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- Weekly Wrap-Up - October 26th, 2024
Weekly Wrap-Up - October 26th, 2024
Tesla jumps over 25% after earnings report
CMG Venture & Mark Roussin
October 26, 2024
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Good morning investors!
If this is your first time reading, welcome to The Investor’s Edge — a thriving community of nearly 20,000 subscribers striving to be better investors with an edge in the market.
Every weekend we publish “The Weekly 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.
Grab your coffee and let’s dive in.
Market Talk
Outside of a few big names, it was a tough week all around for the market. The Nasdaq did briefly make new all-time highs on Friday.
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3 Stories Moving the Market
These are some of the biggest stories from the second half of the week that had an influence on market action.
Netflix's Subscriber Growth Is Slowing, but Its Profit and Stock Price Are Still Surging
Tesla shares surged nearly 22% on Thursday, marking their largest single-day gain in over a decade, adding almost $150 billion to the EV maker's market value.
The move came after CEO Elon Musk reassured investors with a forecast of 20%-30% sales growth for next year and plans to release an affordable vehicle by early 2025.
Tesla also reported third-quarter margins above Wall Street expectations, benefiting from reduced production costs, which fell to an all-time low of $35,100 per vehicle. Global deliveries rose in the quarter, helping revenue increase 8% from last year to $25.18 billion, though that number was below forecasts of $25.47 billion.
Tesla also earned $326 million from its Full Self-Driving autopilot software, used in vehicles like the Cybertruck.
👉 EDGE TAKEAWAY: Tesla's 22% share price jump may seem enticing, but the rally likely…upgrade to Edge+ to read the Full Edge Takeaway.
Southwest and activist investor Elliott strike deal to keep CEO Bob Jordan, add six new directors
Southwest Airlines and activist hedge fund Elliott Investment Management reached an agreement to avoid a proxy battle.
The deal adds six directors to the board, including five of Elliott’s nominees and former Chevron CFO Pierre Breber. This brings the board to 13 members.
As part of the agreement, Executive Chairman Gary Kelly will step down next month, with a new chairman to be appointed, while CEO Bob Jordan retains his position. Elliott had previously criticized Southwest's leadership for slow progress on profitability improvements.
Despite underperforming the S&P 500 with a less than 1% stock gain this year, Southwest announced a Q3 profit above estimates, cut unprofitable routes, and authorized a $2.5 billion buyback, starting with $250 million. The airline is also exploring changes like premium seating to boost revenue.
📚 EDGE-UCATION: What is an activist investor?
An activist investor is a person or group that buys a significant minority stake in a publicly traded company with the intent of changing how the company is run. Their goal is to influence the company’s strategy, management, or financial structure to increase shareholder value, often through steps like increasing stock buybacks, improving profitability, spinning off business units, or changing leadership.
Activist investors use various tactics to push their agendas, including:
Engaging with Management and Board: They may first attempt direct discussions with a company’s board and executives to encourage desired changes.
Public Campaigns: If private discussions don’t work, activists often go public with letters, media appearances, or shareholder proposals to pressure management and inform other shareholders of their views.
Proxy Battles: Activist investors may nominate directors or propose policies at shareholder meetings, requiring other shareholders’ votes. This is known as a proxy fight and can give the activist significant influence if successful.
Notable activist investors include firms like Elliott Management, Third Point, and Carl Icahn, which are known for pushing for changes in various companies to improve financial returns. While they can help bring positive changes, some critics argue they focus too heavily on short-term gains over long-term stability.
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Boeing machinists reject new labor contract, extending more than 5-week strike
Boeing machinists voted against a new labor contract offering 35% wage increases over four years, extending their strike that has paused most aircraft production near Seattle.
The contract, which failed with 64% voting against it, was a priority for CEO Kelly Ortberg, aiming to resolve ongoing safety and quality issues.
Boeing, which reported a $6 billion quarterly loss, now faces cash flow challenges through 2025 and risks a downgrade to its credit rating. The strike costs the company an estimated $1 billion monthly.
Workers cited high living costs and concerns over the loss of their pension in 2014 as reasons for rejecting the deal, which included raises, 401(k) contributions, and bonuses but no pension reinstatement.
In Other News
In this section, we'll be curating a selection of news headlines we think you'll find interesting. If a topic catches your eye, click the provided links to read more about it.
IBM stock slips on disappointing consulting and infrastructure revenue
UPS tops quarterly profit estimates on rebounding volumes; shares jump
Capri stock craters 45% after judge blocks $8.5 billion Tapestry deal
Union Pacific misses quarterly profit estimates despite price hikes, shares fall
American Airlines lifts 2024 profit forecast after sales strategy shift, posts third-quarter loss
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IE+ Posts of the Week
We continue to push out more and more content every week to give investors that edge. Here are the posts Investor’s Edge+ subscribers received this week.
Edge Report
Mondays are for the investors. Every Monday morning we share exactly what we’re watching in the week ahead, how we’re positioning, and even share a sneak peek into our systems and models. This week we discussed the upcoming earnings reports and how we were preparing for them. See the latest full report here:
Stock Deep Dive - PayPal
Our Deep Dive focused on PayPal this week. We not only broke down the financials of one of the world’s largest online payment systems company, but we also shared our valuation models, price targets for 2024, and put the stock through our new Edge Scoring System. You can see the full analysis here:
The Week Ahead
Next week is shaping up to be quite possibly the biggest week of the year in terms of data. Countless earnings reports from major companies, key labor market data, the Fed’s preferred inflation metrics, and much more. Buckle up!
Earnings Reports
It is the biggest week of earnings season and we will be busy. Here is the list of names we will be covering next week:
Monday 10/28: Waste Management
Tuesday 10/29: Alphabet, Visa, AMD, McDonald’s, American Tower, PayPal, and Chipotle
Wednesday 10/30: Microsoft, Meta, Eli Lilly, AbbVie, Caterpillar, and Coinbase
Thursday 10/31: Apple, Amazon, Mastercard, Merck, Uber, Starbucks, Intel, and VICI Properties
Friday 11/1: Exxon Mobil, Chevron, and Enbridge
Here is the full calendar of scheduled earnings releases:
Source: Earnings Whispers
Economic Reports
Next week is a huge week on the economic front as we get the Fed’s preferred inflation metrics as well as several key labor market reports.
There will also be initial jobless claims, the GDP report, and manufacturing PMI data.
Want more? Check out our other resources
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Mark (Dividend Seeker)
Chris (CMG Venture)
Thank you for reading this edition of the Weekly Wrap-Up. Have a great weekend!
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.
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