Tesla reversal and industry risk, Salesforce earnings, and DoorDash IPO

Equities 7 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Tesla had its first ugly trading session in a month yesterday together with weakness in many other speculative US technology stocks. Could this be a sign of potential reversal? We also discuss Tesla's weak home market compared to the EV adoption in the European and Chinese car market and what it means for Tesla. We also discuss Salesforce earnings and its potential Slack acquisition, and take a look at the upcoming DoorDash IPO and the announced mega merger yesterday between S&P Global and IHS Markit.


Tesla had its first ugly trading session since 9 November with the stock opening 2.8% higher but falling for most of the session ending 5.8% lower. Other stocks in the most speculative segment of US technology stocks also had a weak session suggesting a potential reversal in many of these names. The S&P 500 Index committee also announced yesterday that Tesla will enter the world’s leading index on 21 December in one move and thus not in ladder approach which was speculated as the best option given Tesla’s high market value. This will be a huge test for the market as many active portfolio managers and index ETFs will have to make trading decisions on Tesla shares.

Source: Saxo Group

The narrative on electric vehicles is centered on two strong ideas. One is that China is leading the transitioning to electric vehicles and that Tesla will become the biggest player globally. However, an article in Bloomberg News yesterday about new tougher battery standards in EU was an eye wakener to us because the graphic below shows that Europe is seeing the largest share of new passenger cars being EV almost at twice the level of China. In Q2 2020 the EV share of new cars fell in North America. This caused us to change our view that Europe’s carmakers will catch up fast with the competition and be a big threat to Tesla. In the history of consumer markets global dominant players have always got their strength from big home markets. In the case of Tesla its home market is not picking up speed in terms of adoption. We believe there is a real threat in China and Europe that Tesla could lose out as local consumers have a propensity to choose their own local brands. It is something worth considering if you are shareholder of Tesla.

Source: Bloomberg

Salesforce reports earnings and potentially Slack acquisition

Salesforce is reporting FY21 Q3 earnings tonight after the US market close and expectations are strong earnings per share of $0.75 up from $-0.13 a year ago. Analysts are expecting revenue of $5.3bn up 16% y/y a significant slowdown from a year ago when revenue growth was at 33% y/y. Maybe that is the reason why Salesforce is likely to announce the acquisition of Slack Technologies together with its earnings release. While Slack’s quarterly revenue figure is only 5% of Salesforce it is growing around 33% y/y and many potential synergies can maybe be achieved by Salesforce.

DoorDash is valued at $32bn

A flood of consumer-oriented companies from DoorDash, the largest US food delivery company, to Airbnb are planning to go public before year-end. DoorDash is indicating in filings yesterday to raise as much as $2.8bn in an IPO valuing the company at $32bn taking all outstanding shares and stock options into consideration after the IPO. The indications suggest DoorDash will set the IPO price on 8 December and start trading the following day. Given the strong Q3 results from Chinese based Meituan which is China’s largest food delivery company we expect a strong IPO for DoorDash. We wrote about Meituan’s earnings in yesterday’s equity update.

Data is the oil of the information age

Yesterday, S&P Global announced the acquisition of IHS Market in a deal valuing IHS Markit at $44bn and with IHS Markit shareholders owning 32.3% of the combined company. The acquisition is the second largest deal this year and will create a financial data powerhouse with combined revenue of $11.6bn and EBITDA of $5.8bn underscoring the profitability of delivering and owning data in the information age. It is what oil was to the industrialization of the world.
Source: Saxo Group
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide and Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.