Morning Reads

Morning Reads

Open Interest Changes



Cybertruck woes

Tesla (TSLA) initially moved slightly higher in after-hours trading on Wednesday after posting Q3 results that were just under estimates, while margins continued to shrink. Tesla's deliveries fell 6.7% sequentially, hurt by planned downtimes for factory upgrades, although the automaker still expects full-year deliveries of 1.8M vehicles. However, the stock dropped 4.2% after CEO Elon Musk tried to rein in expectations on the Cybertruck.

Dim outlook: "We dug our own grave with Cybertruck," Musk conceded, warning that "there will be enormous challenges in reaching volume production with the Cybertruck, and then in making a Cybertruck cash flow positive." He added that it will likely take 12-18 months before the truck is a significant positive cash flow contributor. The downbeat comments dragged Chinese electric vehicle makers' Hong Kong-listed shares - BYD (OTCPK:BYDDF) and Li Auto (LI) fell about 4% each, XPeng (XPEV) declined 9%, while Nio (NIO) was down 8%.

E-truck roadblocks: Tesla is not alone in facing roadblocks in its electric truck journey. This week, GM delayed the opening of its second electric truck plant in Michigan. Ford temporarily cut one of three shifts at the Michigan plant tasked with building F-150 Lightnings, and had previously pushed back its EV production target. Some analysts believe these challenges present an opportunity for Rivian Automotive (RIVN) to build up its electric truck reputation. The Cybertruck is expected to challenge Rivian's R1T, Ford's F-150 Lightning and GM's Chevrolet Silverado EV.

SA commentary: "Given Musk's recession playbook of prioritizing vehicle sales over profitability and the upcoming Cybertruck launch (and subsequent ramp), Tesla's margins are likely to stay under pressure in the near to medium term," said Investing Group leader Ahan Vashi. He has advised long-term investors to hold out for a better entry point to initiate or increase bullish positions. Livy Investment Research said the recent selloff in Tesla was a result of waning confidence in the company’s fundamental prospects, cautioning that there is "limited near-term respite." (104 comments)

More consolidation?

Devon Energy (DVN) is considering major acquisition targets as it seeks to gain scale in U.S. shale, and has held preliminary talks in recent months about a combination with Marathon Oil (MRO). Devon has also been eyeing CrownRock, a Permian Basin producer led by Texas billionaire Timothy Dunn that has been exploring a potential $10B sale. If either deal goes through, it would be Devon's largest since its $2.6B takeover of WPX Energy. The update comes just a week after Exxon Mobil (XOM) said it will buy Pioneer Natural Resources (PXDfor $59.5B, a deal that analysts applauded. In any case, SA analyst UFD Capital believes Devon could be an attractive acquisition target. (46 comments)

Subscriber surge

Netflix (NFLX) soared 12.5% in postmarket action on Wednesday after it posted Q3 profit that topped estimates, saw its best subscriber growth in years and confirmed price hikes. The company added 8.76M global paid subscribers, easily topping the consensus estimate of 6.2M adds, and landed at 247.15M memberships - higher than the 244.41M expected. The subscriber surge was a result of "paid sharing, steady programming and the ongoing expansion of streaming globally," Netflix said. Investing Group Leader Cestrian Capital Research said management's outlook of further revenue growth and higher margins suggests scale and better revenue yield from content assets. (65 comments)

Third attempt

Erik Haas, Johnson & Johnson's (JNJ) chief litigation lawyer, said the healthcare giant is weighing the possibility of another bankruptcy filing in its attempt to deal with tens of thousands of lawsuits related to its talcum powder products. If J&J goes ahead with the filing, it would be the third attempt to use bankruptcy as a way to handle talc litigation after it was beaten back twice. J&J is appealing a bankruptcy court's decision to deny its subsidiary LTL Management's filing, as the unit hadn't shown that it was in financial distress. Haas said this argument was incorrectly applied. As part of its second bankruptcy attempt, LTL had offered $8.9B to settle all current and future talc claims. (19 comments)

Today's Markets

In Asia, Japan -1.9%. Hong Kong -2.5%. China -1.7%. India -0.4%.
In Europe, at midday, London -0.7%. Paris -0.4%. Frankfurt flat.
Futures at 7:00, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -1.3% to $86.16. Gold -0.3% at $1,962.80. Bitcoin +0.4% to $28,487.
Ten-year Treasury Yield +5 bps to 4.95%.

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
9:00 Fed’s Jefferson's Speech
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
12:00 PM Jerome Powell: Economic Outlook
1:20 PM Fed’s Goolsbee's Speech
1:30 PM Fed’s Barr: “Stress Testing”
4:00 PM Fed’s Bostic: "The Role of Policy in Addressing Inequality"
4:30 PM Fed Balance Sheet
5:30 PM Fed’s Harker: Economic Outlook
6:00 PM Fed’s Logan's Speech

Companies reporting earnings today »

What else is happening...

Ten-year Treasury yield (US10Y) hits highest level since mid-2007.

Federal Reserve observes muted economic activity - Beige Book.

Disney (DIS) breaks out ESPN figures in new reporting structure.

Cruise, GM (GM) and Honda (HMC) to launch robotaxis in Tokyo.

Nokia (NOK) reports Q3 earnings, plans up to 14,000 layoffs.

Pfizer plans to more than double COVID pill Paxlovid's price.

Terex's weak outlook sparks selloff in Caterpillar (CAT), peers.

Average 30-year fixed-rate mortgage touches 23-year high.

UBS analysts: Apple (AAPL) iPhone 15 demand looks weak.

BofA poll: Fund managers want to see lower government deficits.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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