Friday's Headlines: Tesla Raises Its Prices… Again!

Friday's Headlines: Tesla Raises Its Prices… Again!

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Calavo Growers (CVGW) +0.6%

Duolingo (DUOL) +0.4%

Monster Energy (MNST) 0.0%

Moving Down ⬇️

DraftKings (DKNG) -12.3%

Yext (YEXT) -10.9%

StoneCo (STNE) -10.3%

Redfin (RDFN) -9.8%

Stitch Fix (SFIX) -9.69%

 

Here are the stories that you need to know ahead of market-open today, Friday the 17th of June:

Musk Talks To Twitter 🎙

Ahead of his planned $44 billion acquisition of the company, tech entrepreneur Elon Musk held his first meeting with Twitter employees yesterday.

Dialing into the all-hands call 10 minutes late, Musk spoke for about 45 minutes on everything from his plans for the company to his thoughts on free speech — and even a brief aside on the possibility of extraterrestrial life.

The main points of the call included:

  • Musk’s goals for Twitter, which he believes can reach over 1 billion daily active users (DAUs) within the next five to ten years — up from its current tally of 229 million.
     
  • His thoughts on free speech — a very divisive topic for a platform like Twitter. Essentially, Musk believes that people should be allowed to say anything they want, but that doesn’t mean their views should be amplified by Twitter.
     
  • Planned staff layoffs, which is a bogeyman affecting the entire tech industry right now. Musk said that anyone who is a “significant contributor” shouldn’t have anything to worry about, but did note that costs are currently exceeding revenue, which is “not a great situation”.

This call had been hotly anticipated by many observers considering the decidedly mixed reaction that news of the planned acquisition received, with many Twitter employees vocalizing their dissatisfaction with Musk. Yesterday seems to have done little to help, with the majority of reactions within the company negative, according to reports.

 

Tesla To Raise Its Prices 🚗

Speaking of Elon Musk, Tesla stock is down in premarket trading this morning after the company raised the prices of some of its vehicles by as much as $6,000.

As the cost of labor and materials continues to skyrocket, Tesla has decided to hike the price tag on certain models across its entire lineup, including its Model 3 and the popular Model Y. The last time Tesla raised prices for cars was back in March, but for some models, this is the fourth price hike in a year. At the time of the last increase, CEO Musk warned of inflationary pressures on factories.

It’s been a challenging couple of months for many companies, not least a high-growth manufacturing company like Tesla. The company is very exposed to the fluctuations of raw-material prices, which affect between 10% - 15% of the company’s cost structure, according to CFO Zachary Kirkhorn. With the costs of materials like aluminum and lithium rising, as well as a protracted semiconductor shortage, many automakers are feeling the pinch, with production targets being missed and prices being raised across the board.

Separately, Tesla was also badly impacted by COVID shutdowns in China, which halted production at its Shanghai factory — its largest by output volume. However, that factory has since returned to full production.

 

Adobe’s Guidance Disappoints 👎

Adobe is down in premarket trading after last night’s earnings report failed to live up to expectations.

While revenue of $4.4 billion and earnings per share of $3.35 exceeded analyst estimates, management’s full-year guidance came up short, revising revenue expectations to $17.65 billion and adjusted earnings per share to $13.50 — down from $17.90 billion in revenue and $13.70 in adjusted earnings per share from its report back in December.

One thing we know at MyWallSt is that guidance is the thing investors really care about when it comes to earnings. On Wall Street, the most important step is the next step. It is interesting to see Adobe follow in Salesforce and Microsoft’s footsteps in citing currency fluctuations as a reason for the weaker guidance, alongside uncertain macroeconomic conditions and summer seasonality. The aggressive interest rate strategy employed by the Fed is strengthening the dollar against the world’s currencies.

Adobe has two main sources of revenue and both performed well in the quarter. Adobe’s Digital Media Segment, which encapsulates its Creative Cloud and Document Cloud — aka software you immediately recognize like Photoshop and Acrobat Reader — contributed $3.2 billion in revenue, growing 16% year-over-year. The Digital Experience Business, which covers much of Adobe’s business-focused offerings such as analytics, content management systems, and advertising software, drove $1.1 billion in revenue, up 17%.

Adobe boasts a number of sticky products that businesses and individuals alike rely heavily on. This affords it a level of pricing power beyond other companies, as evidenced by the announcement of a number of price increases within its Creative Cloud. As well as this, with over 90% of its revenue coming from subscriptions, Adobe enjoys long-term predictability with its income too. While competitors like Figma look to disrupt the stranglehold Photoshop has over the industry, Adobe’s diversification across a number of verticals provides an additional level of security for investors. While last night’s earnings report was a minor blip, it’s tough to see the company being knocked from its throne anytime soon.

JamesJames

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