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from Breakingviews:
Tesla shareholders are pulling ahead of themselves
By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Tesla’s shareholders seem to be assuming Chief Executive Elon Musk is infallible. The $10 billion U.S. electric carmaker is on a roll, last week recording its first quarterly profit and receiving the best score the Consumer Reports publication has bestowed on a car for six years. The company’s stock has since surged as much as 70 percent, leaving Tesla worth more than Fiat and Peugeot combined and trading at a whopping 27 times estimates for earnings in 2016.
Both top and bottom lines look set for rapid expansion now that production of the award-winning Model S is in full swing. Tesla’s revenue for the first three months of the year jumped 83 percent from the previous quarter as sales hit 400 vehicles a week. Consensus estimates for 2014 put sales at $2.5 billion, six times last year’s showing. By 2016, that’s expected to almost double again to $4.3 billion.
And Tesla’s gross margin is improving, reaching 17 percent in the three months to March. Musk predicts it will reach 25 percent in the fourth quarter. This measure does not, however, take research and development or general and administrative costs into account. Factor those in and Tesla’s pre-tax margin in 2016 is estimated at 12 percent.
from India Insight:
Tracking Sensex: Top five gainers, losers this week
The BSE Sensex ended above the 20,000 mark on Friday after gaining 2.6 percent in the last five trading sessions. The index has now risen for four straight weeks. Here are the top five Sensex gainers and losers of the week:
GAINERS
Tata Motors: The automaker’s stock surged 8.15 percent in the week ending May 10, making it the best Sensex performer. Though the stock is still flat in 2013, it has gained nearly 15 percent since April. However, Ambareesh Baliga of Edelweiss Financial Services advises caution: "Tata Motors' overdependence on Jaguar Land Rover (JLR) to negate the Indian underperformance makes it a risky investment at this juncture especially in view of lower margins at JLR"
from Global Investing:
Less yen for carry this time
The Bank of Japan unleashed its full firepower this week, pushing the yen to 3-1/2 year lows of 97 per dollar. Year-to-date, the currency is down 11 percent to the dollar. But those hoping for a return to the carry trade boom of yesteryear may wait in vain.
The weaker yen of pre-crisis years was a strong plus for emerging assets, especially for high-yield currencies. Japanese savers chased rising overseas currencies by buying high-yield foreign bonds and as foreigners sold used cheap yen funding for interest rate carry trades. But there's been little sign of a repeat of that behaviour as the yen has fallen sharply again recently .
from Breakingviews:
U.S. auto sales put brakes on economy’s detractors
By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
U.S. car sales are putting the brakes on the economy’s detractors. Americans are buying more vehicles thanks in part to pent-up demand and cheap loans. But the housing recovery helps, too. That and other economic data suggest consumers are looking beyond slimmer paychecks. Federal spending cuts allowing, that means the U.S. engine may be about to purr.
from Breakingviews:
VW’s mega-profit hides risky governance weak spot
By Olaf Storbeck
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Volkswagen is defying gravity. Even though the European car market has been in terrible shape for two years, VW’s 25.5 billion euros of 2012 pre-tax profit was the highest ever for a listed German company. While half of that profit was a one-off, thanks to a revaluation of financial derivatives related to the Porsche takeover, the actual business is performing nicely. Operating profit increased by 2.1 percent to 11.5 billion euros. But the industrial strength comes with a serious weakness - in corporate governance.
from Breakingviews:
Peugeot’s writedown shocker isn’t end of trouble
By Olaf Storbeck
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
In a French corporate version of glasnost, PSA Peugeot Citroën is cleaning up its balance sheet and will write off assets to the tune of 4 billion euros - 28 percent of its current asset base, an amount equivalent to twice its current market capitalisation. Now it can focus on the future: it’s bleak.
from Global Investing:
Hyundai hits a roadbump
The issue of the falling yen is focusing many minds these days, nowhere more than in South Korea where exporters of goods such as cars and electronics often compete closely with their Japanese counterparts. These companies got a powerful reminder today of the danger in which they stand -- quarterly profits from Hyundai fell sharply in the last quarter of 2012. (See here to read what we wrote about this topic last week)
Korea's won currency has been strong against the dollar too, gaining 8 percent to the greenback last year. In the meantime the yen fell 16 percent against the dollar in 2012 and is expected to weaken further. Analysts at Morgan Stanley pointed out in a recent note that since June 2012, Korean stocks have underperformed Japan, corresponding to the yen's 22 percent depreciation in this period. Their graphic below shows that the biggest underperformers were consumer discretionary stocks (a category which includes auto and electronics manufacturers). Incidentally, Hyundai along with Samsung, makes up a fifth of the Seoul market's capitalisation.
from Breakingviews:
Fiat pegs Chrysler as most undervalued carmaker
By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Fiat Chief Executive Sergio Marchionne seems to want Chrysler to be the most undervalued automaker. That’s the implication of his latest offer to buy a slice of the Motown manufacturer from the United Auto Workers’ retiree healthcare trust. Marchionne has put $198 million on the table for 3.3 percent, valuing 100 percent of Chrysler’s stock at $6 billion. It’s worth much more.
from Breakingviews:
Porsche’s real legal crash test is yet to come
By Olaf Storbeck
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Porsche has enjoyed a smooth ride in the courts so far. The carmaker has avoided the potholes created by its epic and unsuccessful attempt to gobble up Volkswagen. Disgruntled investors accuse the company of systematic lying during the 2008 saga, and are suing for billions of compensation. Porsche rejects all accusations. But in spite of the significant hurdles investors who feel they’ve been duped are facing in the German legal system, the group isn’t out of the woods yet.
from Breakingviews:
Avis gives Zipcar a faster lane to profitability
By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Avis Budget is giving Zipcar a faster lane to profitability. Selling to the mainstream car rental giant for $500 million means a 32 percent loss for those who bought shares in Zipcar’s 2011 initial public offering. But it will allow the car-sharing company to boost its margins by tapping into Avis’s underused fleet.
