Earnings Season is a volatile period with Big Money Managers and Short Sellers positioning to capitalize on news releases. Good reports are rewarded and weak reports or lowered forward guidance will be sold. Monitoring company earnings reports will help understand the big moves and provide insight to whether the Investment or Trade Thesis is still valid.
NOTE: report dates and times are subject to change
SCHEDULE JANUARY 23 – 27
| MONDAY 23 | TUESDAY 24 | WEDNESDAY 25 | THURSDAY 26 | FRIDAY 27 |
| MICROSOFT INTUITIVE SURGICAL | BOEING FREEPORT MCMORAN TESLA | VISA | CHEVRON |
EARNINGS REPORTS
MICROSOFT (JANUARY 24 AFTER THE CLOSE)
stockmarketHQ Notes
We listened to the Microsoft Earnings Conference call.
Top Three Take-Aways
3 things stood out in Microsoft CEO Satya Nadella’s comments from a future perspective.
- “…we accelerated a bunch of workloads during the pandemic over a period of two years. (companies) are optimizing, I don’t think (they) are going to take two years to optimize… (companies) are going to take this year to optimize and then as (companies) optimize the new projects start… The new projects don’t start instantly at the peak usage. They start and then they scale… at some point the optimizations will end. In fact, the money that they save in any optimization of any workload is what they will plow into new workloads… what has to happen is a cycle time where the optimization cycle finishes, the projects start, and then the projects ramp.”
- “This… sets us up to participate in the secular trend where digital spend as a percentage of GDP is only going to increase”… “we do fundamentally believe on a long term basis as a percentage of GDP, tech spend is going to go up”
- “I think the way for our investors to see this is we fundamentally believe that the next big platform wave… is going to be AI. And we strongly also believe a lot of the enterprise value gets created by just being able to catch these waves, and then have those waves impact every part of our tech stack and also create new solutions and new opportunities.” “…the next major wave is being born, as we turn the world’s most advanced AI models into a new computing platform… we’re going to lead in the AI era, knowing that maximum enterprise value gets created during platform shift”… “I think every app is going to be an AI app.”
what does that mean at stockmarketHQ
Microsoft’s 2022 earnings report beat analyst estimates for both earnings per share and revenue estimates, however they provided lighter than expected forward guidance with expected revenue of $50.5B – $51.5B vs analyst expectation of $52B for 2023.
There is an IT spending cycle which can be thought of as three parts. 1. Investment in projects/systems – which was accelerated during the pandemic. 2. Optimization – In 2023/24 companies will use the systems to become more efficient and save money. This will result in a slower year or two. 3. New projects start.
The lighter than expected forward guidance is a result of 2023 being in the second phase of the IT spending cycle – Optimization.
Satya Nadella’s statements provide a powerful foreshadowing of how the Big Tech corporations view the future.
Tech spending as a percentage as Gross Domestic Product – described as a Secular Trend. A Secular Trend is a change in the way that society behaves, think iPhone, electric vehicles and streaming. Items which are viewed on such a large scale that they are related as a percentage of Gross Domestic Product spending are Government spending, health care and housing. Technology is becoming a foundation of society and the economy.
There are two important parts to Microsoft CEO Satya Nadella’s statement
- when the global economy recovers GDP will increase
- the percentage of budgets on tech spending will continue to grow. In 2021 tech spending accounted for 10% of US GDP, or $1.9Trillion.
The Next Big Platform Wave – ARTIFICIAL INTELLIGENCE.
The Next Big Thing. This has been the highlighted Investment Thesis for many stocks, Apple, Nvidia, Meta Platforms etc. Nobody knows what it is going to be or what shape it is going to take or how society will interact with it. But IT HAS STARTING, and the big tech CEO’s are starting to tell us what form it is going to take.
- In 2000, the internet was the Next Big Thing… and you probably didn’t invest in it…
- In 2010, the mobile internet was the Next Big Thing… and you probably didn’t invest in it…
- In 2022, Satya Nadella is telling you… the next major wave is being born, as we turn the world’s most advanced AI models into a new computing platform… we’re going to lead in the AI era, knowing that maximum enterprise value gets created during platform shift… You better invest in it.
CNBC Microsoft Earnings Report
https://www.cnbc.com/2023/01/24/microsoft-msft-earnings-q2-2023.html
BOEING (JANUARY 25 BEFORE THE OPEN)
https://www.cnbc.com/2023/01/25/boeing-ba-earnings-q4-2022.html
FREEPORT MCMORAN (JANUARY 25 BEFORE THE OPEN)
TESLA (JANUARY 25 AFTER THE CLOSE)
stockmarketHQ Notes
- Earnings per share (adjusted): $1.19 vs $1.13 analyst estimates
- Revenue: $24.32 billion vs $24.16 billion analyst estimates
- 4th Quarter 2021 Tesla reported revenue of $17.72 billion and adjusted earnings of $2.52 per share ($0.85 adjusted for an August 2022 stock split).
- Automotive gross margins came in at 25.9%, the lowest figure in the last five quarters.
We listened to the Tesla earnings conference call. Elon Musk is not your regular CEO. He is not polished, he is not a car salesman or politician, his conference call commentary is not made from ‘prepared remarks’, seems done ‘on the fly’ and is filled with ummm’s, ahhhh’s and even used the words ‘freaking’ and ‘damn’. But that’s his appeal to his investor base and his customers. He’s a billionaire genius who sounds just like each and every one of us.
On Musk’s Twitter Acquisition
Many analysts have sighted his purchase of Twitter as a ‘distraction’ away from the core vehicle business. As Musk points out on the call, “for the vast majority of people, my follower count speaks for itself. I have the most interactive account — social media account, I think, maybe in the world, certainly on Twitter, and that actually predated the Twitter acquisition. So I think Twitter is actually an incredibly powerful tool for driving demand for Tesla… So the net value of Twitter, apart from a few people are complaining, is gigantic, obviously.”
From a business perspective, it’s possible Twitter turns out to be the greatest marketing strategy in history.
Top Three Take-aways
On the earnings call, three things stood out in Musks commentary
1. “the three pillars of a sustainable energy future are obviously electric vehicles, solar and wind, and the third key item is stationary storage to store the energy from solar and wind, because obviously, the sun doesn’t shine all the time and the wind doesn’t blow all the time… You can convert all of earth to a fully sustainable situation many times over, actually. So I would like to just make it clear that there is a path to a fully sustainable future for humanity, and we — our goal at Tesla is to accelerate progress on that path as much as humanly possible.”
2. ”So in 2022, we delivered over 1.3 million cars and achieved a 17% operating margin, the highest among any volume carmaker, I think maybe among any carmaker. While doing so, we generated $12.5 billion in net income and $7.5 billion in free cash flow”…”our internal production potential is actually closer to 2 million vehicles, but we were saying 1.8 million because, I don’t know, there just always seems to be some freaking force majeure thing that happens somewhere on earth. And we don’t control if there’s like earthquakes, tsunamis, wars, pandemics, etc. So if it’s a smooth year, actually, without some big supply chain interruption or massive problem, we actually have the potential to do 2 million cars this year. We’re not committing to that, but I’m just saying that’s the potential. So — and I think there would be demand for that, too.”
3. “so, I think something that still a lot of people out there don’t quite appreciate is that Tesla — of course, Tesla is as much as a software company as a hardware company, but Tesla is really one of the world’s leading AI companies. This is kind of a big deal with AI on the software side and on the hardware side.”
The Future According to Musk
“There’s also the long-term potential of Optimus where we’re able to use our expertise in electric motors and power electronics, batteries and advanced manufacturing to be able to make a humanoid robot that is actually useful and can be made at high volume with exceptional capabilities because of the autopilot AI that — where we take the — because the car is like a robot on four wheels and Optimus is a robot on legs. But the — as we get closer and closer to solving real-world AI, and we don’t see anyone even close to us in achieving this, the value — I think you appreciate this and a few others do, but most don’t know what I’m talking about. And so — but it’s — this is the thing that has order of magnitude, potential market cap improvement for Tesla.”
what does that mean at stockmarketHQ
When we first identified Tesla as an Investment in 2017, Tesla was a $60B company and had sold 100,000 vehicles. The Investment Thesis was founded on three pillars
- Secular Trend Towards Electric Vehicles
- Scale and Scope – as production increased, costs decrease and profits increase.
- Product Diversification – Model 3, Semi, Cybertruck, Solar and energy storage.
It’s important to consider the earnings report against those pillars.
- STOCK PRICE – A stocks price is valued on the formula Price = Earnings/share x Multiple (multiple is largely based on a companies growth rate). For 2023, Tesla forecasts sales to increase from 1.3 million vehicles to 1.8 million with the capacity to produce up to 2 million, which continues to be 40-50% growth. As China continue to re-open, sales in that region will be a large driver of sales. Tesla provides its monthly delivery numbers which allows the transparency to monitor the production target.
- FUTURE – Musk is the global leader driving the sustainable future. A secular trend which continues to gain momentum through the generational shift. Government support through global coordination, infrastructure spending and credits provides the incentive to foster adoption by humanity.
- PROFIT – Profit margins are decreasing, but as volume increases, production costs decrease. Musk also discusses how he sees ‘deflation’ in input costs. As costs decline, it provides the underlying support to profit margins going forward.
One of the rationalizations for analysts to lower price targets or downgrade the stock is that Tesla should be valued like a ‘car company’ similar to Ford or General Motors with a ‘Multiple’ of 10 vs Tesla’s existing ‘Multiple’ of 50+. Musk sees Tesla as a hardware and technology company. The vehicle is the hardware, but the car runs on an Artificial Intelligence platform – Full Self Drive – and the associated software.
Musk sees that both the stock price and sales will be affected by US Federal Interest Rate Policy.
- “I think the fed needs to be very cautious about having a fed rate that potentially exceeds 6%. Like if we see deflation, and I think we are seeing deflation, then you would add the deflation number to the “risk-free rate” from the fed. And as that starts to exceed 6%, now you’re starting to exceed the long-term return of the S&P 500 and starts to become questionable as to why don’t just put your money in T bills or savings account essentially instead of in the S&P 500 if the S&P 500 is variable and the bank interest rate is not? This is — so basically, the fed is at risk of crushing the value of all equities. Quite a serious danger.”
- high interest rates affect purchasing power of customers.
Overall, the Investment Thesis for Tesla remains valid. Musk is executing on his growth strategy by building battery and vehicle production factories in the sales regions. Tesla has first mover advantage in the EV space and Musk is accelerating this position through marketing and pricing strategies.
Musk doesn’t see the world for what it is, he sees the world for what it can be… And he has $400B, a social media platform, a new generation of humanity and international government support to move it in that direction
January 23/23
VISA (JANUARY 26 AFTER THE CLOSE)
January 26/23 Earnings Report
January 23/23 Pre-earnings
CHEVRON (JANUARY 27 BEFORE THE OPEN)
January 27/2023 Earnings Report
January 24/2023 Pre-earnings
SCHEDULE JANUARY 30 – FEBRUARY 3
| MONDAY 30 | TUESDAY 31 | WEDNESDAY 1 | THURSDAY 2 | FRIDAY 3 |
| PHILLIPS 66 | META PLATFORMS WASTE MANAGEMENT | ALPHABET APPLE AMAZON FERRARI |
US FEDERAL INTEREST RATE ANNOUNCEMENT
stockmarketHQ Notes
“The disinflationary process has started…” US Federal Reserve Chair Jerome Powell.
The most important statement in his speech.
EARNINGS REPORTS
PHILLIPS 66 (JANUARY 31 BEFORE THE OPEN)
stockmarketHQ Notes
First Article is regarding Phillips 66 earnings report. Following that is an Article summarizing Exxon Mobil’s earnings. In Looking at the oil sector, it is interesting that Chevron announced a $36.5B profit and a $75B share buyback, Exxon a $56B profit, Phillips 66 $11B. All massive records, however the initial reaction was s share price drop.
https://finance.yahoo.com/news/phillips-66-reports-fourth-quarter-120000409.html
WASTE MANAGEMENT (FEBRUARY 1 BEFORE THE OPEN)
https://finance.yahoo.com/news/wm-announces-fourth-quarter-full-000800605.html
META PLATFORMS (FEBRUARY 1 AFTER THE CLOSE)
ALPHABET (FEBRUARY 2 AFTER THE CLOSE)
APPLE (FEBRUARY 2 AFTER THE CLOSE)
AMAZON (FEBRUARY 2 AFTER THE CLOSE)
FERRARI (FEBRUARY 2 BEFORE THE OPEN)
CNBC Ferrari Earnings Article
https://www.cnbc.com/2023/02/02/ferrari-supercar-maker-earnings-guidance.html
SCHEDULE FEBRUARY 6 – 10
| MONDAY 6 | TUESDAY 7 | WEDNESDAY 8 | THURSDAY 9 | FRIDAY 10 |
| DISNEY EXPEDIA |
EARNINGS REPORTS
DISNEY (FEBRUARY 8 AFTER THE CLOSE)
EXPEDIA (FEBRUARY 8)