Market Snapshot
briefing.com
| Dow | 38049.13 | +242.74 | (0.64%) | | Nasdaq | 15510.50 | +28.58 | (0.18%) | | SP 500 | 4894.16 | +25.61 | (0.53%) | | 10-yr Note | +5/32 | 4.13 |
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| | NYSE | Adv 2158 | Dec 611 | Vol 926 mln | | Nasdaq | Adv 2498 | Dec 1716 | Vol 5.3 bln |
Industry Watch
| Strong: Real Estate, Utilities, Communication Services, Information Technology, Materials, Industrials, Energy |
| | Weak: Consumer Discretionary, Health Care |
Moving the Market
-- Big loss in Tesla (TSLA) after disappointing earnings and guidance
-- Strength in other notable names that reported earnings, like IBM (IBM)
-- Ongoing strength in mega cap stocks, except Tesla
-- Drop in market rates following slate of economic data that corroborated the soft landing narrative
| Closing Summary
25-Jan-24 16:30 ET
Dow +242.74 at 38049.13, Nasdaq +28.58 at 15510.50, S&P +25.61 at 4894.16
[BRIEFING.COM] The stock market started, and ended, this session on a positive note. The major indices drifted lower, however, around mid-morning. Early buying activity favored mega cap stocks, aside from Tesla (TSLA 182.63, -25.20, -12.1%) following disappointing earnings and guidance, but the afternoon improvement was powered by gains in the "rest" of the market.
The Invesco S&P 500 Equal Weight ETF (RSP) jumped 1.0% versus a 0.5% gain in the market-cap weighted S&P 500. Meanwhile, the Vanguard Mega Cap Growth ETF (MGK) eked out a 0.2% gain. Apple (AAPL 194.17, -0.33, -0.2%) was another laggard from the mega cap space after confirming changes to iOS, Safari, and the App Store in the European Union.
The overall positive bias today followed pleasing data in terms of ongoing strength in the economy and cooling inflation. The Advance Q4 GDP report showed that real GDP rose 3.3% versus an expected 2.0% and the GDP Price Deflator increased 1.5% versus an expected 2.8%. This comes ahead of the release of the December Personal Income and Spending report at 8:30 ET tomorrow, which features the Fed's preferred gauge on inflation (i.e. the PCE Price Indexes).
Fairly broad based afternoon gains left nine of the S&P 500 sector in positive territory. The energy sector (+2.2%) saw the largest gain, climbing alongside oil prices ($77.36/bbl, +2.29, +3.1%). Meanwhile, the big loss in Tesla pinned the S&P 500 consumer discretionary sector in last place on the leaderboard, down 1.1%, followed by the health care sector (-0.2%), which was driven lower by shares of Humana (HUM 355.36, -47.04, -11.7%) after reporting disappointing quarterly results.
Knight-Swift Transportation (KNX 557.90, +0.92, +1.6%) was among the losing standouts early after reporting quarterly results, but it turned around and recovered to end the day higher. A sizable earnings-related gain in IBM (IBM 190.43, +16.50, +9.5%) was a big reason behind the outperformance of the Dow Jones Industrial Average.
Treasuries settled with gains in response to this morning's pleasing economic data, acting as added support for equities. The 2-yr note yield rose five basis points to 4.32% and the 10-yr note yield climbed five basis points to 4.13%.
- Nasdaq Composite: +3.3%
- S&P 500: +2.6%
- Dow Jones Industrial Average: +1.0%
- S&P Midcap 400: -0.8%
- Russell 2000: -2.5%
Reviewing today's economic data:
- Real GDP increased at an annual rate of 3.3% in the fourth quarter (Briefing.com consensus 2.0%), bolstered by a 2.8% increase in personal consumption expenditures. The GDP Pride Deflator was up just 1.5% following a 3.3% increase in the third quarter.
- The key takeaway from the report is the recognition that inflation pressures calmed in the fourth quarter while the economy once again grew above potential.
- Initial jobless claims for the week ending January 20 increased by 25,000 to 214,000 (Briefing.com consensus 200,000). Continuing jobless claims for the week ending January 13 increased by 27,000 to 1.833 million.
- The key takeaway from the report is that, despite the week-over-week increase, initial jobless claims -- a leading indicator -- continue to run at a level that is well below what is typically seen in a recession period.
- Durable goods orders were unchanged in December (Briefing.com consensus 0.1%) following an upwardly revised 5.5% increase (from 5.4%) in November. Excluding transportation, durable goods orders increased 0.6% (Briefing.com consensus 0.2%) on the heels of a 0.5% increase in November.
- The key takeaway from the report is that new orders were up for most categories outside of defense aircraft and parts, signaling some pickup in manufacturing activity in the final month of the year.
- The Advance Intl. Trade in Goods deficit narrowed to $88.5 billion in December from $89.3 billion in November; Advance Retail Inventories were up 0.8% following a 0.1% increase in November; and Advance Wholesale
- Inventories increased 0.4% following a 0.4% decline in November.
- New home sales increased 8.0% month-over-month in December to a seasonally adjusted annual rate of 664,000 units (Briefing.com consensus 640,000) from an upwardly revised 615,000 (from 590,000) in November. On a year-over-year basis, new home sales were up 4.4%.
- The key takeaway from the report is that new home sales activity increased in December, bolstered by a drop in mortgage rates and a sizable drop in selling prices
Friday's economic calendar features:
- 8:30 ET: December Personal Income (Briefing.com consensus 0.3%; prior 0.4%), Personal Spending (Briefing.com consensus 0.4%; prior 0.2%), PCE Prices (Briefing.com consensus 0.2%; prior -0.1%), and Core PCE Prices (Briefing.com consensus 0.2%; prior 0.1%)
- 10:00 ET: December Pending Home Sales (Briefing.com consensus 2.3%; prior 0.0%)
(Correction: our original post indicated KNX was a losing standout today. The comment has been edited to note that it had been a losing standout, but then turned around to end the day higher)
Treasuries settle with gain after strong GDP data
25-Jan-24 15:35 ET
Dow +174.56 at 37980.95, Nasdaq +17.08 at 15499.00, S&P +20.25 at 4888.80
[BRIEFING.COM] Stocks are moving higher ahead of the close.
After the close, T-Mobile (TMUS), Intel (INTC), Capital One (COF), Visa (V), L3Harris (LHX), Western Digital (WDC), KLA Corporation (KLAC), Levi Strauss (LEVI), and others will report earnings. American Express (AXP), Colgate-Palmolive (CL), Norfolk Southern (NSC), and Booz Allen Hamilton (BAH) represent some of the names reporting earnings tonight.
Treasuries settled with gains in response to this morning's pleasing economic data. The 2-yr note yield rose five basis points to 4.32% and the 10-yr note yield climbed five basis points to 4.13%.
Market climbs somewhat
25-Jan-24 15:00 ET
Dow +110.32 at 37916.71, Nasdaq -0.12 at 15481.80, S&P +12.21 at 4880.76
[BRIEFING.COM] The market moved higher in recent trading.
There is no specific catalyst to account for the move. The Invesco S&P 500 Equal Weight ETF (RSP) is up 0.7% versus a 0.3% gain in the market-cap weighted S&P 500.
Separately, WTI crude oil futures rose 3.1% to $77.36/bbl.
W.R. Berkley, ResMed among top S&P 500 gainers post earnings
25-Jan-24 14:30 ET
Dow +65.48 at 37871.87, Nasdaq -28.19 at 15453.73, S&P +7.07 at 4875.62
[BRIEFING.COM] The S&P 500 (+0.15%) is just off session lows, which it tested in the last half hour.
Elsewhere, S&P 500 constituents W.R. Berkley (WRB 83.35, +5.66, +7.29%), ResMed (RMD 184.06, +12.28, +7.15%), and Packaging Corp (PKG 172.69, +7.68, +4.65%) pepper the top of the standings, all higher following earnings reports.
Meanwhile, Boeing (BA 200.67, -13.46, -6.29%) continues to fall following a BofA Securities downgrade to Neutral out overnight.
Gold little changed after morning econ data
25-Jan-24 14:00 ET
Dow +56.45 at 37862.84, Nasdaq -2.10 at 15479.82, S&P +9.34 at 4877.89
[BRIEFING.COM] With about two hours to go on Thursday the tech-heavy Nasdaq Composite (-0.01%) recently dipped into negative territory.
Gold futures settled $1.80 higher (+0.1%) to $2,017.80/oz, giving back some of this morning's push higher following GDP data and the ECB's policy decision.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $103.58.
Soft landing/no landing seen in economic data
The S&P 500 eked out another record-closing high yesterday after enduring some afternoon selling pressure that wiped out larger gains earlier in the day that sent the index above 4,900. The selling coincided with a disappointing 5-yr note auction, a bump in long-term rates, and mega-cap stocks retreating from higher levels.
The tone in the equity futures market ahead of a large batch of economic data at 8:30 a.m. ET was mixed and indecisive.
Some of the mixed tone could be attributed to a wait-and-see stance in front of the data; some of it could be attributed to a wait-and-see stance to see how the market trades following yesterday's afternoon retreat; and some of it could be attributed to mixed earnings results/guidance that included disappointments from Tesla (TSLA), Humana (HUM), and Knight-Swift Transportation (KNX) and positive surprises from Lam Research (LRCX), IBM (IBM), American Airlines (AAL), Southwest Airlines (LUV), and Blackstone (BX) to name a few.
Tesla, down 9%, is drawing some extra attention; however, its loss has been offset by gains in other mega-cap stocks, namely Microsoft (MSFT) and Alphabet (GOOG). IBM, meanwhile, is drawing accolades for its report and is up 7%, which is a nice support for the Dow Jones Industrial Average.
The best support for the market this morning, though, appears to be a slate of economic data that continued to validate the soft landing/no landing economic view that is a boon for earnings prospects.
Briefly:
- Real GDP increased at an annual rate of 3.3% in the fourth quarter (Briefing.com consensus 2.0%), bolstered by a 2.8% increase in personal consumption expenditures. The GDP Pride Deflator was up just 1.5% following a 3.3% increase in the third quarter.
- The key takeaway from the report is the recognition that inflation pressures calmed in the fourth quarter while the economy once again grew above potential.
- Initial jobless claims for the week ending January 20 increased by 25,000 to 214,000 (Briefing.com consensus 200,000). Continuing jobless claims for the week ending January 13 increased by 27,000 to 1.833 million.
- The key takeaway from the report is that, despite the week-over-week increase, initial jobless claims -- a leading indicator -- continue to run at a level that is well below what is typically seen in a recession period.
- Durable goods orders were unchanged in December (Briefing.com consensus 0.1%) following an upwardly revised 5.5% increase (from 5.4%) in November. Excluding transportation, durable goods orders increased 0.6% (Briefing.com consensus 0.2%) on the heels of a 0.5% increase in November.
- The key takeaway from the report is that new orders were up for most categories outside of defense aircraft and parts, signaling some pickup in manufacturing activity in the final month of the year.
- The Advance Intl. Trade in Goods deficit narrowed to $88.5 billion in December from $89.3 billion in November; Advance Retail Inventories were up 0.8% following a 0.1% increase in November; and Advance Wholesale Inventories increased 0.4% following a 0.4% decline in November.
The Treasury market saw some expected volatility in the wake of these releases, but has held its ground for the most part, which is another support for stocks. The 2-yr note yield is down three basis points to 4.34% and the 10-yr note yield is down four basis points to 4.14%, comforted it seems by the friendlier inflation readings in the GDP report.
Shortly before the data were released, the European Central Bank announced it had voted to keep its key policy rates unchanged, as expected, and its directive made it sound as if the ECB is content to keep them where they are.
Suffice to say, the market has a lot to chew on at the moment, including stimulus actions in China that have sparked some welcome rallies in the equity market there. The Shanghai Composite surged 3.0% today while the Hang Seng Index added another 2.0%, bringing its week-to-date gain to 5.9%.
Currently, the S&P 500 futures are up 20 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 87 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 88 points and are trading 0.2% above fair value.
The translation from those indications is that the major indices will be heading higher at the open, with the S&P 500 testing new record ground.
-- Patrick J. O'Hare, Briefing.com
Humana's rising medical costs much worse than expected, sending shares spiraling lower (HUM)
A rough quarter for Humana (HUM) was widely anticipated after the health insurer warned a week ago that Medicare Advantage medical expenses were trending much higher than anticipated, echoing the same message that competitor UnitedHealthcare (UNH) relayed when that company reported its first EPS miss in over five years on January 12. Even with that warning, the magnitude of HUM's Q4 earnings miss, and its downside FY24 EPS guidance is creating a huge shockwave that's not only hammering HUM shares, but is also hitting other health insurance stocks hard, including UNH, Cigna (CI), and CVS Corp. (CVS).
- On January 18, HUM revised its Q4 Medicare Advantage adjusted benefit ratio forecast to 91.4% from 89.5%, indicating that more members are using their insurance coverage, driving HUM's medical costs higher. The company warned that the impact of rising utilization rates for 2024 could be material if current trends continue. Based on the company's dismal outlook, it's apparent that this trend is continuing, if not accelerating.
- For FY24, the company guided for EPS of $16.00, missing estimates by a huge margin, and representing a decline of nearly 40% yr/yr. If that wasn't bad enough, HUM also pulled the plug on its outlook for FY25, commenting that it no longer believes its previously communicated target of $37/share in EPS is achievable.
- Instead, the company now is aiming to grow adjusted EPS by $6-$10 in 2025, mainly through price increases and growth in other businesses outside of Medicare Advantage.
- Rising Medicare medical costs is an industry-wide problem, but it's important to point out that HUM has greater exposure to this risk than other insurers. As the country's second largest Medicare insurer, HUM has over 5.4 mln members. For 2024, the company is forecasting Medicare Advantage growth of about 100,000 members, representing yr/yr growth of 1.8%.
- A major challenge now for HUM, and its competitors, will be to balance membership growth with price increases to help offset this surge in rising medical costs. CEO Bruce Broussard touched on this topic, stating that the company doesn't want to lose hundreds of thousands of members as it raises prices in a highly competitive market. At the same time, he described the medical cost increases as "unprecedented", signaling that these headwinds aren't likely to fade anytime soon.
- It's not COVID, RSV, or the flu that drove HUM's medical benefit ratio higher than it expected -- those costs were already baked in. Rather, it's a sharp increase in hospital stays, outpatient surgeries, and increased physician visits that's causing the surge in medical costs. The higher utilization rate is partly due to people taking care of procedures that were postponed during the pandemic, but other factors are also likely in play with cancer diagnoses and heart-related conditions rising.
There's no way to sugar coat it, this was a dreadful earnings report from HUM and the outlook for 2024 seems equally bleak. Price increases for Medicare Advantage members are inevitable, so a key metric to watch moving forward will be membership attrition. Until market participants have a better understanding of how those price increases will impact HUM's financials, the stock is likely to remain out of favor.
Lam Research continues etching out all-time highs following upbeat Q2 results (LRCX)
Lam Research (LRCX +4%) continues to etch out all-time highs, popping today after topping metrics across the board in Q2 (Dec), including a seventh straight double-digit earnings beat. There were many reasons to be optimistic ahead of the semiconductor equipment firm's Q2 report, including cheerful guidance from Taiwan Semi (TSM) last week and record orders in DecQ from peer ASML (ASML) yesterday. However, by that same token, there were reasons to be cautious as recent upbeat developments set a high bar for LRCX to clear.
Still, with the powerful momentum behind it, LRCX surpassed raised expectations easily. Also, for the most part, LRCX is out of the woods regarding its many challenges over the past two years and is better positioned to capitalize on a new growth cycle in the chip industry.
- LRCX is jumping off a higher and more structurally sound foundation ahead of what it sees as the beginning of a new growth cycle within semiconductors. Since 2019, LRCX has expanded its total non-memory revenue share, ended CY23 with a nearly 50% larger installed base, and, through aggressive operational efficiency improvements, has delivered operating margins almost 250 bps higher than the prior cycle's trough.
- These advancements were notable in Q2. LRCX delivered a 13% bump in adjusted EPS sequentially to $7.52 and an 8% improvement in revs since Q1 (Sep) to $3.76 bln, its second consecutive quarter of sequentially improving numbers. Operating margins were flat qtr/qtr at 30% but still topped the midpoint of LRCX's 28.5-30.5% forecast.
- Wafer fab equipment (WFE) spending, the primary gauge on overall demand for LRCX, ended 2023 in the low $80 bln range, moderately higher than management expected due to decent strength from China. However, zooming out, overall memory WFE spending plunged by 40% yr/yr in 2023, led by cuts in NAND (flash memory) spending of over 75%, painting a picture of just how turbulent the previous year has been.
- Entering 2024, LRCX is not anticipating a major uptick in WFE spending, projecting around the mid-to-high $80 bln range, a modest recovery compared to 2023. Management echoed ASML and Micron's (MU) remarks, expecting a muted year ahead. This is reflected in its Q3 (Mar) outlook, targeting adjusted EPS of $6.50-8.00 and revs of $3.4-4.0 bln, both roughly flat sequentially.
- However, also like ASML and MU, LRCX is remarkably bullish over outsized growth following this year's recovery. The company expects semiconductor revs to reach $1.0 trillion combined by the end of 2029 due to rising device manufacturing complexity, prompting WFE spending to roughly double compared to today's levels.
The forward-looking market is shrugging off a likely stagnant year ahead for LRCX and zoning in on rapid growth come CY25. It is important to note that LRCX is now one of several semiconductor firms expressing enthusiasm over promising demand in 2025. Given this level of conviction from the industry, investors feel confident enough to buy now in anticipation of catching the beginning of the next growth cycle.
IBM surges following impressive Q4 report and 2024 outlook (IBM)
IBM (IBM +13%) is trading sharply higher today after reporting a nice EPS beat in Q4 with upside revs. Investors were also pleased to see IBM post $11.2 bln in free cash flow (FCF) in FY23, handily beating guidance of $10.5 bln. We think the FY24 FCF guidance of about $12 bln was impressive as well. IBM also expects FY24 constant currency (CC) revenue growth will be consistent with its mid-single digit model. FX is expected to be about a one-point headwind to revenue growth in FY24.
- IBM reported growth for Software (+2.0% CC) and Consulting (+5.5% CC) as clients continue to accelerate their digital transformations, modernize their applications and automate their workflows. These segments are growth vectors that represent 75% of IBM's revenue base, up from about 55% in 2020. And its stable recurring revenue stream represents about half of IBM's revenue.
- Within Software, the growth was not as strong as we have seen in recent quarters. However, to be fair, IBM was lapping a tough year ago comparison. IBM was able to post growth in both subsegments: Hybrid Platform & Solutions (+1% CC) and Transaction Processing (+4% CC). In HP&S, the star of the show was Red Hat (+7% CC), while Automation (flat CC) and Data & AI (+1%) were just ok. The main laggard was Security, which was down -6% CC.
- Consulting had another solid quarter. IBM noted that its Consulting unit has been outperforming its peers. That is partly because IBM launched Watsonx, its flagship AI and data platform, in mid-2023. IBM is excited by the traction it is seeing. IBM noted that Consulting delivered durable revenue growth through the year, despite an uneven macro environment. Consulting also posted a trailing 12-month book-to-bill ratio over 1.15.
- Its Infrastructure segment has been the laggard in recent quarters, but finally returned to growth at +2.0% CC, after several quarters of decline. It is not huge growth, but it was a key milestone. This segment ebbs and flows more on product launches and IBM is now in the seventh quarter since the very successful launch of z16 in 2Q22. But it was good to see this segment finally return to growth.
Overall, investors seem quite pleased with how IBM wrapped up 2023. As we mentioned in our IBM preview, we had an inkling this would be a good quarter after peer SAP reported good results. And that turned out to be the case. We could nitpick about Software not being as strong as recent quarters but IBM had signaled before that it was lapping a tough comparison. Investors seem to not be too worried. Plus Consulting remained robust with good bookings. Also, Infrastructure's long-awaited return to growth was welcome news. We also think investors are pleased with the FY24 FCF and revenue guidance.
Seagate Tech slips despite returning to profitability for the first time in a year in DecQ (STX)
Seagate Tech (STX) returns to non-GAAP profitability for the first time in a year in Q2 (Dec) despite enduring another quarter of declining yr/yr revenue growth, affirming management's expectation that Q1 (Sep) marked the bottom of a prolonged bearish cycle. The data storage manufacturer also issued decent Q3 (Mar) guidance, with the midpoints of its adjusted EPS and revenue forecasts exceeding analyst estimates.
Despite these bright spots, investors were not initially convinced, sending shares over -5% lower during after-hours trading yesterday. One reason behind the immediate sell-the-news reaction was uneasiness over a recovery in China (where STX derives a meaningful chunk of its annual revenue). However, today, China made several announcements pointing to a potential policy shift toward stimulating its stagnant economy, alleviating some fears over an extended recovery period in the region.
Coupling this with a bullish tone expressed by management during its Q2 earnings call has helped bring the stock toward its flatline, looking to build upon its +30% rally since November.
- Adjusted EPS turned positive after four consecutive quarters of red, jumping to $0.12, nicely above the high end of STX's prior forecast of $(0.30)-$0.10. A 540 bp improvement in adjusted operating margins yr/yr was the primary fuel behind STX's long-awaited return to profitability.
- STX accomplished this feat despite revenue falling by 17.6% yr/yr to $1.55 bln, landing at the mid-point of its $1.4-1.7 bln guidance. Sequentially, revenue expanded by 6.9%, led by healthier nearline demand and a seasonal uptick in consumer drives, partially offset by a decline in VIA sales (video and image applications).
- Encouragingly, STX noted that a gradual recovery within the U.S. cloud market is unfolding, underpinned by solid progress in consuming excess inventory and more stable end-market behavior. Enterprise OEM trends also displayed signs of demand stability within the U.S.
- However, China remains a headwind; STX anticipates a slower pace of recovery due to sticky challenges in the region. The Asia-Pacific market comprised 45% of STX's FY23 (Jun) revenue, higher than Americas at 41% and EMEA at 14%, highlighting the importance of a swift rebound in China. While possible stimulus news helped shares claw back from an initial sell-off, we surmise that without China undergoing a more meaningful recovery, STX could run into a wall, struggling to extend its shares' recent momentum.
- Even with the slowdown in China, STX expects margin expansion every quarter through CY24. As such, it no longer forecasted the possibility of operating in the red in the upcoming quarter, guiding to Q3 adjusted EPS of $0.05-0.45. Conversely, revenue growth will remain weak, falling by 11% yr/yr at the midpoint of STX's Q3 revenue prediction of $1.50-1.80 bln.
Bottom line, STX's results were mostly upbeat. However, concerns over China are weighing today. The stock's impressive rally over the past three months also plays a role in today's modest profit-taking. Still, we view STX's Q3 report as a bullish sign ahead of rival Western Digital's (WDC) DecQ results today after the close.
Tesla shareholders turning onto the exit ramp as growth reaches major speedbump in 2024 (TSLA)
The growth concerns that have been percolating in the background for Tesla (TSLA) are now front-and-center after the electric vehicle maker missed EPS and revenue estimates for the second quarter in a row, while warning that vehicle volume growth may be notably lower in 2024 compared to 2023. High interest rates aren't helping TSLA's cause, as reflected in its pedestrian 3.5% sales growth rate for Q4, but its own missteps are what's really turning bulls into bears as the stock's lofty valuation becomes harder to justify.
- For instance, it's becoming increasingly clear that Cybertruck -- TSLA's futuristic-looking pickup truck that launched in early December -- isn't going to spark a significant growth catalyst in 2024 as sales of Model 3 and Model Y continue to slow. Going back to when TSLA first announced the Cybertruck concept in November 2019, there was an expectation that the vehicle would help to recharge its growth rate, but the disappointing volume guidance for 2024 suggests otherwise.
- Plenty has been written and said about TSLA's price cutting strategy and its impact reared its ugly head again in Q4. Automotive gross margin (excluding regulatory credit sales) missed analysts' expectations at 17.1%, while gross margin slipped by another 30 bps qtr/qtr to 17.6% as lower ASPs more than offset a reduction in manufacturing costs.
- Making matters worse, TSLA hasn't taken its foot off the pedal as it relates to spending, even as its growth materially slows. Following a 43% jump last quarter, operating expenses were up 27% in Q4 as the company continues to ramp up investments in AI and other R&D projects.
- The end result is that operating income dove by nearly 50% yr/yr to $2.1 bln.
- Elon Musk's argument for cutting prices has centered on the premise that maintaining volume growth and market share is more important than driving short-term margins and profits higher. His reasoning is based on the notion that TSLA is transitioning into a software/AI company and that more EVs on the road translates into a greater opportunity to sell full self-driving (FSD) and other technologies to more drivers.
- However, it's unclear when -- or even if -- that transition will materialize in a way that justifies the stock's P/E of roughly 67x. During the earnings call, Musk admitted that its AI supercomputer, Dojo, which will power its FSD technology, is a "high-risk, high-payoff" type of project. That comment likely didn't inspire much confidence from shareholders.
TSLA is in "no man's land" right now as the growth curve from the Model 3/Y platform reaches maturity and as the next viable growth catalyst may be a couple years away. That next growth wave is tied to the launch of TSLA's next generation platform that will support the launch of a lower priced mass market vehicle. Musk commented that the platform was slated to launch in 2H25, but even he acknowledged that he is typically too optimistic regarding timelines. In the meantime, it seems that TSLA's growth will be stuck in neutral, likely necessitating a markdown in the stock's valuation.
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