🚘 Tesla and the fall of EVs
🚘 Tesla and the fall of EVs
Electric vehicles aren't looking to be the future, so what is? iPhone sales slump; TSMC & ASML release earnings; Sony in talks to acquire Paramount; A $110 million cryptocurrency scheme; and more.
Good morning friends and enthusiasts 👋,
Happy Friday and welcome to the 23rd edition of Weekly Brief. A warm welcome to the 4 new enthusiasts who joined J. Nicholas this week. We now have 272 subscribers (27.2% of our 1,000 subscriber goal).
The S&P 500 is down ~3% this week following escalating tensions between Israel and Iran, paired with lower rate cut expectations, and hotter than expected inflation data carried over from last week. But the good news is, Jim Cramer thinks it might be a good time to buy.
On top of that, this week Tesla announced a vote asking shareholders to reapprove Elon Musk’s $56 billion pay package; iPhone sales dropped to COVID lows; U.S. TikTok ban wins Senate endorsement; and the first-ever cryptocurrency market manipulation case.
Let’s get into it.
IN THIS ISSUE
🚘 Tesla and the fall of EVs
💰 Sony in talks to acquire Paramount
🧑⚖️ A $110 million cryptocurrency scheme
On this day. On April 19, 1775, the American Revolution started with the Battles of Lexington and Concord, as an effort by 13 British colonies in North America to win their independence.
FEATURED STORY
🚘 Tesla and the fall of EVs
Tesla is by far the worst-performing stock in the S&P 500 this year, dropping by almost 40% year-to-date and wiping out nearly $300 billion in market value. Tesla has dropped so much in fact, that it’s sunk more than Boeing, the airplane manufacturing company that had one of their doors literally fly off mid-flight earlier this year. And it’s not just Tesla; a bunch of EV stocks have also seen a major drop in price.
EV Stocks like Rivian (RIVN), Lucid Motors (LCID), and China’s Nio (NIO) have dropped a combined ~160% year-to-date. To make matters worse, just this month, Ford announced they’re pausing production on EVs and focusing on gas-electric hybrids that are in more demand from consumers. This decision alone cut $12 billion (~C$17 billion) in spending on Ford’s EV plan.
“Deploying plug-in technology will deliver some of the environmental benefits of EVs as the nation continues to build charging infrastructure.” — GM CEO Mary Barra
More names like General Motors (GM), Mercedes-Benz, and Hyundai are now abandoning their “EV-only strategy,” shifting their focus to prioritizing hybrid production to meet emissions requirements amid slowing demand for EVs. Hyundai is even considering completely converting their $7.6 billion (C$10 billion) Georgia EV plant into a hybrid plant for the same reason.
In short, demand for EVs and sustainable energy production from consumers is at an all-time low. This, paired with rising competition and billions of dollars of investment from every automaker imaginable, forces these companies to slash prices, reducing margins and demotivating them from selling electric vehicles in the first place. Low demand, coupled with high investment and no return on said investment, will result in a demotivated market with no growth.
But who knows? World governments are ambitious in their efforts to push the adoption of EVs, offering rebates and tax cuts for automakers, (among other things). Canada in particular wants 60% of all cars sold to be electric by 2030. It’s ambitious for sure, and absolutely no one wants it, but it’s probably going to happen eventually.
Speaking of Tesla
🤝 Shareholders vote for Musk’s compensation package: This week, Tesla announced a proxy vote asking shareholders to reapprove Elon Musk’s $56 billion pay package, just a few months after a Delaware court found it unfair and voided it. This vote also includes a decision to reincorporate in Texas instead of Delaware as a result of the court decision.
FINANCE
📱 iPhone sales drop, Samsung regains crown
Apple’s iPhone shipments fell by nearly 10% in Q1 2024 (as reported by Bloomberg), allowing Samsung to reclaim the crown of the most smartphone sales. Samsung now holds a 20.8% market share, with Apple slipping back to second place with 17.3%. Chinese brands like Xiaomi are just barely behind Apple with a 14.1% market share.
Samsung’s Galaxy S24 series, launched earlier this year sold over 60 million units while Apple shipped 50.1 million iPhones, down from 5.3 million year over. Sales in China, Apple's largest overseas market, dropped 24% in the first six weeks of 2024 amid competition with Xiaomi and Huawei. This all comes after Apple lost its title as the world's most valuable company earlier this year to Microsoft.
📉 TSMC, ASML release earnings
This week, two of the largest and most important companies in the world released earnings. Those companies names? Taiwan Semiconductor Manufacturing (TSMC) and Advanced Semiconductor Materials Lithography (ASML). Here’s how the companies performed (in USD):
TSMC Q1 2024 (TSM):
Earnings per share: $1.38 vs. $1.30 expected
Revenue: $18.87 billion vs. $18.31 billion expected
Net income was $6.97 billion, or $1.38 per share, up 8.9% from $6.37 billion, or $1.30 per share a year ago. Revenue rose 16.5% to $18.87 billion from $15.65 billion the previous year.
ASML Q1 2024 (ASML):
Earnings per share: $3.31 vs. $3.36 cents expected
Revenue: $5.63 billion vs. $5.73 billion expected
Net income was $1.30 billion, or $3.31 per share, down 37.4% from $2.18 billion, or $5.21 per share a year ago. Revenue dropped 21.6% to $5.63 billion from $7.7 billion the previous year.
BUSINESS
💻 Google fires amid Project Nimbus protests
Google fired 28 employees this week after a sit-in protest against Project Nimbus, a $1.2 billion (~C$1.7 billion) cloud computing contract, in partnership with Amazon, for the Israeli government and military. The project has faced criticism since 2021, and more so in 2024 where employees are accusing Google of profiting from the Israel-Palestine war. A Google spokesperson explained the firing, with the biggest reason being violations of company policy:
“These protests were part of a longstanding campaign by a group of organizations and people who largely don’t work at Google. A small number of employee protesters entered and disrupted a few of our locations.”
💰 Sony in talks to acquire Paramount
Paramount is again a topic in business news this week after a report by The New York Times signalled a joint merger and acquisition with Sony Pictures Entertainment and Apollo Global Management. Sony’s CEO Tony Vinciquerra is considering an all-cash offer to take Paramount private.
Unlike Skydance, who wants to buy out National Amusements (Paramount’s parent company), Sony and Apollo plan to integrate Paramount into its media business. The value of this Sony/Apollo deal would be over $11 billion (~C$15.2 billion), however Paramount is currently focused on discussions with Skydance.
POLITICS
🇺🇸 U.S. TikTok ban wins Senate endorsement
New legislation with the potential to ban TikTok in the U.S. gained more momentum after the U.S. House of Representatives combined it into another bill of aid for Ukraine and Israel. The new bill is backed by both major parties and is expected to move fast through Congress.
Amendments in this new combined bill extended the deadline for TikTok to break from its Chinese parent company, gaining Senate endorsement in the process. If passed, the bill would lead to an immediate ban of TikTok across the U.S. and would signal a big regulation of the tech industry to come.
🧑⚖️ A $110 million cryptocurrency scheme
A New York federal jury just convicted Avraham Eisenberg, a resident of San Juan, Puerto Rico, in a $110 million (~C$152 million) cryptocurrency scheme, marking the first-ever openmarket manipulation case involving crypto.
Per CNBC, Eisenberg fraudulently obtained $110 million worth of cryptocurrency from Mango Markets (a crypto exchange) and its customers by artificially inflating prices of the MNGO token whilst borrowing crypto without intending to repay. He faces up to 20 years in prison for wire fraud, commodities fraud, and more and his sentencing is scheduled for July 29, 2024 in Manhattan.
Thank you for reading today’s issue of Weekly Brief. I’m hoping for another Deep Dive to come out next Wednesday. It seems I say this every week, but this time I’m more confident it will actually happen.
If you have any questions or feedback, reply to this email (I read every reply). Have a great week ahead!
— Jacob
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📚 Book of the Week
Note: I don’t recommend books that I haven’t read or that I would never read. The books I recommend are books I have already read or that I will eventually read.
Beating the Street — Peter Lynch
Book Description:
An important key to investing, Lynch says, is to remember that stocks are not lottery tickets. There’s a company behind every stock and a reason companies—and their stocks—perform the way they do. In this book, Peter Lynch shows you how you can become an expert in a company and how you can build a profitable investment portfolio, based on your own experience and insights and on straightforward do-it-yourself research.
In Beating the Street, Lynch for the first time explains how to devise a mutual fund strategy, shows his step-by-step strategies for picking stock, and describes how the individual investor can improve his or her investment performance to rival that of the experts.
There’s no reason the individual investor can’t match wits with the experts, and this book will show you how.
As of Jan 31, 2024, (resulting from my Amazon.ca Associates account being terminated) I do not earn any affiliate commissons from the links below.