, analysts seem to think the worst of it may be over for the Emperor of EVs. Both revenue and EPS missed estimates, clocking in at $0.45/sh on $21.3bn in sales vs the $0.51/sh on $22.2bn estimated. Auto sales fell 13%, but both Energy and Services managed to increase, rising 7% and 25%, respectively. However, despite the attempts by these segments to give CPR to the whole firm, profits were still off 56% from the same quarter last year. [Source]( Ultimately, the biggest contributor to this absolute mess was Tesla’s price cuts, trimming gross margins by 18% annually. And, it looks like Tesla is just gonna ball out and lean into this margin deterioration with a focus on affordable vehicles. Who Cares? An “affordable Tesla” might sound like an oxymoron, but Tesla’s Model 2 is still expected to hit production lines by 2H’2025. This model is expected to price right around the $25k mark, but the new Tesla Roadster is still in the works as well. The new Roadster will carry a much higher price tag, helping to stem margin pressures, but the good news is that Tesla stated in their release that these new vehicle lines can be produced within existing manufacturing sites—no new Gigas for now. And, trying to avoid becoming the next Boeing, Tesla’s new platform design and an even more advanced FSD are still fully in the works. [Source]( The more than 1bn miles of training data Tesla has racked up still makes other competitors look like toddlers driving around Little Tikes. Plus, Tesla is one of the reasons for Nvidia’s success, loading up on GPUs like a prepper loads up on beans, water, and virginity. [Source]( According to Musk, on their earnings call, FSD is “not that far” from surpassing humans in terms of the reliability of not crashing into and killing pedestrians, drivers, and other robots. Heavy investment is ongoing in this regard, and more broadly related to getting manufacturing lines, AI training, and more as efficient as possible. To do so, the firm dumped $2.8bn into CapEx last quarter, 34% higher than in Q1’23. The Takeaway? 2024 could be the year Tesla officially moves from an auto company to a tech company. “The next phase of growth” was a key theme in the firm’s SEC documents and earnings call and also happens to be the same excuse Elon used to fire “more than 10%” of the company’s employees earlier this year. Elon spent a lot of time in the Q&A session of yesterday’s call focused on the pending robotaxi service, calling it a “combination of Airbnb and Uber” as some of the fleet will be owned by Tesla while others, probably the majority, by existing owners. Analysts are betting on the company’s potential here. After all, Elon was the guy who made EVs a thing when nobody thought it was possible. So, even though robotaxis, Optimus, AWS-like-inference, and much more sound batsh*t insane, if anyone can do it, it’s probably Elon. As always… we’ll see. 💭 The Big Question 💭: What does the future of Tesla look like? Will their FSD and Robotaxi services be a major success within the next 5-10 years? Since it’s still down over 40% YTD, you buying? Banana Brain Teaser 💡 Previous 🗓 Last week Chris earned x dollars per hour for the first 40 hours worked plus 22 dollars per hour for each hour worked beyond 40 hours. If last week Chris earned a total of 816 dollars by working 48 hours, what is the value of x? Answer: 16 Today 🕐 In a certain sequence of 8 numbers, each number after the first is 1 more than the previous number. If the first number is -5, how many of the numbers in the sequence are positive? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Failure is an option here. If things are not failing, you are not innovating enough.” — Elon Musk How Would You Rate Today's Peel? 😁 [All the bananas]() 😐 [Meh](=) 😩 [Rotten AF]() Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA]() // [ACADEMY]( // [COURSES]() // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353