Earnings season is almost complete, but several hot names are
expected to report next week. These include Tesla (NASDAQ:
), Wal-Mart (NYSE:
), Newmont Mining (NYSE:
), and Coka Cola (NYSE:
After crashing post Q3 earnings, shares of the car maker are
above where they were for the last earnings report. Despite the
high valuation, most analysts are bullish on the company.
Morgan Stanley has an Overweight rating on the company, citing
strong sales despite several fires. Morgan Stanley also commented
on the company's plans to build a battery factory: "Tesla's plans
for a 'Giga' battery factory starting to get more attention as a
call option on the economics of mass produced batteries and the
business model. We found the final sentence of Tesla's prepared
remarks on its plans to build the worlds's largest lithium ion
battery factory intriguing: 'It is amassive, massive opportunity to
push the cost curve down to levels people haven't even dreamed of
yet.' We find investors are starting to seriously ask if Tesla can
be much more than just a car manufacturer. If this company can
establish a technological and scale lead in every storage and
infrastructure, might we one day look back at Tesla's humble
beginnings as a car maker much as Amazon began as a book
Bank of America stands out as one of a few banks with an
Underperform rating on Tesla, it has a bold $65 price target.
"We estimate Tesla would need to sell approximately 330K
vehicles per year by 2020, or 15X expected 2013 volume, to begin to
justify its current market price. Furthermore, we estimate that
luxury vehicle EBIT margins of about 11.5% would be required on
this volume, which appears a stretch given that the majority of the
company's sales will likely be attributable to the more mass market
oriented Gen 3 model by that time. In short, we believe significant
fundamental headwinds confront Tesla's current stock price and that
another sharp correction could be forthcoming."
The world's largest retailer is expected to report EPS of $1.60
on revenue of 130.63 billion Thursday.
Credit Suisse recently upgraded the company to outperform with
an 80 dollar price target. An interesting point it makes regards
the closing of JCPenney stores. "we estimate Tesla would need to
sell approximately 330K vehicles per year by 2020, or 15X expected
2013 volume, to begin to justify its current market price.
Furthermore, we estimate that luxury vehicle EBIT margins of about
11.5% would be required on this volume, which appears a stretch
given that the majority of the company's sales will likely be
attributable to the more mass market oriented Gen 3 model by that
time. In short, we believe significant fundamental headwinds
confront Tesla's current stock price and that another sharp
correction could be forthcoming."
Deutsche Bank has a Hold rating on Wal-Mart with a $75 price
target. "The company stated that it had positive comps during the
Holiday season, but its SSS were weighed down by the
negative impact from the reduction in SNAP benefits (18% of
all SNAP benefits spent at WMT) as well as the impact from winter
storms that resulted in store closures and hurt traffic during the
period. Our forecasts have been revised to SSS of -0.6% (Flat
prior) and -0.5% (1.5% prior) at WMT and Sam's respectively, taking
our 4Q EPS to $1.58 ($1.67 prior). We believe the SSS update is
likely somewhat in-line with expectations, given the cautious
commentary throughout retail in recent weeks, particularly in light
of a very weak January sales period."
Last week as a big week for gold miners. Several companies in
the industry announced decreased costs while the price of gold
rallied. Newmont picked up more than ten percent on the week.
JP Morgan downgraded the stock from Overweight to Neutral at the
beginning of February with a $26 price target. "Newmont closed off
2013 with a strong performance but the outlook for 2014
is more complex. Newmont is busy adjusting its production
profile from one focused on maximum gold production and growth, to
one which targets quality ounces. It has guided to lower AISC,
capital and G&A costs for 2014 and will use a little more
conservative $1,300/oz gold price for year end reserve estimates
and impairment tests.
"Newmont is expecting to deliver 5.0-5.3moz in 2014 on a
consolidated basis, which is roughly 8% lower than our earlier
forecast. The production at the Ahafo mine is expected to fall to
383koz (midpoint) this year after the mine produced 570koz in 2013.
Similarly, Yanacocha's production will fall to 940koz after it
delivered 1022koz in 2013. The AISC guidance is marginally lower by
$25/oz at $1,125/oz compared to 2013 guidance and may have
disappointed some investors.
"Overheads and capex would fall meaningfully in 2014. This
year's capex is expected to be $1.3-1.4b of which 90% is attributed
to the sustaining portion. Overhead expenses including G&A,
exploration expense and other expense are forecast to decline
substantially compared to 2013. However, the tax rate is expected
to increase to 34-37%."
Coca-Cola used cold weather as an excuse for missed earnings
throughout 2013. The recent wave of chilly weather. More
interestingly, the company announced acquisition of ten percent of
Green Mountain Coffee Roasters at the beginning of the month.
Morgan Stanley commented, "While the financial terms of the
agreement were not disclosed, we expect and believe the agreement
should be viewed as a modest positive, given Coke can potentially
utilize alternative methods of driving beverage demand, highlighted
by Starbucks' favorable experience from its GMCR partnership
on the coffee side. Coke also gets first mover advantage with GMCR.
However, the final impact is likely to be modest in the next couple
of years, and it will take time to build cold system household
penetration (SodaStream is currently at a 1% share). There is also
cannibalization risk, which would likely be managed through
deal economics. Coke did indicate it expects the bottlers to
'have a role which is complementary.'"
The biggest piece of economic data to pay attention to next week
are the FOMC minutes released Wednesday. When Janet Yellen gave her
congressional testimony this week, she implied that there will be
no drastic changes.
As always, initial and continuing jobless claims will be
notable. However, January's comparatively strong nonfarm payrolls
(versus December) take some pressure off of the release.
Monday - President's Day, U.S. Markets Closed
Earnings Releases Expected: Access Midstream Partners (NYSE:
), Herbalife (NYSE:
), Medtronic (NYSE:
), Panera Bread (NASDAQ:
), Potbelly (NASDAQ:
), Coke a Cola (NYSE:
) Economic Releases Expected: NAHB Housing Market Index
Earnings Releases Expected: Avis (NASDAQ:
), Jack in the Box (NASDAQ:
), Tesla (NASDAQ:
) Economic Releases Expected: FOMC Minutes, PPI
Earnings Releases Expected: Directv (NASDAQ:
), Groupon (NASDAQ:
), Newmont Mining (NYSE:
), Nordstrom (NYSE:
), Walmart (NYSE:
) Economic Releases Expected: Initial and Continuing Jobless
Claims, CPI, Natural Gas Inventories, Crude Inventories
Earnings Releases Expected: Dish Network (NASDAQ:
(c) 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Free Trading Education -
Check out the free events taking place on Marketfy
this week. Spaces are limited. Sign up today.