Zero­Hedge News

• Tesla Jumps After Beat­ing On Top And Bot­tom Line
  Tesla Jumps After Beat­ing On Top And Bot­tom Line

  Head­ing into Tesla’s Q2 earn­ings, in our pre­view ear­lierwe noted that sen­ti­ment is optim­stic and the out­look for Q2 is pretty good because despite grap­pling with the chip short­age, a cus­tomer back­lash in China, and the same ship­ping bot­tle­necks plagu­ing all global automak­ers right now, Tesla man­aged to set a record for vehi­cle deliv­er­ies in the sec­ond quar­ter: 201,250 cars.

  As Bloomberg notes in its earn­ings pre­view, ana­lysts have honed in on that bull­ish feat, and the idea that Tesla has been rais­ing prices peri­od­i­cally through­out the year. Like the rest of its auto­mo­tive peers, tight sup­ply is giv­ing Tesla some extra pric­ing power and the abil­ity to pad mar­gins amid costly sup­ply chain headaches and raw mate­r­ial spikes.

  On the bear­ish side, ques­tions as usual will swirl about the source of Tesla’s prof­itabil­ity: as noted last quar­ter, vir­tu­allyall of the company’s prof­its came from the sale of zero-​emission reg­u­la­tory cred­its which Tesla sells to other automak­ers (i.e., Jeep owner Stel­lan­tis). It basi­cally equates to 100% mar­gin and has been a sig­nif­i­cant con­trib­u­tor to net income. But, as Bloomberg notes, it can’t last forever.

  For those who need a refresh, this is how much TSLA has sold in reg­u­la­tory credits:

  • 1Q 2020: $354M
  • 2Q 2020: $428M
  • 3Q 2020: $397M
  • 4Q 2020: $401M
  • 1Q 2021: $518M

  And visu­ally:

  Also it’s worth recall­ing that this is Tesla’s first earn­ings call since Elon Musk feisty appear­ance ear­lier this month in Delaware Chancery Court over the automaker’s con­tro­ver­sial 2016 acqui­si­tion of SolarCity. Musk con­tended that the acqui­si­tion was a sound deci­sion — that it wasn’t done to ben­e­fit him­self instead of shareholders.

  In any case, as we enter Tesla’s earn­ings, we have record deliv­er­ies, rosy out­look on the quar­ter (albeit with ques­tions about how the com­pany gen­er­ates its profit). And yet, Tesla’s stock is down 7.2% this year, while the S&P Index it belongs to is up nearly 18%. Clearly investors are a lit­tle con­cerned about the company’s long-​term prospects at a time when vir­tu­ally every OEM is com­ing up with numer­ous EV offer­ings and invest­ing bil­lions in future capacity.

  With that in mind, here is how Tesla did in the sec­ond quar­ter as per the just released investorlet­ter:

  • Rev­enue $11.96B, beat­ingthe est $11.36B
  • Adjusted EPS $1.45, beat­ingthe est 97c
  • Free Cash Flow $619M, beat­ingthe esti­mate of a Neg­a­tive $319.1M

  The result visually:

  Of note, unlike pre­vi­ous quar­ter when vir­tu­ally all the profit came from the sale of reg­u­la­tory cred­its, in Q2 the sit­u­a­tion nor­mal­ized some­what with $354MM in reg­u­la­tory cred­its, which rep­re­sents about 30% of the GAAP Net Income of $1142.

  Other high­lights: In Tesla’s com­ments on rev­enue, which rose 98% Y/​Y, we find that the company’s aver­age sell­ing prices in Q2 declined by 2% Y/​Y — which is odd at a time when car prices are explod­ing higher — which the com­pany said was “due to the prod­uct updates and as lower ASP China-​made vehi­cles became a larger per­cent­age of our mix.” The full comment:

  Total rev­enue grew 98% YoY in Q2. This was pri­mar­ily achieved through sub­stan­tial growth in vehi­cle deliv­er­ies, as well as growth in other parts of the busi­ness. At the same time, vehi­cle ASP1 declined by 2% YoY as Model S and Model X deliv­er­ies were reduced in Q2 due to the prod­uct updates and as lower ASP China-​made vehi­cles became a larger per­cent­age of our mix.

  Look­ing at prof­itabil­ity next, we find that Tesla recorded another, if far more mod­est, $23MM impair­ment on its Bit­coin hold­ings. More from the report:

  Our oper­at­ing income improved in Q2 com­pared to the same period last year to $1.3B, result­ing in an 11.0% oper­at­ing mar­gin. This profit level was reached while incur­ring SBC expense attrib­ut­able to the 2018 CEO award of $176M in Q2, dri­ven by a new oper­a­tional mile­stone becom­ing probable.

  Oper­at­ing income increased YoY mainly due to vol­ume growth and cost reduc­tion. Pos­i­tive impacts were par­tially off­set by growth in oper­at­ing expenses includ­ing increased SBC, Model S/​X ramp (neg­a­tive mar­gin in Q2), addi­tional sup­ply chain costs, lower reg­u­la­tory credit rev­enue, Bitcoin-​related impair­ment of $23M and other items.

  How aboput the bal­ance sheet? Here Tesla reported $16.2BN in cash, which decreased mainly dri­ven “by net debt and finance lease repay­ments of $1.6B, par­tially off­set by free cash flow of $619M.”

  In knee­jerk reac­tion the stock jumped as much as 3% on what appears to be a solid beat on rev­enue, earn­ings and Free Cash Flow, how­ever it has since faded much of the gains, giv­ing a neg­a­tive answer to those won­der­ing if this earn­ings report will be the one that finally send TSLA stock green for the year.

  Devel­op­ing

  Tyler Dur­den Mon, 07/​26/​2021 — 16:17
• Bit­coin Tum­bles After Ama­zon Denies It Will Accept Crypto In 2022
  Bit­coin Tum­bles After Ama­zon Denies It Will Accept Crypto In 2022

  Update (1600ET): An Ama­zon spokesper­son told Bloomberg in an emailed state­ment that the City A.M. report, cit­ing an insider, claim­ing it will accept bit­coin in 2022 (and is inves­ti­gat­ing issu­ing its own coin)are false.

  • *AMA­ZON DENIES CITY A.M. REPORT IT WILL ACCEPT BIT­COIN THIS YEAR

  • *AMA­ZON ALSO DENIED IT PLANS TO LAUNCH A CRYPTO COIN IN 2022

  • *AMA­ZON SAID IT WILL CON­TINUE EXPLOR­ING CRYPTOCURRENCIES

  The reac­tion was swift but did not erase all the gains of the weekend…

  * * *

  After crypto’s dra­matic surge higher overnight, the nar­ra­tives have been flowing.

  From tech­ni­cal break­outs (BTC above its 50DMA) to fun­da­men­tal (Ama­zon insider says “ready to roll” on accept­ing crypto pay­ments), but Occam’s Razor still rules. Sim­ply put, it was a mas­sive short liquidation.

  More than $950 mil­lion of crypto shorts were liq­ui­dated on Mon­day, the most since May 19, accord­ing to data from Bybt​.com.

  Source: bybt​.com

  “The extent of the jump was prob­a­bly dri­ven by over-​leveraged shorts,”said Vijay Ayyar, head of Asia Pacific at crypto exchange Luno in Sin­ga­pore, while adding the rumors over Ama­zon likely had a role to play too.

  For now, Bit­coin is hold­ing on the major­ity of the short-​squeeze gains…

  Source: Bloomberg

  Cue the FUD.

  Tyler Dur­den Mon, 07/​26/​2021 — 16:08
• Crypto Pops, Dol­lar Drops, Bonds & Stocks Chop
  Crypto Pops, Dol­lar Drops, Bonds & Stocks Chop

  Before we get started on today’s mar­ket malarkey, we would like to spend a moment of reflec­tion - today is the 9^th anniver­sary of Draghi’s infa­mous “what­ever it takes” moment…

  It appears to have worked… for stonk mar­kets at least…

  Source: Bloomberg

  Since that date, bit­coin is up 454,000%!

  Source: Bloomberg

  Cryp­tos grabbed all the head­lines today as bit­coin surge over the weekend…

  Source: Bloomberg

  Bit­coin pushed past its 50DMA and tested above $40k toward the end of the US equity day ses­sion (even with Tether headlines)…

  Source: Bloomberg

  What hap­pens next? Raoul Pal has some ideas…

  2/​And here is the non-​log ver­sion… pretty much per­fect from a con­tex­tu­al­iza­tion stand­point. pic​.twit​ter​.com/​r​T​k​E​T​w​6​R​5​L

  — Raoul Pal (@RaoulGMI) July 26, 2021

  Ethereum also soared, get­ting within a tick of $2400…

  Source: Bloomberg

  As crypto gained, the dol­lar slipped lower on the day, hit­ting one week lows…

  Source: Bloomberg

  Chi­nese tech stocks were a blood­bath again as Beijing’s crack­down deepens…

  Source: Bloomberg

  And while US Small Caps did their usual chaotic thing at the cash open, by the close US equi­ties had eked a very mod­est gain with a small pos­i­tive drift all day…

  Energy stocks out­per­formed dra­mat­i­cally as Health­care and Utes lagged…

  Source: Bloomberg

  After Friday’s op-​ex, VIX opened above 19 this morn­ing but drifted lower all day to end below 18 (but that is still above Friday’s close)…

  But we do note that all major asset’s real­ized vols remain below average…

  Trea­suries ended the day prac­ti­cally unch after some overnight bid was erased. The long-​end very mod­estly under­per­formed. As the chart shows, Asia was buy­ing, Europe was sell­ing, and US did nothing…

  Source: Bloomberg

  The 10Y tested down to 1.22% but ended unch…

  Source: Bloomberg

  Real yields crashed a new record (neg­a­tive) low today…

  Source: Bloomberg

  The last time real yields were here, gold was trad­ing above $2000, but the pre­cious metal strug­gled to break away from $1800 today…

  While energy stocks soared, WTI ended unchanged after a roller­coaster of a day…

  Finally, Bloomberg notes that few times in recent his­tory his­tory has the mood of U.S. tech­nol­ogy investors been so bright head­ing into a cru­cial earn­ings week. Beneath the sur­face, how­ever, there’s a level of anx­i­ety rarely seen. Hedge funds have been net short Nas­daq 100 Index futures for 22 con­sec­u­tive weeks, accord­ing to recent data from the Com­mod­ity Futures Trad­ing Commission.

  Source: Bloomberg

  The only time that streak was exceeded was dur­ing the 2008 finan­cial cri­sis, when the cohort was short tech for 41 weeks.

  Tyler Dur­den Mon, 07/​26/​2021 — 16:00