...I guess it's true. Out with the old and in with the new.
Thursday, October 24th | Issue No. 122
S&P 500: 3,004.52 +8.53 (+0.28%)
Dow Jones: 26,833.95 +45.85 (+0.17%)
Nasdaq: 8,119.79 +15.50 (+0.19%)
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CURREN$Y SAID IT BEST...
"All about increasing the profit margin at all costs."
WHY THIS IS HAPPENING...
Tesla talks that talk when it comes to innovation, especially about its electric cars. The issue is that the company has been known to blow money fast so it can say, "We the best." Everything was all good just a week year ago when it reported its best Q3 ever with $6.82B in revenue and profits of $2.90 per share. This year's Q3 is far from the best Drake Elon Musk has ever had as it did miss on revenue with $6.3B but it beat on earnings with a profit of $1.86 per share when the expectation was a loss of $0.42 per share. This is a win considering it lost $1.12 per share in Q2 of this year.
Imagine this... your bank account is about to go in the negative on a Wednesday and you don't get paid until Friday but since it's a holiday week you actually get paid on Thursday and avoid an overdraft fee. That's what just happened to Tesla investors.
Let's play the blame game. Although sales for the cheaper Model 3 are up, sales for the more expensive Model S and Model X are way down. When top line sales drop but bottom line profits rise, that means one thing... profit margins are doing the damn thing and the company is keeping more of the money it makes. Tesla's margins are up 4% compared to last quarter.
Some other positive news is that the Shanghai location is almost ready to start live production, the new Model Y should be tippin' on four fours next summer, and a few semis may hit the streets next year as well.
Tesla stock is down 24% this year.
FOR THE NEWB IN YOU...
Top line is fancy talk for total revenue and bottom line is a company's net profit. During a stock's earnings report, Wall Street projects top and bottom line goals for companies and when they don't achieve them, it's called a "miss" but when they do it's a "beat." (ex. "Tesla reported a miss on top line revenue but a beat on bottom line profit.")
FOUND ON ROADS DAILY...
That's a joke most non-Ford owners tell Ford (NYSE: F) owners about their cars and trucks.
Well, it's debatable whether or not Ford automobiles are found on roads daily but the company's forward outlook sure needed a pick-me-up.
WHY THIS IS HAPPENING...
Ford's Q3 earnings report was expected to be the equivalent of a hoopty but turned out to be a Mustang after it beat expectations of $0.26 per share by earning $0.34 per share in profit. The issue is this Mustang no longer has a gas pedal and probably will sit idle for the rest of the year. The company projected to make up to $7.5B in revenue and $1.35 per share in profit but it looks like that's a no-go as the next expectations are capped at $7B in revenue and $1.32 per share in profit. Long story short, folks just aren't buying Fords like they used to, especially in China.
The real issue is that the company's profit is down almost 60% compared to last year. Looks like when Ford goes low, Tesla goes high, word to Michelle Obama.
Ford stock is up 11% this year after trading at its lowest share price ever last December.
FOR THE NEWB IN YOU...
Not sure what top (revenue) and bottom (net income) lines are? Scroll up and jump in the Tesla to find out.
Follow the money with our stock market newsletter, PAPERTRAIL, your daily dose of Wall Street flavor.
ALL EYEZ ON...
Nothing to see here.
AND NOW A WORD FROM OUR SPONSOR...
Puff Daddy Diddy once said that it's all about the Benjamins but don't forget about the dividends.
Typically, we always hear about long-term or short-term investing but people don't ever really mention the dividend investing.
A dividend is simply a piece of a company's profits paid back to shareholders and let me tell you, I'm here for it. I invest in dividends stocks for my two daughters which collectively own stocks valued in the low 5-figures. I do this not only so they can grow their dough better than a savings account but so by the time they're in high school, they'll have nice fat dividend checks coming in every month to pay for things like their car insurance, gas, cell phone bill, and leisure activities. (You best believe they're paying their own way!)
Dividends are not a "sexy" investment but they damn sure are consistent and that's one of the reasons I'm rapping, "It's all about the dividends baby!" If you rock with dividend paying stocks the long way, grab our Dividends tee today!
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DID YOU KNOW...
What's the best selling pickup truck in the world? (answer below)
WHO'S GOT NEXT...
Companies reporting earnings today about how much paper they're stackin' (or losing) and new things to come:
Aflac (NYSE: AFL)
Amazon (NASDAQ: AMZN)
American Airlines (NASDAQ: AAL)
Alaska Air Group (NYSE: ALK)
Southwest Airlines (NYSE: LUV)
BJ's Restaurants (NASDAQ: BJRI)
Intel (NASDAQ: INTC)
Hershey (NYSE: HSY)
Capital One (NYSE: COF)
Comcast (NASDAQ: CMCSA)
Valero Energy (NYSE: VLO)
Visa (NYSE: V)
Twitter (NYSE: TWTR)
WATCH ME WORK...
Stocks on my watchlist:
PAPERTRAIL Pro with monthly portfolio reports coming soon.
Disclosure: The author of this issue owns stock of Aflac, Caterpillar, Exxon Mobil, Southwest Airlines, Tesla, Twitter, Visa.
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NOW YOU KNOW...
Dr. Eric Patrick
Managing Editor | F-150 Survivor
Disclosure: This editorial is by no means a solicitation to buy or sell any of the above-mentioned securities. It is merely a means for educational purposes. All investors are subject to their own research and due diligence. This post may contain affiliate links and we may receive commissions for purchases made through links in this post.