The Daily Chase: Tesla shares jump, retail sales shrink
Here are five things you need to know this morning.
Tesla misses but stock jumps: Earnings from electric car maker Tesla came out after the bell yesterday, and while the company failed to meet expectations on just about every financial metric, the stock jumped as the company said it plans to move ahead with plans to release more affordable vehicles soon. Profits fell by more than 50 per cent and the company burned through US$2.5 billion in cash in the first quarter of this year, but on the conference call, CEO Elon Musk said the company is speeding up its timeline for a $25,000 car that could be available by as soon as year-end. While Musk has a history of overpromising and underdelivering, investors seem to be taking him at his word as the stock is changing hands up about 10 per cent from where it was at the close of trading yesterday. “What matters is investors have some spark of hope that growth will re-accelerate next year,” Gene Munster, managing partner at Deepwater Asset Management, told Bloomberg. “For the believers, he gave them enough to continue to stay the course.”
Boeing burns through US$3.9B: Also reporting earnings this morning is U.S. plane maker Boeing, where the company reported an adjusted loss per share of US$1.13, and revenue of $16.57 billion in the first three months of the year. Investors seemed to react positively to the numbers after they came out, with shares changing hands early Wednesday in positive territory. One reason for the muted optimism is that the company had previously warned it would see a cash outflow of up to $4.5 billion for the period — so burning through $600 million less can be seen as a good thing. The company has been trying to survive an onslaught of bad news since a door plug blew out of a two-month-old 737 Max in early January, eroding confidence in its manufacturing process. Regulators have ordered the company to slow its production to a crawl of 38 planes a month while the probe unfolds, and while it happens the company has been hit by a leadership exodus, civil and criminal investigations, Congressional hearings and whistleblower revelations.
Competition Bureau concerned with Viterra-Bunge deal: When it was announced last summer, the US$8-billion takeover of grain handling firm Viterra by U.S. agribusiness firm Bunge was heralded as the creation of a new global player in the industry. Backers touted the benefits of scale, but Canada’s Competition Bureau has come out with a negative outlook on the deal, expressing in a report to the government on Tuesday that it is concerned the takeover will lessen competition. As currently constructed, the takeover is “likely to result in substantial anti-competitive effect” and a loss of competition specifically when it comes to grain purchasing in Western Canada and the sale of canola oil in Eastern Canada, the Bureau said. One of the sticking points is Bunge’s minority stake in grain company G3, a major competitor to Viterra, which is a global company but one with significant Canadian assets, mostly acquired from the acquisition of the former Sask Wheat Pool nearly two decades ago. Shareholders have signed off on the pact but governments have yet to give their OK. The federal government has until June to say yes or no, and Canada isn’t the only country with concerns. The deal is also facing scrutiny in Argentina, where a completed merger would see the combined company owning 40 per cent of the country’s soy market.
Retail sales shrank in February: One man’s bad news is another man’s good fortune, and that’s a decent way of describing the latest retail sales numbers released by Statistics Canada this morning. Retail sales shrank by 0.1 per cent in February, to $66.7 billion. That’s less than the slight uptick that economists were expecting, and the numbers were even worse in volume terms. That’s bad news if you’re a retailer, but if you’re hoping for a rate cut any time soon, the bleak numbers released this morning can be seen as good news. Veronica Clark, an economist with Citi, told BNN Bloomberg’s The Street this morning that the main number that matters to the Bank of Canada is the inflation print, but data suggesting weak consumer demand is certainly another argument in favour of an easing of monetary policy. Bank of Canada officials are worried about households under pressure, softer economic activity,” she said. “This data this morning will further that argument.” On the swaps market, the odds of a rate cut at the central bank’s next meeting in June went from about 60 per cent to more than two-thirds after the numbers came out. The loonie also weakened, another sign that investors think a rate cut is imminent.
Rogers beats expectations, albeit barely. It has been a rough few weeks for Canadian telecom stocks, but Rogers Communications Inc. published quarterly numbers premarket today that suggest there might be reason for optimism. The company narrowly beat expectations for profit in the recent quarter, coming in at 99 cents per share versus the 98 anticipated. Total revenue dipped a little, as the wireless and cable businesses grew while the media arm went the other way. The company added 98,000 net new wireless customers during the quarter, better than the 85,000 expected.
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