Tesla Is Expected To Remain The EV Leader For 2023
In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Strong Bidding
The biggest news this week was that the Treasury auctions have been going amazingly well due to the fact the bid-to-cover ratio has averaged only 0.12%. We are now in the midst of the strongest bidding for Treasury securities since October 2021.
Frankly, this means that bond investors are fully expecting inflation cooling off and that the Fed will soon announce that its key interest rate hikes will soon end.
Q4 2022 hedge fund letters, conferences and more
The Commerce Department announced that its preliminary estimate for fourth-quarter GDP growth is an annual pace of 2.9%. The fourth quarter GDP will be revised after the trade and other economic data are updated in the upcoming weeks. For all of 2022, the Commerce Department said that GDP expanded at a 2.1% annual pace, down from a robust 5.9% annual pace in 2021.
I should also add that the Conference Board announced that its Leading Economic Index (LEI) declined 1% in December, following a 1.1% decline in November. The LEI decline for December was worse than economists’ consensus estimate of a 0.7% decline and represents the tenth straight monthly decline.
The LEI is designed to forecast a recession, which remains conspicuously absent but according to the LEI may be still forthcoming.
Temporary Blip
It was reported that in the past five months, the U.S. economy has shed 110,800 temporary workers, including 35,000 in December. This is a warning sign that the job market is getting weaker. 3M Co (NYSE:MMM) is the just latest company to announce layoffs in the wake of a disappointing quarterly sales and earnings announcement.
As soon as this job market weakness shows up in weekly unemployment claims and weaker-than-expected payroll numbers, the Fed will have to take notice, since one of its Congressional mandates is the U.S. unemployment rate.
Despite many companies announcing layoffs, the Labor Department on Thursday announced that weekly unemployment claims declined to 186,000 in the latest week, down from a revised 192,000 in the previous week. Continuing unemployment claims rose to 1.675 million in the latest week, up from a revised 1.655 million in the previous week.
Overall, the four-week average of continuing claims declined to 197,500, so despite rising layoffs, the labor market remains remarkably healthy.
If you are confused by the economic corundum, you are not alone. The Biden Administration’s release of approximately 200 million barrels of light sweet crude oil from the SPR in 2022 grossly reduced the U.S. trade deficit, which exaggerated overall economic growth. Furthermore, China’s declining exports also boosted the U.S. trade deficit, which caused economists to revise their U.S. GDP estimates higher.
The truth of the matter is China is reopening after its Covid Zero restrictions were abruptly discontinued and it reopened international air travel. India, Indonesia, South Korea, Taiwan, Thailand, and Vietnam all benefited from China’s economic woes. Europe is also faring much better than expected due to an unusually warm winter as well as more accommodative central banks.
Tesla Still Leads
Tesla Inc (NASDAQ:TSLA) announced its fourth-quarter results on Wednesday that its fourth-quarter sales rose 37% and its earnings rose 59%. Although Tesla’s sales were slightly below analyst expectations after its Chinese price cuts, its earnings were a bit better than analyst consensus expectations.
Tesla's future sales are expected to be strong due to recent European and U.S. price cuts. The fact that the company announced that the Tesla Semi truck would be built in Nevada inspired confidence in the company's cash flow and long-term prospects.
The news that Elon Musk was exploring options to pay off Twitter's debt also helped Tesla stock rebound 50% from its recent low and I do not expect that its January lows will be retested.
The concerns about Tesla's operating margins are diminishing, but until its Shanghai plant reopens and its first quarter results are announced, it is anticipated that the company's margins will be under compression.
Long-term, Tesla is facing more competition from Chinese EV companies as well as Ford, Hyundai/Kia, Nissan, and VW Group (Audi, Seat, Porsche & VW), but the company is expected to remain the EV leader for 2023.
Coffee Beans
A trail camera set up to capture images of wildlife in Colorado was hijacked by a bear that used the camera to pose for about 400 "selfies." Source: UPI. See the full story here.
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