FT : Tesla dodges supply woes to deliver record number of new vehicles

Tesla dodges supply woes to deliver record number of new vehicles
Wall Street forecasts another leap in sales as two new plants are set to increase production

Tesla smashed its own production and delivery records in the final months of last year, shrugging off supply chain and other problems to hand new customers the keys to more than 308,000 vehicles.

The blowout figure, announced on Sunday, caps a year in which Tesla broke through earlier bottlenecks and rapidly scaled up production at a new plant in China to come close to reaching 1m in annual sales.

Growing confidence that the electric carmaker could overcome its persistent growing pains, while also achieving comfortable profit margins, lifted the company’s stock market value by a third in 2021, to more than $1tn.

Tesla’s fourth-quarter deliveries came in some 40,000 above the mean estimate of Wall Street analysts who follow the company, according to FactSet. The strong performance put the total number of deliveries for the year at 936,172, up from 499,550 the year before.

Chip shortages and other supply constraints have hit some other carmakers, slowing production. Speaking to investors in October, Zach Kirkhorn, chief financial officer, said shortages had prevented the company from running its factories at full capacity, and the big jump in production that it had managed in the first nine months of the year had been “exceptionally difficult to achieve”.

Despite that, Tesla went on to smash through its own record production volume in the final quarter with 305,840 new vehicles rolling off its production lines, or 68,000 more than in the preceding three months.

The 308,600 new vehicles delivered to customers in the final quarter was 28 per cent higher than the previous record, which was hit in the third. It was also 71 per cent more than in the same period the year before.

With two new plants due to start increasing production this year, Wall Street is forecasting another leap in sales, with deliveries expected to reach 1.42m. That is despite delays to some of the company’s planned new models, with volume production of its Cybertruck pick-up put off until 2023 and no target delivery dates yet for its semi-truck and a new version of its original Roadster.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Given bonds’ stubbornly low yields, analysts and advisors have urged investors to reconsider the traditional 60/40 blend of stocks and bonds in a portfolio

Cover Story:
-Given bonds’ stubbornly low yields, analysts and advisors have urged investors to reconsider the traditional 60/40 blend of stocks and bonds in a portfolio. The “bond king” himself, Bill Gross, has called bonds “garbage.” Jim Grant, a Barron’s alumnus and publisher of Grant’s Interest Rate Observer, has said that bonds offer “return-free risk.” In turn, experts suggest income-seeking investors to broaden their focus to stocks and more equity-like areas of fixed-income markets, such as convertible securities and junk debt.

Interview:
-Barron’s interviews Anthony Klotz, a professor of business administration and an associate professor of management at Texas A&M University. Klotz has made a career of studying resignations. A year ago, Klotz predicted what has come to be known as the Great Resignation—a term he unwittingly coined for a phenomenon that has left economists puzzled, central bankers flat-footed, and the U.S. economy grappling with shortages of goods and services. While some workers finally re-entered the labor market in November, the Covid-era workforce-participation rate remains below pre-pandemic levels, defying expectations for a mass return to work that would have thawed supply chains and cooled inflation.

Tech Trader:
2021 proved tricky for tech investors. While the Nasdaq Composite—a reasonable proxy for the sector—was up 23% for the year through the middle of this past week, that trailed the return of the S&P 500 by about five percentage points. It’s the first time that’s happened since 2016. Tech stocks overall were solid, but the indexes proved misleading, with strong performances by a few of the largest components masking some ugly stuff under the surface. Barron’s suggests that Nvidia could be next company to join the trillion-dollar club, thanks to a 132% rally that lifted its market value to $750 billion.

The Trader:
-In 2022, the Federal Reserve could begin increasing its target interest rate around the middle of next year—lifting the rates that banks can charge on loans they extend—while more of that excess capital could be returned to shareholders via higher dividends, stock buybacks, or both. The Invesco KBW Bank ETF (KBWB), which provides concentrated exposure to the group, returned about 38% in 2021.
-The Trader, edited by Ben Levisohn evaluates its own advice, as dispensed through 2021: “Looking back on 2021, there was only one right answer for anyone playing the stock market: Buy and hang on. Every dip turned out to be short-lived and small enough to be ignored. There were no bear markets, no corrections, and even 5% declines were few and far between—there was just one. The S&P 500 index will finish the year up around 27%, and near its all-time high.”

Features:
-IBM could be one of the big turnaround stories of 2022. Barron’s highlighted the company’s improving outlook in a recent cover story, calling it Microsoft Jr. Under CEO Arvind Krishna, IBM has spun off a pedestrian business of managing data centers into Kyndryl Holdings, refocused on the cloud and artificial intelligence, and vowed to start growing again for the first time in about a decade.
-Johnson & Johnson is shaking off its stodgy image as it moves to develop a broad and underappreciated drug portfolio and spin off its consumer business. The stock, now priced around $173, trades for a reasonable 17 times projected 2022 earnings of $10.38 a share and has a secure 2.5% dividend yield.

European Trader:
-Europe’s biggest online-only fashion retailer Zalando has had a tough year, as shoppers returned to physical shops after pandemic lockdown restrictions eased. The Berlin-based e-commerce player mainly sells clothes, beauty products, and footwear from third-party vendors to customers in 23 countries. It also makes some of its own branded items.

Emerging Markets:
-Barron’s suggests that a Korean electric-vehicle battery powerhouse LG Energy Solution, India’s dominant life insurer Life Insurance Corp. and a Chinese online fast-fashion site run by Bytedance (parent of TikTok) that had more U.S. downloads than Amazon.com might offer some of the top opportunities in emerging markets investment for 2022. These and other emerging market companies may launch initial public offerings in 2022. Tech unicorns from Colombia to Indonesia could turn the stream into a flood—or not, depending on how much 2021’s IPO flops quash animal spirits.

Commodities:
Poor winter weather conditions combined with already-low global inventories could send prices for wheat higher by up to 19%, experts say. War in Eastern Europe could catapult them further. “Europe, Ukraine, and the U.S. face some very unfavorable weather that will really set off a supply shortage concern,” says Shawn Hackett, president of Hackett Financial Advisors.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-As the year closed out, Omicron drove coronavirus cases to record highs, upended air travel and left staffing holes at hospitals. Uncertainty looms as the variant continues to spread, and as people return to workplaces and schools that vow to remain open.
-Airlines canceled more than 2,400 flights across the United States by midday Saturday, by far the worst day in the industry’s week-long struggle with bad weather and crew shortages.
-In an almost empty cathedral, with an unvarnished, rope-handled coffin placed before the altar, South Africa said farewell on Saturday to Archbishop Desmond M. Tutu with the simplicity that he had planned.
-Eric Adams has taken office as New York City’s 110th mayor at a perilous moment. Adams, the city’s second Black mayor, faces difficult decisions over how to lead through the next wave of the pandemic. Nevertheless, some prominent Democrats think their party’s nominee for mayor of New York offers a template for how to address issues of public safety.
-Record-setting fires in Colorado have destroyed more than 500 homes.
Unlike fires in mountain wilderness, which often burn over the course of weeks, the destruction on Thursday played out in minutes and hours.
-After slow gains in women’s rights, South Korea is facing a type of political correctness enforced by young men angry at feminists.
-The Islamic State identified the suicide bomber who attacked Kabul airport four months ago (killing over 200 people, including 13 US soldiers) as Abdul Rahman Al-Logari. American officials say he was a former engineering student who was one of several thousand militants freed from at least two high-security prisons after the Taliban seized control of Kabul on Aug. 15.
-A Vatican library is shortening the distance between its works and its scholars. Rare books are going online thanks to a German copier, a Long Island scanning firm and a New York software company.
-Jelena McWilliams, whom former President Trump appointed as the chairwoman of the F.D.I.C., said that she would step down effective Feb. 4. Democrats on the board contended she was stonewalling their attempts to review policy.

THE FINANCIAL TIMES
-Forecasting 2022 geopolitics: The world on the brink of 2022 seems an especially unpredictable, and unsettling, place. For the first time, two FT forecasts this year ask if Russia and China will invade neighbors (they say no). Less optimistically, our forecasters warn a more infectious coronavirus variant than Omicron could yet emerge, inflation will not return to US targets, tighter monetary policy will hit equities, and the next global climate conference will still not achieve enough in limiting warming. A bit playfully, perhaps, John Thornhill forecasts shares of Elon Musk’s Tesla will buck the trend and rise nonetheless.
-A rising tide of hot equity markets lifted almost all listed asset managers in 2021 but the dispersion between winners and losers is expected to increase next year as investors favor groups exposed to fast-growing areas such as private assets, according to analysts.
-The world economy rebounded from the historic recession caused by the Covid-19 crisis better than many economists expected in 2021 but faces a harder path ahead in the coming year, forecasters have warned.
-The rush of volunteers comes as tensions escalate amid reports that Russia has amassed 100,000 troops along its border with Ukraine, sparking fears that Moscow is preparing to invade. As part of intense diplomatic efforts to ease the crisis, US president Joe Biden and Vladimir Putin, his Russian counterpart, spoke by phone on Thursday, ahead of further negotiations in January between Washington, Moscow and NATO powers.
-More than 2M people in the UK were infected with coronavirus last week, according to the latest official figures, causing a jump in staff absences in the health service and fast-rising admissions to hospitals.
-The EU wants to recognize nuclear power and forms of natural gas as “green” activity as part of a landmark classification scheme to help financial markets decide what counts as sustainable investment.
-Certares Management and Knighthead Capital Management are sitting on paper gains of almost $3bn after an audacious $2bn bet in May on Hertz, part of the century-old car hire pioneer’s exit from pandemic-induced bankruptcy.
-Chinese tech group Tencent has taken a stake in Monzo, the latest international investor to join a funding round that values the UK digital bank at $4.5B. The move, revealed on Friday, underlines a rapid recovery in Monzo’s fortunes after a tough start to the pandemic that had crushed its valuation and even prompted outside warnings that it could struggle to stay afloat.
-This may be the year Boris Johnson’s luck runs out. Unfortunately for the UK prime minister, 2022 is set to be dominated by circumstances out of his control.
-The US government significantly underestimated the number of jobs created this year as it struggled to analyze data distorted by the effects of the pandemic, creating fresh challenges for policymakers navigating a highly volatile economic environment.
-Oil and gas shares — knocked early in the pandemic and increasingly shunned by eco-conscious investors — have this year eclipsed the stock markets’ in-vogue environmental, social and governance-focused companies.

THE NEW YORK POST
-New York City health officials have been using race to help decide how to allocate precious coronavirus testing resources, leaked emails from the agency show. In a conversation with reps for the Department of Health and Mental Hygiene, City Councilman Joe Borelli’s office said constituents on Staten Island’s South Shore were having trouble getting tested at city facilities.
-Outgoing Disney executive chairman Bob Iger penned a farewell post on social media Friday as he formally exits the company that he helped to build into a global entertainment powerhouse. Iger, 70, is set to retire when his contract expires at the end of the year after a lengthy run as Disney’s top executive. He has served as Disney’s executive chairman since stepping down as CEO in early 2020.
-A group of Republican-led states slammed Nasdaq’s implementation of a diversity disclosure rule for corporate boards this week, arguing in a court filing that the requirement is illegal and unconstitutional.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • ZEPP -4.4% (lowers Q4 guidance)

Other news:

  • SPRB -5.4% (files for $200 mln mixed securities shelf offering)
  • MP -1.5% (files for $2 bln mixed securities shelf offering; also files for $690 mln green convertible senior notes offering)
  • XLNX -1.4% (AMD and XLNX push back timing of acquisition close into 1Q22)
  • GRAB -1.4% (stock offering)

Analyst comments:

  • PTON -1.2% (downgraded to Mkt Perform from Mkt Outperform at JMP Securities)

>>> US Gapping up

Gapping up

News:

  • XERS +23% (FDA approves Recorlev; plans commercial launch in 1Q22)
  • LXRX +5.8% (submits NDA to FDA seeking approval for sotagliflozin for type 2 diabetes)
  • MCFT +1.2% (Coliseum Capital Mgmt discloses 5.8% stake)
  • FTCV +1% (lowers eToro valuation)
  • AMD +0.5% (AMD and XLNX push back timing of acquisition close into 1Q22)

Analyst comments:

  • APLS +1% (added Needham Conviction list and reiterated Buy rating)