Look Out Tesla! Volvo Plans to Disrupt Electric Car Industry; Plus Tesla’s Major Q2 Miss; Losing My Religion: Denim Company Goes Bust

Tesla disrupt…

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With all the attention Tesla has been getting – and seeking – lately, a major company just threw down the automotive gauntlet in the electric car arena. Enter Volvo, the perennial boxy but safe, Swedish import, which just announced that come 2019, it will only sell hybrid or electric vehicles. That’s right. The ultra-reliable, ever dependable Volvo will likely be giving Tesla a serious run for its money. The fact that its got a solid, dependable reputation to back it up only sweetens the pot. Lucky for Volvo, its parent company Geely Automobile Holdings of China has already sold tons of electric vehicles and now Volvo gets to tap into all those tech resources. And it’s not just Tesla that should be worried. Toyota, Honda and BMW, to name a few, should also look to up their game now that Volvo has entered the field. This announcement is epic since it means that Volvo becomes the very first major automobile manufacture to make the decision to completely kick internal combustion engines to the curb. Interestingly enough, hybrids accounted for only about 2% of auto sales in the U.S. last year, in part because gas prices have fallen so much, that people don’t mind getting cars with traditional gas-guzzling engines.

Speaking of which…

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Shares of Tesla took a nasty little drop today after the company reported that its second quarter sales were flat as a pancake. To add insult to fiscal injury, the company also reported that it delivered just 22,000 vehicles. That seems like a good thing except for the fact that Tesla had built over 25,000 cars. Demand is good. Oversupply is not so good. At all. And the fact that consumers have stopped demanding the Model S sedans and the Model X utility cars leaves Wall Street feeling less than stoked about Tesla. Especially Goldman Sachs, which just released a report documenting its concern over Tesla’s slow growth. It’s never good when Goldman Sachs is concerned about you. Naturally, Tesla pointed its finger at the ever-reliable and handy excuse of “production issues” to explain the shortfall of deliveries. Too bad Wall Street didn’t seem to care what excuse Tesla used.

Another one bites the dust…

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Today’s Chapter 11 bankruptcy filing is brought to us by True Religion, purveyor of super-pricey denim. True Religion brass is pointing the finger at e-commerce and the shift in consumer spending habits, since customers are choosing to purchase their goods from their devices instead of heading into actual stores where True Religion merchandise is typically sold. Fortunately, the company was able to come up with a restructuring agreement with several of its lenders that should get rid of approximately $350 million of its debt, while its creditors would get paid in full, at least the ones critical to the company’s operations. In the meantime, with 140 stores still under its belt, the company is going to explore ways to “reinvigorate the brand.” In other words, it is going to try to figure out how to get people to spend hundred of dollars on True Religion’s pricy merchandise once again.

Alphabet Soup: Google Parent Hits a Milestone; Premium Quality: Tesla Could Get Even Pricier; SEC Gets SCOTUS-Smacked

Whoa…

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Google’s parent company, Alphabet, broke the $1000 per share ceiling and yes, that is a vey impressive feat. Even for Google. What’s more impressive, is that this milestone happened on the very same day that shares of Apple, the world’s most expensive company, was downgraded. Not that Google would be experiencing any schadenfreude, or anything of the sort. In any case, Alphabet can pat itself on the back for becoming the third S&P 500 company to break the $1000 barrier, following in the illustrious footsteps of Amazon – who achieved that milestone just last week – and Priceline. Yes, Priceline. Remember them? To be fair, Google had, once upon a time, hit $1,200 a share but then the stock split. And then it became Alphabet, and the rest is S&P history.  Of course Berkshire Hathaway also trades above $1000. Way above $1000. In fact, if you’re inclined to spending $250,156.00, you could pick up a single solitary share of Warren Buffett’s company. But then again, what’re you gonna do with just one share?

Cry me a river…

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A new Tesla was sounding really good, at least up until the weekend when Automotive News reported that AAA is gearing up to raise its insurance rates on the super-shmancy electric automobiles. But that’s just AAA insurance. The verdict is still out on whether other insurers will follow suit. It’s all because of some very unflattering data detailing Tesla’s higher-than-usual and more expensive claims for both the Models S and Model X. In fact, those pricey claims could mean a 30% premium increase on Teslas, which makes you wonder if the fuel savings is even worth it. Tesla seems to be offended by the new data, calling it “severely flawed” and “not reflective of reality.” Apparently, the data had the audacity to compare a Tesla to a Volvo station wagon. I mean, c’mon? A Volvo station wagon? Not that I have anything against Volvo station wagons. Some of my best friends drive Volvos. And station wagons. It’s just that a station wagon is the last thing on my mind when fantasizing about being behind the wheel of a Tesla. Just saying.  In all fairness, however, Tesla boasts some of the most advanced safety features in their automobiles. Yet, none of that seems to help given the car’s expensive collision costs. In fact, claims for the Model S are 46% higher than other cars, and its losses come in at 315% higher. Yikes. Station wagons aside, those are some very un-sleek numbers. Ironically, Tesla’s medical payment claim frequency is below average while its personal injury protection losses are very low. So take that, Volvo!

Can’t touch this!

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Score one for Wall Street because it looks like the SEC won’t get to grab all those ill-gotten gains like it used to. At least according to the U.S. Supreme Court, which just ruled – in a 9-0 decision –  that the SEC’s use of “disgorgement” now has to face the wrong end of a five year statute-of-limitations. Disgorgment is the act of repaying money that was attained illegally, typically by people and firms in the financial industry.  For this latest Wall Street victory, the securities sector can thank Charles Kokesh, a New Mexico-based investment adviser. It all started back in 2009 when the SEC sued Kokesh for misappropriating funds from his investors. He may not be a saint, but he was ordered to pay $2.4 million in penalties plus another $35 million – which was for disgorgement purposes. The problem, Kokesh and his lawyers argued, was that much of that $35 million disgorgment figure had happened outside a five year statute of limitations. Instead of $35 million, the disgorgment should have been closer to $5 million, which is quite a substantial difference. As for the SEC, this new ruling is going to prove to be a real downer for the agency seeing as how it has since collected $3 billion for disgorgment claims.  Oh well. Maybe it’ll discover a new way around that minor, yet pesky obstacle.

 

Tesla Banks a Profit. Finally; Twitter’s Getting Rid of Employees Despite a Beat; Latest IPO Fails to Wow Wall Street

Booyah!

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Tesla’s CEO Elon Musk is super-pleased with himself after his electric car company posted a quarterly profit for the second time since the company went public. The first time that happened was waaaaay back in 2013. And Musk is banking on the fact that he can pull it off again next quarter. The news was particularly welcome to Musk since he is eager to merge Tesla with his other company, SolarCity. Except investors aren’t as enthusiastic about the prospect or presumably the $2.6 billion cost of the merger. But come November 17 Musk is going to find out if shareholders will have a change of heart and are willing to embrace the move when a vote takes place. In any case, Tesla’s profit came in at a very lofty $21.9 million with a record $2.3 billion in revenue. That would be a 145% increase over last year’s same quarter revenue. Yes you read that right.  The company also scored 14 cents per share when analysts only expected 4 cents. Add that to the fact that last year the stock lost 58 cents per share and we’ve quite a nice comeback story. So what made this quarter different from all other quarters? Ramped up production of Tesla’s Models S sedans and Model X Crossovers. With Musk urging employees to move the vehicles with all their heart and soul, a 92% increase was seen on deliveries of 25,185 cars. But it wasn’t just the current crop of cars that contributed to Tesla’s winning quarter. Apparently, 373, 000 people already pre-ordered the $35,000 Model 3, which won’t even hit the streets until 2017.

Boohoo…

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Twitter announced its third quarter results and yet again, failed to impress anybody. One of the more significant highlights, or rather lowlights, is the company’s decision to lose about 9% of its workforce, or roughly three hundred employees, out of over 3,800 worldwide. That number could go higher but the ultimate goal is to help the company reorganize sales, partnerships and marketing efforts. And who doesn’t like to reorganize, right? The social media company did manage to pull down revenues of $616 million, beating estimates of $605.5 million. Some might consider that an impressive achievement. Except it’s not, since it marked Twitter’s ninth straight quarter of declining growth. And while the company also earned 13 cents per share, once again beating estimates of just 9 cents, growth of monthly active users stayed relatively flat, despite all kinds of exciting new changes.  In the meantime, both Disney and Salesforce.com have passed on potentially acquiring Twitter, as CEO Jack Dorsey said that he’s done talking about reports of possible acquisitions.

That’s NYSE…

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Chinese company ZTO Express made its big Wall Street debut today but failed to dazzle the Street. Unlike the Chinese IPO darling of 2014, Alibaba, ZTO dished out over 72 million shares for $19.50 a pop, only to open today for the first time on the New York Stock Exchange at $18.40. The stock later slid even lower to $17.70. But considering that the company’s original range fell between $16.50  – $18.50, its slide isn’t exactly tragic. Just disappointing. In any case, ZTO still managed to raise $1.4 billion and the company plans to use $720 million of that to purchase more trucks, land, facilities and equipment. In other words, big expansion plans are in the works. As a package delivery company, it handled close to 21 billion parcels just in 2015. It should come as no surprise, however, that ZTO’s main business deals with delivering shipments for Alibaba. In fact, Alibaba accounted for 75% of ZTO’s business in the first half of the year.  You might be wondering why Chinese companies like to list on stock exchanges in the United States. Well, for one, there are currently about 800 companies lined up in China who have filed applications to list on indexes on the country’s indexes.  It’s a considerably slower process and some feel it’s less reliable. Besides, given the volatility of the Chinese economy, raising money in U.S. dollars as opposed to a weaker Chinese currency only sweetens the pot for plenty of companies.

Elon Musk Sets a Record; Whole Foods Says Sorry; Labor Department’s Mixed Messages

Electrifying…

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Image courtesy of digitalart/FreeDigitalPhotos.net

Elon Musk can sit pretty for the next few minutes and now would be a good time for the Tesla haters – if there are any – to make a run for it. The electric car company scored some rockin’ good digits in its latest quarterly earnings reports brutally beating estimates with a 52% surge over last year’s quarter. But it gets better as the company also set a new record, selling over 11,500 cars during this period. To be exact,11,507 drivers are now tooling around in their brand new $75,000 Model S sedans. Yes, I am jealous. And I am about to get even more jealous as Tesla gets revved up to unveil the Model X – an all-wheel drive SUV.  Elon Musk’s plan is to find new homes for 55,000 Telsas over 2015. Problem is, it’s already July and he isn’t even halfway there, having sold just 21,537 thus far. Even though haters insist that there’s simply a lack of demand for the very swanky electric automobile, Tesla execs blame the company’s limited capacity for production. So there.

Isn’t that a bit much for strawberries?

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Image courtesy of zirconicusso/FreeDigitalPhotos.net

Whole Foods might be the business darling of organic food, but some of their business practices were nothing short of toxic. Executives at the company admitted that some customers were overcharged for fresh cut fruits, fresh juices and even sandwiches. But apparently, it had only been happening in New York City where residents are already used to overpaying anyways. Next time you find yourself in the sliced fruit section at Whole Foods, check out the riveting video starring Whole Foods executives John Mackey and Walter Robb, flanked by produce on a television monitor, perhaps hovering over  Kingfisher melons balls and kale shakes. In the video, the gentlemen apologize  for the actions of a small percentage of its employees who “mis-weighed” some items, and priced them higher than what they should have been. In fact, around 80 different items were tested and they all weighed less than their worth. But, apparently there were also some items that were marked lower than what they were supposed to be. That’s how it determined that the errors were unintentional. But the Co-CEO’s apologized for that too. All this comes after a very unflattering investigation by the NYC Department of Consumer Affairs that called it “the worst case of mislabeling they have seen.”

Seven year itch…

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Employers added 223,000 new jobs in June but the remarkable thing about it – I mean besides people getting paychecks – is that the unemployment rate hit a seven year low falling to a somewhat respectable 5.3% from May’s 5.5%. Unfortunately, wages didn’t behave as respectably and stayed put. Nevertheless, these numbers point to an economy that is getting its juice back and may even cause those dudes and dudettes at the Fed to raise interest rates. But before we get all worked up, the Labor Department also warned us that the number of Americas working or simply looking for work fell as well. It’s a problem because it could mean that many folks who would love to have some steady gainful employment are downright discouraged and put the kibosh on their job hunt. At least the folks who did score jobs are helping the economy by spending their hard-earned cash.

Tesla Doing the Electric Slide – Downward, Whole Foods Not Looking Too Wholesome and Woe Is the Housing Sector!

Electric power struggle…

Image courtesy of Paul/FreeDigitalPhotos.net

Image courtesy of Paul/FreeDigitalPhotos.net

It might be a Consumer Reports top pick, but for Tesla Wall Street had a very different reaction. While the luxury electric car company did beat the analysts’ expectations, it also reported a loss of almost $50 million this quarter. Not exactly electrifying news for the company which at this time last year boasted its first profit. As a result, the stock was more fizzle than sizzle. Productions delays of the their Model X car didn’t exactly leave the Street brimming with enthusiasm over the company either. But CEO Elon Musk is not crying himself into a corner as he’s got great big plans for Tesla including building a massive battery factory – or what they’re calling a “gigafactory” – with Panasonic. Musk is also taking the wonders of Tesla abroad with China already having received deliveries of the Model S. Now if he could just figure out a way around those pesky car salesmen in New Jersey…

A whole lotta of food competition…

Image courtesy of KROMKRATHOG/FreeDigitalPhotos.net

Image courtesy of KROMKRATHOG/FreeDigitalPhotos.net

Whole Foods (WFM) is looking a little wholesome these days as the stock lost almost 17% of its value. It missed analysts’ predictions through no fault of their own. Sort of. After all, who can really compete with the likes of Krogers (KR) and perennial powerhouse retailer, Wal-Mart (WMT), both of whom are offering up organic fare for considerably cheaper prices. So rather than attempt a futile price war with these grocery behemoths, Whole Foods is going to try improving the customer experience instead. What that means for you is that Whole Foods will institute new  – and faster – payment and check out procedures. If they really want improve the customer experience, they might want to provide some babysitting so that parents can roam the stores freely without opening up half the grocery packages before they even get to checkout. That’s just my humble opinion. Currently they have 373 stores in the US, Canada and UK. Yeah, I didn’t know about the UK either.

Housing is a bummer…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Just when you were getting excited for spring and all the new fiscal excitement it brings, Janet Yellen goes ahead and kills that buzz by reporting that the housing sector…well…it’s just not really not doing its part to assist with the economic recovery. The amount of filings for building permits fell and those are pretty decent barometers of how the housing sector is doing. As for existing home sales, they seemed to have flat-lined. Those not-so-minor details combined with the fact that the rate of recovery took a veritable stall is leaving the Fed less than enchanted with prospects for a stepped up recovery. The Fed Chairwoman also wouldn’t divulge when low short term interest rates would go back up. If you’re in the market for a cheap mortgage or other type of loan, you better hope they stay low. But Janet Yellen is still holding out for a higher rate of recovery and even expects unemployment numbers to go down, albeit slower tha we would like. Currently, the unemployment rate is holding at a very unflattering 6.3%. Pre-recession that rate was between 4% and 5%.