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🚌 Electric Bus Bargain
Plus, are Americans slowly turning into Europeans?
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Good afternoon and happy Sunday. Novak Djokovic was deported from Australia after a court upheld a decision to cancel his visa, the top two trending posts on Wall Street Bets are about asset bubbles, and it's probably safe to say that 90% of us have done this while working from home. Let's dive in.
Review: US stocks were mixed Friday, dragged lower in the morning by a mixed bag of earnings among bank stocks. JPMorgan, the largest bank by assets, beat both profit and revenue estimates but CFO Jeremy Barnum said “headwinds” of higher expenses could weigh on the firm's future returns. Barnum hinted that inflation is factoring into increased expenses as the bank is paying its personnel more in order to "attract and retain the best talent.” Citigroup also beat analyst expectations Friday when it posted Q4 2021 earnings at $1.46 per share versus $1.38 projections. Specifically, investment banking fees increased considerably. With that said, the bank's net income slid 26% to $3.2 billion, evidently due to increased expenses. Meanwhile, Wells Fargo reported better-than-expected Q4 earnings on Friday, partially boosted by the release of an $875 million reserve fund that was established as a hedge against the pandemic. Still, the CEO says challenges remain as the bank looks to work through last fall's lawsuit and settlement related to overcharging foreign customers. The mixed results caused shares of rival banks Morgan Stanley and Goldman Sachs to slip as well on the final day of the week. Sentiment on the Street also soured after retail sales showed a decline in December of 1.9%. This was worse than economists’ expectations of a 0.1% drop. Additionally, January’s preliminary consumer sentiment reading from the University of Michigan was lower than projected mostly due to inflation concerns which were highlighted by last week's CPI and PPI reports. This week, investors will continue to focus on earnings along with a handful of Chinese data and remarks from the Bank of Japan which is the first major central bank to meet this year. Davos, a gathering of world leaders and policymakers, will also be making headlines, however, for a second year, the event will be virtual. As for last week as a whole, the Nasdaq lost 0.3%, while the Dow and S&P 500 lost 0.9% and 0.3%, respectively. This was the third-down week in a row for the Nasdaq.
Preview: US stock markets are closed tomorrow in observance of Martin Luther King Jr. Day.
On Tuesday, the January Empire State Manufacturing Index is released, summarizing business conditions within New York State and the surrounding region. December's New York manufacturing index rose unexpectedly by a full percentage point, but the news was overshadowed by weaker-than-expected retail sales across the country. The January NAHB (National Association of Home Builders) index is also due Tuesday. Considered a gauge of the single-family housing market, December's index rose by a point to 84, tying with February 2021 as last year’s high-water mark.
Wednesday, be on the lookout for December's seasonally adjusted building permits and housing starts reports. November's single-family housing starts jumped 11.3% from October, signaling increased demand for new construction. Concurrently, building permits rose overall by 3.6%. Also on Wednesday, the Philadelphia Federal Reserve Bank will issue its manufacturing survey for January.
Both initial unemployment claims and continuing jobless claims are due on Thursday, as well as December's existing home sales. Another 230,000 people filed initial jobless claims last week — the highest number since mid-November 2021.
On Friday, watch for December's leading economic indicators, which posted strong gains in November but reflected conditions prior to the Omicron outbreak.
It's another busy week for earnings. We have our eye on Goldman Sachs and Bank of New York Mellon which report on Tuesday. Banks are in focus for investors thanks to rising rates, which can sometimes benefit financial institutions by way of increasing net interest margins or the spread made from lending money. Procter & Gamble (PG) plans to release its quarterly earnings for the latest quarter on Wednesday. Keep an eye out for comments from the executive team about future guidance as it relates to cost increases and inflation heading deeper into 2022. Streaming giant Netflix (NFLX) is up on Thursday with its Q4 earnings. Analysts want to know what’s next for Netflix amid an increasingly crowded streaming market and what many hope is a return to normal as the pandemic wanes and more people venture out of their homes.
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Biggest Prediction of 50-Year Career on Wall Street
You may have seen me on Jim Cramer's TV show. But today, I'm going public with something I've never said on national air... not in any of my appearances on Fox Business or CNBC. I'm a little nervous about it...
But I stand behind the big prediction I'm making right now... because I've never been more confident that a strange day I foresee coming to America could make you a great deal of money.
Granted, I've made plenty of controversial calls in my 50-year career. Like when I called the collapse of Priceline.com on Mad Money back in 2012. Many experts didn't believe me.
But the stock plummeted 100 points overnight, showing a 733% overnight gain on one particular trade. I'm told it was the first time CNBC Mad Money held a reprise the next day.
In fact, I'm going one step further. I'm giving away the ticker symbol of the #1 stock to buy now... using the same system that bears my name on every Bloomberg terminal on Wall Street.
Regards, Marc Chaikin, Founder, Chaikin Analytics
Electric Bus Bargain
Guilty By Association: Proterra’s Stock Gets a Blackeye Over SPAC Deal
Proterra (PTRA), the electric bus maker, is getting a bum rap. However, it's not because of its technology or sales. It's Proterra’s association with a SPAC that has investors nervous. Since merging with a blank-check company to go public in June, shares of Proterra have plummeted. Over the past year, Proterra’s shares are down by nearly 60%.
While depressed stock prices are typically due to underlying issues at a company, with Proterra this isn’t necessarily the case. The electric bus maker, although not profitable yet, had sales of $243 million last year and more than $700 million in cash. Revenue this year and next, respectively, is expected to jump to $407 million and $784 million.
Opportunities Abound for Proterra
Proterra makes most of its money churning out electric buses for cities. Its electric buses are used in urban areas for short-distance routes. With little competition, Proterra has been able to corner 50% of the market. In the third quarter of last year Proterra delivered 52 electric buses, up from 33 a year earlier. The company faces a big opportunity to gain market share among the roughly 5,000 gas-powered buses sold each year in North America.
Outside of electric buses, Proterra makes money manufacturing battery systems for bus and truck companies. That gives the company an edge because it already has relationships with battery suppliers. The company also makes electric charging stations for fleet operators.
Proterra Eyes EV Eco-System
Combined, Proterra is creating a business in which it can sell electric buses, electric powertrains, and electric charging stations to truck and bus companies. That places it in a strong position as the electric vehicle market takes off.
Beyond providing EVs and equipment, the company is focusing on energy generation. It recently announced it turned electric buses in Massachusetts into electric generators. The school buses were able to provide power back to the grid while idle during school hours.
Despite all the positives, investors skeptical of anything tied to a SPAC are staying on the sidelines when it comes to Proterra. For how long remains to be seen as the EV market continues to grow.
Automated Farming Gets a Boost
Deere’s Autonomous Tractors Aim to Bolster Precision Agriculture
Some farmers might not have to worry about labor shortages this harvesting season. Farming equipment maker Deere (DE) is making sure of that with the impending launch of its John Deere 8R tractor. The self-driving tractor controlled by a mobile app can plow fields, plant crops, and maneuver around obstacles without the need for humans.
It's a big deal for the farming industry. Deere controls a large part of the farm machinery equipment market in the US. If it's backing autonomous farming, others will follow suit. CNH Industrial (CNHI) and AGCO (AGCO) are already developing their own products to automate aspects of farming.
Precision Agriculture the Future
With precision agriculture, computers and satellite imagery are utilized to determine how to maximize output on a farm. The future of this new industry relies heavily on autonomous farming equipment, drones that can spread chemicals and monitor crops, and self-driving tractors that work the fields. That enables farmers to grow more crops with fewer workers and with less impact on the environment.
The market is in its early stages and is still up for grabs. However, given Deere’s market share and the soon-to-be launched John Deere 8R tractor, the company is expected to be a major beneficiary of the shift to autonomous farming.
Deere Makes a Power Play
Deere’s new tractors are designed to be used on big farms. As a result, industry watchers expect farmers with thousands of acres of land to be early adopters. Deere’s current line of non-self-driving 8R tractors can cost more than $600,000. It's not clear what the company will charge for the autonomous versions. Deere also plans to sell its automation system as an add-on for other tractor models. That is driving excitement that farmers will adopt the technology en masse.
The precision agriculture market is heating up with the launch of Deere’s 8R autonomous tractor. With such a heavy hitter all-in with automating farming, the industry appears poised to take off.
POWERED BY CHAIKIN ANALYTICS
Biggest Prediction of 50-Year Career on Wall Street
You may have seen me on Jim Cramer's TV show. But today, I'm going public with something I've never said on national air... not in any of my appearances on Fox Business or CNBC. I'm a little nervous about it...
But I stand behind the big prediction I'm making right now... because I've never been more confident that a strange day I foresee coming to America could make you a great deal of money.
Granted, I've made plenty of controversial calls in my 50-year career. Like when I called the collapse of Priceline.com on Mad Money back in 2012. Many experts didn't believe me.
But the stock plummeted 100 points overnight, showing a 733% overnight gain on one particular trade. I'm told it was the first time CNBC Mad Money held a reprise the next day.
In fact, I'm going one step further. I'm giving away the ticker symbol of the #1 stock to buy now... using the same system that bears my name on every Bloomberg terminal on Wall Street.
Regards, Marc Chaikin, Founder, Chaikin Analytics
Are Americans Slowly Turning into Europeans?
Supply-Chain Delays Give Car Makers an In
Supply-chain delays and component shortages are prompting US vehicle manufacturers to rethink how they sell vehicles. Instead of stocking showroom floors with what they think consumers want, they are embracing a build-to-order manufacturing model.
It's a shift for American consumers who are used to going into a showroom and selecting from the available inventory. But it makes sense to let customers select the color, features, and add-ons. Holding inventory at dealers can be a big drag on manufacturers’ and dealerships’ profits.
With consumers now accustomed to waiting for their vehicle given supply shortages, US manufacturers are trying to shift buying behavior permanently. It's not a stretch. Europeans have been ordering vehicles and waiting about a month for delivery since World War II.
Ford Embraces Build-to-Order
Ford (F) is already embracing the build-to-order model with its Mustang Mach-e electric vehicle. The company is offering a $1,000 discount for any consumers who preorder vehicles. Ford has said this approach to manufacturing reduces the money wasted guessing the launch mix for a new brand. A build-to-order model also brings more efficiency to the vehicle manufacturer.
Ford customers order their custom vehicles online and take delivery at a local dealership. Ford is able to reduce inventory costs and deliver vehicles customers want. That prevents Ford from manufacturing too much of a hard-to-sell brand. Ultimately that means fewer discounts and incentives to move old inventory off showroom floors.
Instant Gratification May Win Out
A build-to-order model may not resonate with American consumers who are used to instant gratification. Many don’t want to wait several weeks for their new car or truck. That’s what Polestar, the electric vehicle maker owned by Volvo (VLVLY), found. It originally planned to deliver build-to-order vehicles to its stores, avoiding the need to hold inventory. However, consumers weren't willing to wait, forcing Polestar to stock its dealerships with five to seven vehicles it can sell on the spot.
These days US consumers have no choice but to wait for their vehicle to be in stock. Automobile manufacturers are trying to capitalize on that, hoping to change the way vehicles are purchased in the US. It’s not clear if consumers will be willing to wait a month for their new ride once there is plenty of inventory again.
This communication from The Street Sheet is for informational purposes only. It is not intended to serve as a recommendation to buy, sell, or hold any security and is not an offer or sale of a security. Information contained within should not be perceived as a research report and is not intended to serve as the basis for any investment decision. Any third-party views reflected herein do not reflect the opinion of The Street Sheet. All investments involve risk and the past performance of a security does not guarantee future results or returns. There is always the potential for financial loss when investing in securities or other financial products. Investors should consider their investment objectives and risks before investing.
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