Good morning investors!

If this is your first time reading, welcome to The Investor’s Edge — a thriving community of more than 16,000 subscribers striving to be better investors with an edge in the market.

Every Wednesday we publish “The Mid-Week Wrap-Up” — your ticket to being well informed and staying ahead in the investment game!

This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.

This article is designed to truly give you that EDGE in the day ahead!

Grab your afternoon pick me up and let’s dive in.

Market Talk

Tech and mega caps are leading the way this week, though the rest of the market is little changed.

3 Stories Moving the Market

These are some of the biggest stories so far this week that are having an influence on market action.

Rivian secures $5 billion investment from Volkswagen, shares surge

Volkswagen Group plans to invest up to $5 billion in electric vehicle startup Rivian, starting with an initial $1 billion investment.

The initial $1 billion from Volkswagen will be a convertible note that can be converted to Rivian shares after December 1. The additional $4 billion is expected by 2026, including $1 billion each in 2025 and 2026, followed by $2 billion in 2026 for a joint venture to create electrical architecture and software technology.

Rivian CEO RJ Scaringe said this investment will help Rivian become cash flow-positive and support the production ramp-up of its R2 SUVs and midsize EV platform.

Volkswagen plans to use Rivian’s electrical architecture and software stack starting in the latter half of the decade, but the joint venture will not involve battery technologies, vehicle propulsion platforms, high voltage systems, or autonomy and electrical hardware.

Rivian's shares have surged more than 30% at the highs of the day since the announcement.

Southwest Airlines cuts revenue forecast, blaming changing booking patterns

Southwest Airlines has reduced its second-quarter revenue forecast due to changing booking patterns.

The carrier now expects revenue per available seat mile (RASM) to decline by 4% to 4.5%, instead of the previously estimated 1.5% to 3.5% drop. Additionally, unit expenses excluding fuel are projected to rise up to 7.5%, contrary to earlier expectations of no change. Capacity is expected to increase by up to 9%, compared to the previously anticipated flat growth.

Despite these challenges, Southwest still anticipates record quarterly operating revenue.

The airline attributes the RASM reduction to difficulties in adapting its revenue management to current booking patterns. Although airlines are experiencing record passenger numbers, higher costs and increased capacity are affecting fares and profits.

📚 EDGE-UCATION: What is RASM and why is it important for airlines?

Revenue per Available Seat Mile (RASM) is a key financial metric used in the airline industry to assess the revenue generated by the airline per available seat mile. It is calculated by dividing the total operating revenue by the total available seat miles (ASM), which is the number of seats available multiplied by the number of miles flown.

Importance of RASM for Airlines:

1. Performance Indicator: RASM is a crucial indicator of an airline's revenue efficiency and overall financial performance. It helps airlines understand how well they are generating revenue from their available seating capacity.

2. Pricing Strategy: By analyzing RASM, airlines can evaluate the effectiveness of their pricing strategies. It helps in determining whether the ticket prices and additional revenue streams (like baggage fees and in-flight sales) are optimized.

3. Capacity Management: RASM provides insights into the relationship between capacity (number of available seats) and revenue. Airlines can use this information to make informed decisions about route planning, frequency of flights, and aircraft utilization.

4. Competitive Benchmarking: Airlines can compare their RASM with industry averages or specific competitors to gauge their competitive position. This comparison can inform strategic adjustments to improve market share and profitability.

5. Financial Health: A higher RASM indicates better revenue management and higher profitability potential. It is often used by investors and analysts to assess the financial health and growth prospects of an airline.

6. Operational Efficiency: RASM can highlight operational inefficiencies or areas where an airline can improve to maximize revenue. For instance, it can reveal underperforming routes or times of day when flights are not generating sufficient revenue.

Overall, RASM is a comprehensive measure that helps airlines manage their revenue strategies, improve operational efficiency, and ensure long-term financial stability.

Oil is up 5% this month as investors bet on strong summer demand

Oil prices fell this morning, halting a recent rally, as U.S. oil and gasoline inventories unexpectedly rose.

Crude oil stockpiles increased by 3.6 million barrels last week, contrary to analysts' expectations of a 2.9 million barrel decrease. Gasoline stockpiles also rose by 2.7 million barrels, against forecasts of a 1 million barrel drawdown, indicating potentially soft demand.

Despite this, West Texas Intermediate and Brent crude are up 4.6% and 3.8% for the month, respectively, with expectations that summer fuel demand will rise.

Traders are also watching the Israel-Lebanon border tensions, fearing an Israeli offensive could lead to a confrontation with Iran, threatening crude oil supplies.

The Second Half

The main focus of the week remains the PCE report on Friday. But there are still a handful of key economic reports to watch, as well as earnings from two companies we cover here at the Edge.

Earnings Reports

There are only two earnings report left this week that we here at The Investor’s Edge we will be watching: Micron and Nike:

Here is the calendar of earnings releases scheduled for the rest of the week:

Economic Reports

Here is the calendar of events scheduled for the remainder of the week:

On top of the much anticipated PCE report on Friday, there will be several reports we are watching here at The Investor’s Edge, including the bank stress tests, the GDP report, jobless claims, pending home sales and consumer sentiment.

The Investor’s Edge Discord is here!

Before you go, don’t forget to join our brand-new Discord server.

The channel is tailor-made for investors like you who want to dive deeper into stocks, share insights, and engage directly with us.

Here's what's already in store for you:

🗨️ Chat rooms: Connect with fellow investors, swap ideas, and engage in lively discussions about stocks and market trends—all while rubbing virtual elbows with both Mark and Chris.

🚨 Trade Alerts: Get exclusive, behind-the-scenes access to our trades as they happen. It's like having a front-row seat to our investment decisions!

Join us on Discord and let's level up our investing game together. The future of trading awaits—and you're invited to be a part of it! 🌟

Thank you for reading this edition of the Mid-Week Wrap-Up.

Until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.