Love Tesla cars but scared of their company’s cash burn and Elon Musk-related antics? There is a way to invest in the company without buying the stock. Tesla has issued automobile asset-backed securities, or bonds with coupon payments backed by lease payments from Tesla customers. Last year, the carmaker sold $1.5bn of such bonds, which are not backed by the company’s cash flow, but directly by lessee’s payments. One portfolio manager put it this way, “Oftentimes, investors get Tesla the company and Tesla the car confused, but in this case, you really get to separate the two out”. The bonds issued have various tranches divided up by credit quality.
FINSUM: This seems like a smart way to invest in Tesla without all the volatility related to Elon Musk and the company’s cash flow struggles.
It has been several years in the making, but drone delivery appears as though it is about to become a reality. Google has just had its drone delivery project approved by the FAA, the first such approval. The caveat is that the approval is only for an area in rural Virginia. But still, it is a breakthrough for the growing and fiercely competitive drone industry. Amazon and others are vying for FAA approval as companies want to be the go-to provider of nation-wide drone delivery. The division of Alphabet running the drone program is called Wing Aviation.
FINSUM: UPS, FedEx, and USPS drivers should be nervous about this, but it is a major breakthrough that has been a long-time coming.
Netflix has been hammered recently by news that Disney is launching its own streaming service. The stock saw a major selloff on Friday (4%) because of the threat the Disney move theoretically poses to Netflix’s model. However, the fears seem overblown, providing a buying opportunity of Netflix. Analyst Scott Devitt from Stifel explains, “We see little risk to Netflix growth plans and pricing power against this new offering given Netflix’s most popular price point should remain lower than the Disney bundle while Netflix is on track to materially outspend Disney on content”.
FINSUM: Netflix seems likely to remain both cheaper and offer more content for the foreseeable future, so the fears do seem overdone to us.
HSBC just put out a big warning to investors—it is time to sell Apple stock. The news comes as a bit of a surprise because the iPhone maker has been performing well this year and there have been rumors of a big new push into healthcare. However, HSBC says investors should get out of the stock because Apple’s new services business will disappoint. The bank summarized its view this way, saying “Services makes ecosystem more sticky but won’t necessarily enable Apple to recruit more consumers to iPhone … All in, we remain far more cautious on services than some of the numbers in the street might suggest”.
FINSUM: Not only does HSBC think the new services offerings will disappoint on the top line, but they think they will be lower margin too! It is hard to speculate how this might go, but we do think this transition to services will be harder than many expect.
You certainly won’t think of it this way, but Morgan Stanley is arguing that Apple is now a great healthcare play. The bank’s research team says Apple is on the verge of a major new product that will transform the healthcare space, meaning there could be a lot of value in the stock that is not being priced in. Katy Hubert of MS says “Apple is building a healthcare ecosystem and is poised to emerge as a leader in consumer-centric healthcare … Healthcare is a large, greenfield services opportunity for Apple”. She continued, saying “Unlike recent announcements on news, gaming, video, and payments, where Apple is joining existing competitors, healthcare is a market where Apple has the potential to lead digital disruption”. The stock is up strongly this year because investors are happy with its shift to a more services-oriented business model.
FINSUM: It is hard to speculate on the potential impact without know the product, but we must say Apple does seem to have a major opportunity if it can map a healthcare product onto the hundreds of millions of users of its products in the US alone.
In a sign of just how far Bitcoin and other cryptocurrencies have fallen from their heights, the CBOE has just scrapped its plans to continue to offer Bitcoin futures. Creating mainstream products around Bitcoin was all the rage until recently, but Wall Street’s appetite for doing so has tumbled alongside cryptocurrencies’ prices. Godman Sachs’ plans to create a bitcoin trading desk, much discussed early last year, have yet to materialize.
FINSUM: Have cryptocurrencies reached their zenith? In terms of prices, things are way off (Bitcoin at $20,000 in December 2017 to $4,000 now), but what about in terms of their place in the financial system?