April 4, 2015

Michael Kramer and the clients of Mott Capital own Tesla

US Markets

• S&P 500 -1
• US 10-Year 2.50%
• Oil $62.47
• Dollar Index 97.15
• VIX 971.5

International Markets

• China Shanghai +0.91%
• Hong Kong HSI -0.17%
• Japan Nikkei +0.06%
• South Korea KOSPI  +0.15%
• German Dax +0.04%
• UK FTSE -0.56%

Global Growth Proxies

• Copper $2.93
• Silver $15.05
• Platinum $891
• Semiconductor Index SOX 1464.19

Key News:

• Trade talks continue between the US and China
• Tesla delivery numbers weak than expected. 

The S&P 500 is expected to open flat, but there is no doubting that trend is higher. If there is one risk to the market as of now, it is an unfilled gap around 2,830. As we know, markets do not go up in a straight line. Should the S&P 500 drop below support around 2,865, then the odds of a pullback to 2,830 increase.  Outside of that the trend is clear, and a path to 3,000 is now in place, and perhaps even higher — more on that in a day or so.

Russell 2000 (IWM)

The path for the Russell 2000 is to 1,592. Meanwhile, there is always the risk for a pullback to 1,521.

Tesla (TSLA)

The big news overnight was the big miss for Tesla in terms of delivery and production. The company delivered a total of 63,000 cars in the quarter, with 10,600 in transit. The company produced just 62,950 Model 3’s in the quarter, well below the Model 3 Tracker we have followed on Bloomberg. I’m not sure what happened here, the Bloomberg model, had previously been so correct, this was a big surprise.

Overall, the logistic of delivering to China and Europe was a definite issue with a high number of cars in transit. Additionally, which I found surprising, was that the company produced only 14,150 Model S and X, which is about half of what they would typically produce, which is where I see the big problem and the reason for the big miss in deliveries. Now whether that was because the company discontinued its lower range batter options, or people are waiting for an interior refresh later this year, or because the company moved more resources to the Model 3, I don’t know. But if the company had delivered what had been a pretty consistent 25,000 Model S and X in the quarter we’d be talking about 75,000 cars delivered in the quarter and the talk of a miss would be null.  Maybe I should visit the store in Manhasset and see what they say.

Again, I can’t tell what happened to that production.  Anyway, the chart shows that stock clearly failed at the moment of truth, and support lies somewhere around $261.

Facebook (FB)

Facebook was upgraded this morning at Guggenheim to buy from neutral with a $200 price target. It probably is enough to give the stock a boost and keep it above support at $173. The longer it stays above that support region, the more likely we can confirm a breakout, I think one needs to think about the stock rising to $186.

Micron (MU)

Morgan Stanley downgraded Micron to underweight from equal weight and a $32 price target. There was a great story on Digitimes about DRAM prices continuing to fall in the second half of 2019. So much for that demand recovery, the company has guided too.  Anyway, the stock is pointing to a lower open. $40.25 is support for now.

Roku (ROKU)

Roku was downgraded at Guggenheim this morning to neutral from buy with a price target of $72. The stock has this lower highs, higher lows things going on, and I think for now the path is lower towards $64.

That is it for now.

Mike

Photo From Flickr

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.