Displaying items by tag: stocks

(New York)

There seems to be some serious incredulity over whether Elon Musk’s tweet about taking the company private will ever come to pass. And with good reason, as it would take around a $100 bn of private capital to do so—no small feat for a money-losing company. However, Barron’s says it may actually happen. The company’s board is moving to lay out a strategic plan for how to pursue the privatization. CNBC further comments that “Tesla's board will likely develop a special committee of a smaller number of independent directors to review the buyout details”. Tesla’s share price fell 5% yesterday, apparently on doubts the plan would go ahead.

FINSUM: This is the kind of coup that someone like Musk could likely pull off. We also think it is a smart strategic play. However, given how challenging the undertaking is, we are leaning towards it not happening.

(New York)

The market finally had a down day yesterday (with the exception of the Nasdaq) after a good recovery. That said, many are worried about the market’s breadth, as most of the gains this year have come from just the six FAANG stocks. However, Barron’s notes that “just three sectors out of 11 are up more than the S&P 500 this year—that would be tech, discretionary, and health care—seven sectors have stronger breadth readings than the S&P 500, and all except energy have more than half their stocks trading above their 50-day moving average”.

FINSUM: Market breadth seems to have improved considerably over the last month, and generally speaking, the fundamentals underlying the market look healthier.

(New York)

In what seems like a series of warnings out of Morgan Stanley, the bank has put out another today on a critical sector. MS says that the market darling chip sector, often referred to as semi-conductors, are in for a rough road. The bank says the sector has the poorest risk-reward ratio in years. “Cyclical indicators are flashing red … Elevated inventory and stretched lead times leave no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction”, says the bank.

FINSUM: Gains of semiconductors have greatly outpaced the market over the last three years, and MS thinks it is all about to come crashing down.

(New York)

Morgan Stanley has put out a warning about the worryingly declining breadth of the stock market this year. The bank says that “Fewer stocks are carrying the load of the market, a sign of exhaustion and, in our view, a bad signal for further price gains”. The bank appears to be quite correct. According to the article “Bloomberg points out that Amazon.com, Netflix and Microsoft accounted for 71% percent of the S&P’s gains through early July. Along with Apple, Alphabet and Facebook, they accounted for 98% percent of the gains”.

FINSUM: Honestly that could not be a more worrying sign on breadth. 98% of gains from from 6 stocks. That does not spell widespread strength. However, earnings have been good for the last month (when the reporting period for these stats ended), so gains may have been better lately.

(New York)

Elon Musk shocked the world and the market yesterday. After several weeks of turbulent rhetoric and behavior, the CEO yesterday announced that he was seeking to take Tesla private. Musk said bluntly, “Am considering taking Tesla private at $420”, continuing “Funding secured”. The stock was trading at only $356 when he announced his intentions. There are three ways doing so would benefit Musk and Tesla. Firstly, they wouldn’t need to do anymore public equity funding issues. Secondly, he would not need to face anymore pesky questions from analysts. Thirdly, doing so would stick it to the short-sellers that Musk hates.

FINSUM: If we take a step back and examine it, Tesla does seem like the sort of company which might be better off private at this point. Just as Uber has stayed private while it has burned mountains of capital, Tesla might be wise to follow that lead.