🔋 Tesla's Low Battery

Tesla dropped its latest report on production… and it’s not pretty… April 3, 2024 | Peel #680 Silver Banana goes to... [Brilliant. ](=) In this issue of the Peel: - 🏭 Some parts of China’s economy are actually… expanding? - 💰 Both Champion X and Endeavor Group have agreed to a buyout. - 🚕 Tesla dropped its latest report on production… and it’s not pretty… Market Snapshot 📸 Banana Bits 🍌 - Vanguard and State Street don’t run the world, but for now, [they do run Disney]() - The WSJ dives deep into one of the most [storied boomer companies in the U.S., GE](=) - This guy must not go outside, but allegedly, restaurant traffic is [falling off a cliff in the U.S.](=) - Guess who’s back—not Shady, but [inflation fears](! Fast-Track to a Master of the Universe with Brilliant! = Build the acumen you need to Excel in high-stakes environments. 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[Why are you still here? Get it before it’s gone!]() Macro Monkey Says 🐒 Fat Bottom Economies They might not make “the rockin’ world go ‘round,” but economies sure do help a lot when coming off a bottom. Add China to the list of things that are BACK in 2024 because, with recent data releases out of Beijing, the economy that has (by far) taken the longest to recover from C-19, is finally joining the rest of us. And, given that China is massive, with both the second-largest economy and population in the world, it’s not just China that stands to benefit. Let’s get into it. The Numbers [Source]( Per S&P and the nation’s official government data sources, manufacturing returned to positive territory in March. According to S&P, they’ve been above for a few months now, but the government data shows China returning to 50.9 on its manufacturing PMI, indicating the nation’s manufacturing sector is expanding once again. Exports make up close to 20% of China’s GDP in any given year, almost twice the percentage of exports in the U.S. figure. So, with manufacturing expanding again, this helps China more than it would have if we had the same news in the U.S. At the same time, other data is moving in a positive direction as well. [Source]( Lower bond yields and, by extension, cheaper financing is driving improved investment. Especially in comparison to the cost of doing so in the U.S., China has a big respective advantage in this, albeit relatively small, economic modality. Apparently, China has been taking notes on U.S. responses to macro calamities of late. It feels like the U.S. has been printing money since Moses had a paper route, but China has historically been much less antsy in doing so. But that’s not stopping them now. A speech by Chinese President Xi Jinping in October, viewed by American media outlets like the WSJ, just recently indicates that the CCP wants China’s treasury to ramp up bond purchasing in its own version of open market operations. Experts agree that carbon-copy operations are unlikely in China as the nation’s benchmark rate is well off the near-floor levels the U.S. was at when we started printing money faster than our population sucks down Big Macs. So they have more room to run before taking those extreme measures. However, there are other factors to consider, most importantly, the value of the yuan against the USD. [Source](=) If China’s yuan were to fall too far, inflationary pressures could start to heat up. Now, with an annual inflation rate currently sitting at 0.7%, that shouldn’t be too much of a concern. But, perhaps the concern comes when factoring in the other forms of easing China has already begun. Most notable is the cut to bank reserve requirements, allowing them to expand lending, which, combined with a weaker currency, could just create a brand new problem. The Takeaway? China is in a very delicate economic dance right now. Multiple forces are pulling the economy in different directions, but the good news is that some parts of the economy are starting to move in the right direction. Growing retail spending, improving CPI metrics, and as we said above, an expanding manufacturing sector, are all starting to bring China BACK in 2024. But, none of those metrics are in what you’d consider “good” territory before the country shut down its economy for ~3 years and managed a GFC-level property crises at the same time. Overall, they’ve done well, but like the Fed in early 2022, this could easily go very wrong… so finger’s crossed! What's Ripe 🤩 Champion X (CHX) 📈10.4% - U.S. oil and gas companies are realizing they’re gonna need a lot of energy to keep up with renewable rivals, hence all this damn consolidation. - Oilfield services provider Champion X agreed Tuesday to a buyout offer from SLB, a larger rival in the space, for $7.75bn. - The deal is all in stock, with Champion holders receiving 0.735 shares of SLB per CHX they hold. That’s a 14.7% premium, so the arb smell is strong here. Endeavor Group (EDR) 📈2.1% - And the dealmaking continued to be so damn BACK, with Endeavor Group agreeing to a $13bn buyout by Silver Lake. - Endeavor is the majority owner of TKO Group, the owners of UFC and WWE. But don’t worry, you can still invest in Suga Sean, as TKO’s public float isn’t changing. - Shares didn’t rise much to that $27.50/sh price, indicating some trepidation over the deal going through. But the point is, we’re back, baby. What's Rotten 🤮 PVH (PVH) 📉22.2% - The [Men’s Underwear](=) index is right up there with the [Hot Waitress]( index as our favorite macro indicators, but the former might be flashing red right now. - PVH, the owner of brands like Calvin Klein and Tommy Hilfiger, shat its pants thanks to weak revenue guidance for the clothing brand holding company. - The firm beat on the top and bottom line last quarter, but macro changes and slow growth in Europe are causing concern for this quarter. Healthcare Stocks (XLV) 📉1.6% - A true national tragedy unfolded yesterday as, it turns out, health insurers won’t be able to commit quite as much highway robbery on us in 2024. - Insures like UnitedHealth, CVS, and others tanked as payments to these firms through Medicare Advantage is set to increase only 3.7% for the year. - According to people who actually know how Medicare works, that’s effectively a 0.16% decline in payments. Maybe another $3k ambulance bill would help? = Thought Banana 🤔 Warning: Low Battery It was a rough day for the [WSO Alpha]( portfolio yesterday, losing 1.25%, and as a result, I’d like to advocate for Elon Musk to be added to the FBI’s Top 10 Most Wanted list. His crime? Portfolio violence. And by extension, emotional damage to myself and physical damage to my wall thanks to that new hole I definitely didn’t just punch in it. Anyway, like a Tesla’s battery in the cold Boston winter, demand for the company’s vehicles appears to be running much lower than expected in this first quarter of 2024. What Happened? On Tuesday, Tesla dropped its latest report on production and, more importantly, delivery numbers for the first quarter of 2024. The world’s most valuable car company reported deliveries of 386,810 vehicles in Q1 along with 412,376 total vehicles produced. = [Source]() As we can see in the above chart, this was Tesla’s lowest quarterly delivery in nearly 2 years. But that’s not even the worst part. Analysts had been expecting “rock bottom” numbers, and somehow, Tesla’s numbers managed to come in even lower than that, marking the first YoY decline since 2020 and sending the stock down 4.9% on Tuesday. Needless to say, the Street threw up at these numbers. But Tesla’s stock has been beaten down quite a bit already in 2024, falling 29% in the first quarter and marking the third worst quarterly performance for the stock since IPOing in 2010. We knew it would be bad, but not this bad. Analysts pegged their median estimate for deliveries at 431,125, roughly 11.4% higher than the actual figure. = Why Happened? Like when a (or, more specifically, *my) dog pees on the floor, this is partially their own fault and partially the fault of others and the industry as a whole. Price cuts that tanked the stock in 2023 haven’t done a great job at driving demand, as they weren’t able to increase units as Tesla expected. So, they hit themselves with a double-whammy on that one, leading to the more recently announced price hikes. Competition in China was a huge driver as well, with new players like Xiaomi entering the market, BYD continuing to gain market share, and a continued fall in affiliation for American brands by Chinese consumers. Plus, more one-off challenges like shipping delays for key parts caused by Houthi rebels in Yemen, temporary closures of the Berlin Gigafactory, and reductions in the schedule of Chinese staff from banker hours of 6.5 days/week to just 5 hurt as well. [Source]() But, arguably an even more pervasive outcome here is the fat spread between units produced and delivered—hitting an all-time high as we can see in the above chart. That means higher inventory levels, thus higher costs and lower turnover, thus lower stock price. All around, it was basically the worst possible outcome. What’s Next? While this is bad news for Tesla, shareholders, and any idiots dumb enough to publish a 25-page [Equity Research piece](=) on the company last month, the good news is that this is hopefully the “rock bottom” that analysts alluded to. Now that FSD is literally mandatory for new deliveries and is available to all Tesla drivers in the U.S., this gives credence to the idea that the firm’s home market could soon see a revival in deliveries. Plus, closures in Berlin were paired with minor slowdowns at the Fremont Gigafactory, both plants that focus on the firm’s lower-cost models, the Model 3 and Model Y. Plus, Cybertruck deliveries will begin in earnest in 2024, adding a whole new product line to the firm’s delivery stats. So, while at lows, there’s reason to expect Tesla’s numbers can’t get much worse from here. …at least, we sure hope so… 💭 The Big Question 💭: Is this truly the “rock bottom” of delivery numbers for Tesla? If not, how much worse can it get? Are you buying this dip? Banana Brain Teaser 💡 Previous 🗓 If the circumference of a circle inscribed in a square is 25π, what is the perimeter of the square? Answer: 100 Today 🕐 Set X consists of eight consecutive integers. Set Y consists of all the integers that result from adding 4 to each of the integers in set X and all the integers that result from subtracting 4 from each of the integers in set x. How many more integers are there in set Y than set X? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “It’s OK to have your eggs in one basket as long as you control what happens to that basket” — 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