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The Monster Week In Review: November 17
It was a big week with some significant news, which started Monday morning with GE announcing it would cut its dividend, and lower its full-year 2018 guidance. Shares of GE ($GE) fell about 10 percent this week alone, and are now down by 42 percent year-to-date. With the S&P 500 up by over 15 percent in 2017 and underperforming, by, get this, 57 percentage points.
The week ended with Tesla ($TSLA) finally showing off its new Semi-Truck. But perhaps most impressive was the new Tesla Roadster. Wow. Zero to 60 in under 2 seconds, 600-mile range. Ferrari and Porsche were just put on notice, that is for sure.
I don’t expect much out of the semi-truck business, to be truthful. The market is estimated at $30 billion a year in North America according to Bloomberg. It comes down to how much of the market share Tesla can capture. Even if they should win 10 percent of the market, it would add only $3 billion in revenue, and would likely be a drag on overall margins.
According to Ycharts, Tesla is expected to have revenue of roughly $28 billion by the year 2020, which means the Truck could maybe add $3 to 4 billion to that if we aggressively target a 10 percent share right off the bat, which seems highly unlikely. But perhaps the technology being put into this truck could be easily converted into other products, like the Tesla Bus.
The most significant news out of the Tesla event wasn’t the truck or the roadster, it was the hyper-charger, which Tesla claimed could give the truck a 400-mile charge in 30 mins. I’d have to imagine that Tesla has figured out how to put this technology on all of their cars, which means every car could get a full charge in under 30 minutes.
Additionally, the idea that Tesla would be powering the hyper charger through solar energy stored in batteries is a genius idea. Again, once the company recoups the cost of the equipment and installation, the rest of the money Tesla makes on the charger is profit.
Additionally, once the Model S is equipped with the 200 kWh battery pack in the new roadster, which I can’t imagine is too far down the road, the range issue for the Tesla is officially dead. The Model S would likely be able to drive further on one charge than a car on a full tank of gasoline.
So while the truck and roadster stole the headlines, the real news was the hyper-charger and the 200 kWh battery.
I’m still waiting for the solar paint or solar roof panels on the car. The day will come.
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Biotech has been absolutely crushed over the past month with shares of the Nasdaq Biotech IBB ($IBB), down about 8 percent, which is an improvement.
The ETF appears to have bottomed out at the $300 -303 level again, as it did back in August. That region served as stiff resistance on the way up, and it shall act as strong support on the way down. It appears that ETF has bottomed and could be head higher again, back towards $320, as we previously noted during the week.
The chart below shows that double bottom, and how quickly the ETF took out the $309 region, it seems like we could now fill that gap, at $322.
One can get further confirmation by looking at some of the components. Celgene ($CELG) shares have broken out, rising above $102.5. Does the stock go straight up to $120, no but it is likely to head in that direction on both a technical and fundamental basis.
So why do we track and follow the ETF”s? First of all, it tells us the general direction of the sector, and it shows which direction stock within the ETF are likely to move. Acadia Pharmaceuticals ($ACAD) is a perfect example of this, with the way the stock goes up and down at multiples to that of the IBB. Just look, Notice anything?
What about like this?
Notice when Acadia and the IBB rise, the IBB trades at 7 to 8 times that of Acadia, but when the IBB falls, its trades at 11.5 times the price of Acadia. If you want to know which Acadia will go rise or fall just track the IBB if the IBB rises, Acadia rise and trades at a ratio of about 7 to one. If the IBB falls, Acadia falls at a rate of about 11 to 1.
Cisco ($CSCO) shares have broken out to a level not seen since 2001, what is that 16 years! That is a long time to have to wait. Shares are likely going higher as well. But the stock could see a short-term pull before that longer-term rise happens.
It seems more than likely shares of the stock retreat back toward $34.50, filling the gap, before turning and making a run towards $45.
We’ll finish the week with Wal-Mart ($WMT) yes Wal-Mart, because it not every day that Wal-Mart trades like a high-flying tech stock. The share of the stock rose by over 7 percent to an all-time high, closing the week at $97.40. The company topped estimates when reporting its results this week, and its online business drove it.
That is a wrap.
Free Articles Written By Mike:
Higher Bid For Qualcomm Is Unlikely, Traders Indicate
Biotech Celgene Could Rebound By More Than 15%
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Michael Kramer and the Clients of Mott Capital owns shares of TSLA,CELG,ACAD
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
© 2017 Mott Capital Management, LLC. Use, publication or reproduction in any media prohibited without the permission of the copyright holder.
Tags: #GE #Tesla #Biotech #Celgene #Acadia #Cisco #walmart
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.