Tesla Shares Soared; Market Reacts to Coronavirus

Strong earnings drove Tesla stock to new heights this week, continuing the carmaker’s rally. Tesla’s  fourth-quarter results beat expectations, and its stock rocketed 13% on the news after hours, according to CNBC.

Tesla CEO Elon Musk shot back at analysts, telling one that “a lot of the retail investors actually have deeper and more accurate insights than many of the big institutional investors and certainly they have better insights than many of the analysts,” writes Michael Sheetz of CNBC.  

Indeed, Tesla’s performance has proven Musk’s critics wrong on many fronts. “The stock has been on a tear since mid-December, hitting a string of records that have pushed the company’s valuation above $100 billion, which is more than Ford Motor Co.’s valuation at its peak in 1999,” writes Claudia Assis of MarketWatch. “Tesla shares have gained about 94% in the past 12 months, far outpacing advances of 25% and 18% for the S&P 500 index SPX, -0.48%  and the Dow Jones Industrial Average DJIA, -0.33%.” 

Tesla plans to sell more than 500,000 cars in 2020, according to Musk.

“The short-seller crowd have been covering their positions in the past few weeks and the position of shorts in Tesla’s stock has declined, according to the most recent short-interest tally. With its current frothy valuation, there will be continued pressure on Tesla to prove it has actually changed,” writes Therese Poletti of MarketWatch. “If Tesla can keep going at its current pace, and Musk can keep his Twitter outbursts under control, then maybe Tesla can live up to its currently ridiculous valuation. The biggest risks right now are all its manufacturing plans, so investors need to hope that Tesla has learned many lessons since the failures of a year ago.”

Despite good reports from Tesla and Apple (see item below), the broader market dropped, due mostly to news from China about the coronavirus outbreak.

“Stocks fell on Thursday as the death toll from the coronavirus continues to rise in China, stoking fears about the virus’ impact on global economic growth,” writes Fred Imbert of CNBC. “China’s National Health Commission confirmed Thursday that the death toll has hit 170, with confirmed cases of the virus surpassing 7,700. Cases have also been confirmed in places outside of China, including the U.S.”

iPhone Sales Drive Record Earnings for Apple

Apple is on a roll, enjoying the fruits of its success with the bestselling iPhone 11.

“Apple (AAPL) posted record earnings for the last three months of 2019 on the back of the iPhone’s resurgence. Written off as a fading giant whose best days were behind it, iPhone sales proved it still has some gas left in the tank,” writes Clare Duffy of CNN Business. “With the iPhone 11, Apple returned to basics, producing its cheapest phone in years with a stellar camera and some improvements over the somewhat derided iPhone XR that preceded it. The iPhone 11 was Apple’s bestselling smartphone during the last three months of 2019, CEO Tim Cook said on a conference call with investors.”

UK Considers Options for Doing Business with Huawei

The United Kingdom is apparently hedging its bets with regard to its stance on doing business with Huawei, seeking a middle ground between Chinese and American interests.

“The UK has decided to let Huawei continue to be used in its 5G networks but with restrictions, despite pressure from the US to block the firm,” writes Leo Kelion of the BBC News. “The Chinese firm will be banned from supplying kit to “sensitive parts” of the network, known as the core. In addition, it will only be allowed to account for 35% of the kit in a network’s periphery, which includes radio masts. And it will be excluded from areas near military bases and nuclear sites.”

I understand the implicit risks of doing business with Huawei, but I also understand the UK’s need to explore all possible options for pushing forward with 5G technology. This is definitely a story worth watching.