The highlight of the past week was Tesla TSLA crossing Elon Musk’s $420 target. The electric vehicle (EV) pioneer seems unstoppable. The most significant catalyst to its most recent rally is the Shanghai Gigafactory 3 and its ahead-of-schedule timeline, with cars being shipped out across China’s mainland. Tesla now has access to the world’s EV market and the stock price reflects this. In the past week, the company also secured $1.4 billion funding from China banks for its Shanghai Gigafactory.
With the EV revolution gathering steam, Ford F recently bumped up its investment in Rivian, the maker of electric SUVs and pickup trucks. Meanwhile, CarMax Inc. KMX and Winnebago Industries, Inc. WGO unveiled their quarterly results.
(Read the Last Auto Stock Roundup here).
Recap of the Week’s Most Important Stories
1. Tesla recently secured a 10 billion yuan ($1.4 billion), five-year loan from a group of China banks in order to expand production at its Gigafactory 3 in Shanghai. Reportedly, part of this new loan will be used to roll over some of the company’s previous debt. Tesla aims to utilize 3.5 billion yuan of the new loan to roll over an existing debt, while the remaining amount will be invested in the company’s Shanghai factory as well as other China operations. Earlier this year, these China banks had issued a 12-month loan of up to 3.5billionyuan for the Zacks Rank #2 (Buy) firm, slated to be repaid on Mar 4, 2020. The interest rate of the new loan will be the same as the 3.5 billion yuan loan, at 90% of China’s one-year benchmark interest rate. (Read more: Tesla Secures 5-Year Worth $1.4B Loan for Shanghai Factory)
You can see the complete list of today’s Zacks #1 Rank stocks here.
2. Ford recently recalled more than 600,000 vehicles, which include certain versions of the 2006-10 Ford Fusion, Mercury Milan and Lincoln MKZ, for a hydraulic defect that might result in crashes. The vehicles, which were made between Feb 22, 2006-Jul 15, 2009, total 600,166 in the United States and its territories. (Read more: Ford Recalls More Than 600,000 Vehicles Over Hydraulic Defect)
The #2 U.S. carmaker bumped up its investment in Rivian, an electric car start-up, along with the existing backers Amazon and Blackrock. It has been an impressive year for Rivian, with the company raising another $1.3 billion toward the end of 2019. Rivian kicked off 2019 with a $700-million funding round led by Amazon. Notably, in April 2019, Ford Motor Company had also made an investment of $500 million in Rivian for the production of Electric Lincoln SUV utilizing Rivian's skateboard platform, the launch of which is due in 2022. In September, it raised another $350 million from Cox Automotive. (Read more: Ford Revs Up EV Investment, Bumps Up Stake in Rivian)
3. CarMax posted third-quarter fiscal 2020 (ended Nov 30, 2019) net earnings per share of $1.04, missing the Zacks Consensus Estimate of $1.16. Notably, lower-than-expected revenues across the wholesale vehicle segment resulted in the underperformance. The bottom line also compared unfavorably with a profit of $1.09 per share reported in the year-ago quarter.Net sales and operating revenues in the reported quarter increased 11.5% year over year to $5,790 million. The top line beat the Zacks Consensus Estimate of $4,709 million. (Read more: CarMax's Q3 Earnings Miss, Revenues Top Estimates)
4. Winnebago reported earnings of 73 cents per share in the first quarter of fiscal 2020, beating the Zacks Consensus Estimate of 70 cents. Notably, higher-than-expected revenues across all segments resulted in the outperformance. Sales in the Motorhome and Towable segments came in at $225.9 million and $341.3 million, beating the consensus mark of $185 million and $271 million, respectively. The bottom line also compared favorably with 70 cents a share recorded in the year-ago quarter. Overall revenues in the reported quarter increased 19.2% year over year to $588.5 million. The top line beat the Zacks Consensus Estimate of $530 million. (Read more: Winnebago Earnings and Revenues Beat Estimates in Q1)
5. BMW AG BAMXF is under investigation by the U.S Securities and Exchange Commission due to its sales practices, per Wall Street Journal. The SEC is looking into the U.S. activities of BMW to ascertain whether it is involved in a technique known as sales punching. Additionally, BMW faces lawsuits in Europe on charges of collusion with rivals to manipulate prices on emissions control technologies. The company is also under pressure in the United States on account of the U.S.-China trade war, which has impacted SUV exports from its factory based in Spartanburg, SC. (Read more: BMW Under SEC Investigation for Inflating Sales Numbers)
Price Performance
|
Company |
Last Week |
Last 6 Months |
|
GM |
-2% |
-4.6% |
|
F |
-0.8% |
-7.1% |
|
TSLA |
8.1% |
90.8% |
|
TM |
-0.8% |
14.3% |
|
HMC |
-1.5% |
10.9% |
|
HOG |
0.2% |
6.4% |
|
AAP |
1.6% |
5.8% |
|
AZO |
-0.8% |
12.4% |
The following table shows the price movement of some of the major auto players over the past week and six-month period.
In the past week, General Motors declined the most, while Tesla was the maximum gainer. Even over the past six months, Tesla was the best performer, having rallied 90.8%, while Ford has been the worst performer.
What’s Next in the Auto Space?
Car enthusiasts will be keeping a close watch on December and full year 2019 U.S. car sales, which will be coming out early next week. Investors in the auto sector would be closely tracking the monthly sales reports of auto biggies like Honda Motor HMC, Hyundai and Toyota Motor TM, among many others. They will also await third-quarter 2019 earnings of China-based electric car maker NIO Inc., which will be unveiling its numbers on Dec 30.
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