30 June Watchlist 👀

by 30 Jun, 2020

Today we are watching…

1. Tesla (#tesla)

“Dear Employees, breaking even is looking super tight, so go all out” and Tesla can deliver an electric shock to the bears that said this could never be done. Elon Musk has a history of overpromising and under delivering, not that most people care because his promises are so outrageous anyway. The problem with Tesla is that with prices falling, deliveries are inflated and the business gets no closer to breaking even. The problem can be solved if deliveries are inflated so much that economies of scale are unlocked and prices can be brought back up, but it’s hard to bring back up the price of a consumer product. If Tesla doesn’t have pricing power, it’s in big trouble. Fortunately, the brand is one-of-a-kind. It almost certainly does have pricing power, it’s just a case of how much as competitors close in.

2. Boeing (#boeing)

Regulatory bods from the Federal Aviation Administration (FAA) will look down their noses and watch on as taxiing maneuvers and recertification flights commence for the grounded Boeing 737 Max this week. It’s a step forward for Boeing, whose best-selling airliner was brought down twice last year. The stock is up 14%. The FAA has not completed its compliance work, but there’s definitely a bullet in the chamber now for Boeing as its stock has been devoid of positive catalysts for a long time. The question for investors is whether it’s safe to invest in a company with deepening debt due to coronavirus bailouts. Things could still get worse before they get better!

 

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