|Bid||50.60 x 0|
|Ask||51.40 x 0|
|Day's range||50.40 - 51.20|
|52-week range||49.20 - 65.80|
|Beta (5Y monthly)||N/A|
|PE ratio (TTM)||N/A|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
U.S. new vehicle sales in July continued to show signs of recovery from the coronavirus pandemic, as Toyota Motor Corp <7203.T> on Monday posted its lowest sales decline since the COVID-19 outbreak slammed the sector in mid-March. The rebound in U.S. auto sales since hitting a bottom in April has seen major automakers scramble to ramp up production and boost weak inventories at dealerships, especially in states where they remained open throughout the shutdowns. The rebound in sales, though, could be threatened by spiking cases in southern and southwestern U.S. states, which have increased uncertainty over the U.S. economic recovery.
Tesla valuation is “mind-boggling” — and hard to justify even in the most “bullish/imaginative scenarios”, say Bernstein analysts.
(Bloomberg Opinion) -- At the moment when so many industries are staggered by the coronavirus pandemic, investors are beating the market by putting their money in companies committed to environmental, social and governance priorities favoring transparency, diversity and sustainability.ESG is where profits are, signaling that doing the right thing increasingly is the smartest bet. The iShares exchange-traded fund investing in companies it thinks have “positive environmental, social and governance characteristics,” one of the largest of the type, produced a total return this year that is more than three times the performance of S&P 500 index.The convergence of high-mindedness and profit was noted this month by Al Gore, the former vice president, 2000 Democratic presidential candidate and Oscar-winning environmental documentarian. He told a Bloomberg conference, “It is ever clearer that sustainable technologies are cheaper and better.”For more and more companies, doing the right thing is becoming as much a business imperative as a social responsibility, especially in the market for renewable energy. Apple Inc., the Cupertino, California maker of personal computing and mobile communication devices that has appreciated 30% this year, recently unveiled its plan to become carbon neutral across its entire manufacturing supply chain and product life cycle by 2030. Nike Inc., the Beaverton, Oregon designer and manufacturer of athletic shoes and apparel, is part of the RE100 coalition of companies planning to supply all energy needs from renewable sources by 2025.“Long term, renewables could emerge stronger than ever, especially if governments integrate support for clean energy into Covid-19 economic-recovery programs,” said a report in May by the Yale School of Environment.That’s already reflected in the anticipated performance of 38 U.S.-based companies generating at least 50% of their revenue from clean-energy products or clean technology. As a group, their sales are expected to rise 9% this year, 30% in 2021 and 23% in 2022, according to data compiled by Bloomberg.By contrast, the 26 corporations in the S&P 500 Energy Index, a benchmark for fossil fuel, will suffer revenue declines of 29% in 2020, followed by growth of 11% in 2021 and 13% in 2022, according to analyst estimates compiled by Bloomberg.The phenomenon of ESG stocks outperforming the market is a long-term trend accentuated by the coronavirus. The 38 clean companies produced a 254% total return (income plus appreciation) in the past 12 months, 250% during the past 2 years and 330% since 2015. Among them, Palo-Alto-based Tesla Inc.’s 1-year return is 575%, including 130% since March when the coronavirus prompted much of the U.S. economy to shut down.Enphase Energy Inc., the renewable-energy equipment maker based in Petaluma, California, gained 199% the past year, including 27% since March. Lehi, Utah-based Vivint Solar Inc. is up 192% over the past 12 months and 107% since March, according to data compiled by Bloomberg.Traditional energy companies in the S&P 500 Energy Index lost 35%, 46% and 33%, respectively, for the 1, 2, and 5-year periods. Irving, Texas-based Exxon Mobil declined 38% during the past year, including 13% since March. Houston-based Conoco Phillips is down 30% over 12 months, including 16% since March. Kinder Morgan Inc., the Houston pipeline transportation and energy storage provider, tumbled 28% during the past year, including 25% since March, according to data compiled by Bloomberg.Since March, when the pandemic proved its virulence, ESG’s advantage over the market doubled. That’s reflected in the distance between the performance of BlackRock’s iShares Global Clean Energy ETF, one of the largest exchange-traded funds investing in renewable energy and clean technology, and State Street’s Energy Select Sector SPDR Fund, one of the largest ETFs investing in traditional energy companies. The fossil fuel crowd is getting crushed, according to data compiled by Bloomberg.Anyone who thinks that ESG investors are more lucky than smart, or a trendy cohort of woke millennials, should consider the divergence between Aramco and Tesla. Aramco, the Saudi oil giant that remains for now the world’s largest company, was valued at more than $2 trillion after its initial public offering in December. Since then, Tesla’s market capitalization quadrupled to $286 billion passing Toyota Motor Corp. to become the world’s biggest automaker. During the same period, Aramco declined 15% to $1.7 trillion, according to data compiled by Bloomberg.The gap between Aramco and Tesla narrowed $500 billion, a little more than the $467 billion value of the world’s 9th-largest company. That would be Berkshire Hathaway, created by Warren Buffett, once the world’s richest man and the avatar of value investing. He’s shown no inclination to move toward ESG. So far.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Matthew Winkler, Editor-in-Chief Emeritus of Bloomberg News, writes about markets.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Fueled by buybacks, analyst valuations, earnings expectations and IPOs, SoftBank Group Corp. shares are retracing their way back to heights last seen during the dotcom bubble 20 years ago.SoftBank shares rose 2.3% in Tokyo Tuesday to close at 6,645 yen, the highest since March 2000. The stock is up almost 150% from March.At the peak in February 2000, SoftBank reached what remains its all-time intraday high of exactly 11,000 yen. Founder Masayoshi Son has said that surge led him to surpass Bill Gates as the world’s richest man -- if only for just three days.Some now see the stock nearing those heights again, as analysts review their assessment of Vision Fund companies.“Expectations for SoftBank’s profit growth as an investment company have been rising after the success of recent IPOs,” said Tomoaki Kawasaki, senior analyst at Iwaicosmo Securities Co. His price target is 8,000 yen, the second-highest among analysts tracked by Bloomberg. Tokai Tokyo Research Center analyst Masahiko Ishino, who last week trimmed his price target to 10,000 yen, is the only analyst who rates the stock higher. Ishino has rated SoftBank shares at or above the 10,000 yen mark for more than a year.HSBC on July 22 also lifted its price target 21% to 7,430 yen. “We continue to like the risk reward outlook at SoftBank,” analysts Neale Anderson and Binnie Wong wrote. “SoftBank is executing rapidly on its share buyback and debt reduction program.”After 133% Rally, SoftBank Investors Bet There’s More AheadIn addition to share buybacks that could be worth as much as 2.5 trillion yen ($23.7 billion), what were once downsides are now advantages, as holdings in Uber Technologies Inc. and perhaps even WeWork are seen to contribute to earnings, according to HSBC. SoftBank is “for better or worse, heavily exposed to the impact of the market’s excess liquidity, and we think it may be one of the firms that benefits most in the near term,” Citigroup Global Markets analysts Mitsunobu Tsuruo and Hiroki Kondo wrote on July 21.SoftBank will report earnings on August 11. Even if the stock should reclaim 10,000 yen, Son wouldn’t now challenge for the crown of world’s richest man. But a more realistic goal is in sight -- that of Japan’s most valuable company. A share price of around 13,400 yen could see it take that title, based on Toyota Motor Corp.’s valuation.Of course, under Son’s reckoning SoftBank is already worth far more -- his shareholder value metric, the equity value of SoftBank’s holdings minus net debt, puts its worth at 12,605 yen a share.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Tesla Inc. Chief Executive Officer Elon Musk unlocked the second chunk of his moonshot pay award.The electric-car maker’s average trailing market value over six months rose above $150 billion on Tuesday, according to data compiled by Bloomberg, despite a dip in the company’s share price. That means Musk is now able to exercise an additional 1.69 million stock options, though he must wait at least five years before he can sell them.The options have a strike price of $350.02, meaning he would reap a $2.1 billion gain if he exercised and could immediately sell the shares.Musk unlocked the first tranche of the award in May, when Tesla’s average six-month market value topped $100 billion. The company’s shares have more than doubled since then, and the company is now worth more than Toyota Motor Corp., Volkswagen AG and Hyundai Motor Co. combined.Musk’s compensation package -- the largest corporate pay deal ever struck between a CEO and a board of directors -- includes 20.3 million options, split into 12 tranches, that could yield the founder more than $50 billion if all goals are met, according to Tesla’s estimates.A representative for the company didn’t respond to a request for comment. Tesla shares rose 1.1% at 12:36 p.m. in New York trading Wednesday, taking this year’s gain to 279%.For Musk, 49, to unlock the third tranche, Tesla must reach a six-month average market capitalization of $200 billion, and either post revenue of $35 billion or $3 billion in adjusted earnings before interest, taxes, depreciation and amortization, over four consecutive quarters.His latest award will boost his fortune to $74 billion on the Bloomberg Billionaires Index.(Updates share price in sixth paragraph and net worth in final paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Tesla Inc's rapid rise to become the world's most valuable carmaker could mark the start of a new era for the global auto industry, defined by a Silicon Valley approach to software that is overtaking old-school manufacturing know-how. Tesla's ascent took many investors by surprise. Daimler, which bears the name of the man who invented the modern car 134 years ago, bought a nearly 10% Tesla stake in May 2009 in a deal which provided a $50 million lifeline for the struggling start-up.
Toyota Motor Corp will make 2% fewer vehicles globally in August than originally planned, the Japanese automaker said on Tuesday, as output recovers gradually from a steep drop because of the coronavirus pandemic. The company said it aimed to make 15,000 fewer vehicles than its initial plan, which was around 750,000, according to Reuters' calculations. As Japan fears a second wave of infections spreading from the capital, one Toyota employee working at its headquarters has tested positive for coronavirus since developing symptoms earlier this month, the company said on Tuesday.
(Bloomberg) -- Deep in the electric-vehicle industry’s supply chain is a little-known Japanese manufacturer that makes a seemingly mundane, but essential, device: coil-winding machines.If the motor is the heart of an EV, then coils in turn are the heart of the electric motor. Odawara Engineering Co., founded 70 years ago as a supplier for appliance makers, is an expert in the making the dense loops of wire that go into those motors. Tesla Inc., manufacturer of the Model S and Model 3 sedans and most recently the world’s most-valuable automaker, is one of its biggest customers.Although the coronavirus pandemic has depressed global auto sales, BloombergNEF predicts that economies will speed up adoption of EVs as some countries choose to bolster funding for low-emission cars and infrastructure. The global market for coil-winding machines is projected to expand at 10% annually and will reach $1.3 billion in 2024, according to Global Info Research.“We have to keep making our machines better,” said Masahiko Hoshina, vice president at Odawara Engineering. “Our clients can’t win if they can’t differentiate their products.”Electromagnetic coils interact with magnets to turn electric energy into motion, the basic principle behind the motors that power everything from drills to commuter trains. The shares of Odawara Engineering jumped 21% on Monday. Located in Odawara, a city about 90 kilometers (56 miles) west of Tokyo, the company’s prime business during Japan’s postwar economic boom was building coil-winding machines for makers of refrigerators and air conditioners. Apart from Tesla, the company also counts Toyota Motor Corp. and Nissan Motor Co. among its customers. In 2018, Tesla made up 12% of Odawara Engineering’s sales, but in 2019 that probably slipped below 10%, the threshold for reporting such figures.Robust demand for Odawara Engineering’s machines means it will probably keep its outlook intact for the current year. The company maintained its forecast for operating profit of 700 million yen ($6.5 million) and revenue of 14.5 billion yen intact when it reported results in May, as the Covid-19 outbreak shuttered economies across the globe.“The shift toward electrification and automation won’t change” even during the pandemic, said Akihiko Kawazoe, an analyst at Toyo Securities. “The company probably won’t be impacted by the coronavirus as much. Its sales will likely be in line with its outlook.”Odawara Engineering’s Hoshina said the company’s backlog for coil-winding machines has increased since December, and he said the manufacturer is now focused on cutting costs. Bigger companies in the sector are buying smaller ones, and competition is becoming more global, he said.In 2018, Germany’s Schaeffler AG bought Elmotec Statomat GmbH & Co., a winding technology company. ABB Ltd and Thyssenkrupp AG have joined CWIEME, a global trade and expo group for coil winding and electric motors. Odawara Engineering also competes with Tana Automation Co., Nittoku Co. and China’s Changzhou Jinkang Precision Mechanism Co.In order to fit more wire into motors, Odawara is working on “hairpin” winding machines. Instead of round wires, square-shaped wires are used to pack more into electric motors, improving their efficiency and performance. Denso Corp. was among the pioneers in developing hairpin-winding technology.Even though the market is getting bigger, Odawara Engineering will focus on developing innovations instead of rushing to add capacity, according to Hoshina. Because the machines are complicated and made by hand, merely adding more workers wouldn’t work, he said.“We plan to grow gradually by choosing our clients,” Hoshina said. “By looking at which clients and what motors are promising.”(Updates with stock climb. A previous version of this story removed an erroneous reference to a share move.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Here's why I decided to cash in on some of my Tesla stock. Shares of Tesla are up a dizzying 261% this year and nearly 500% over the past 12 months. It's also now light years ahead of other leading car manufactures like Ford (NYSE: F), GM (NYSE: GM), and Fiat Chrysler (NYSE: FCAU).
(Bloomberg) -- During a series of Cisco Systems Inc. online all-hands meetings on race in early June, some workers posted comments in message channels that other staff and company management said were demeaning to Black people, exposing racial divisions at the Silicon Valley tech giant and leading to the dismissal of a number of people.During the first videoconference on June 1, following the killing of George Floyd by Minneapolis police, Chief Executive Officer Chuck Robbins spoke with Ford Foundation President Darren Walker, who is Black, and Bryan Stevenson, a Black lawyer and author who founded the Equal Justice Initiative, in front of 30,000 employees. The conversations about race continued in subsequent online global staff meetings.“Black lives don’t matter. All lives matter,” one worker wrote in the comments during one of the virtual all-hands meetings, according to screen shots obtained by Bloomberg. Another said the phrase Black Lives Matter “reinforces racism” because it singles out one ethnic group. “People who complain about racism probably have been a racist somewhere else to people from another race or part of systematic oppression in their own community!” a third worker wrote in the chat section visible for all those online.Cisco, the world’s largest networking company, said it fired “a handful” of workers for inappropriate conduct because it “will not tolerate” racism. Bloomberg News wasn’t able to confirm the identities of all the fired workers so chose not to name any of them.Floyd’s death in late May under the knee of a Minneapolis police officer re-energized the Black Lives Matter movement and prompted a nationwide reckoning over the role of race in American life. Many technology companies, including Cisco, responded by affirming their support for equal rights and opportunities for Black Americans, donating to groups leading those efforts and educating their workforces on the struggle for racial equity.Internal BacklashExecutives have publicly positioned themselves against racism, but some workers inside these companies are chafing at the new focus on race. The incident at Cisco is just one example of a company facing an internal backlash to its support for racial justice.The conflict has intensified questions about how these largely forward-thinking companies should manage employees with differing views on race. While Cisco fired some workers, other tech companies facing dissent, such as Microsoft Corp.’s LinkedIn and HashiCorp Inc., have taken different approaches such as increased employee training. Automaker Toyota Motor Corp. dismissed U.S. workers involved in a video that mocked Floyd’s death.“Employers should be striving for zero tolerance when it comes to racism and discrimination, period,” said Kristen Clarke, the president and executive director of the Lawyers’ Committee for Civil Rights Under Law. “The protests we’ve seen in the streets have become part of our new normal and will eventually make their way inside workplaces if employers fail to meet the moment.”‘Heartbreaking’Cisco said 237 of 10,400 comments made during the June 1 videoconference objected to what was being presented or disagreed that the meeting should even be taking place. Most of the messages expressed praise for management, making the minority of reactionary posts stand out and sparking responses from other staffers. The posts, written while Robbins was announcing a $5 million donation to groups combating racism, shocked some executives.“I just felt sad to see it,” Francine Katsoudas, Cisco’s executive vice president and chief people officer, said in an interview. “I felt a ton of empathy. I knew that for the African-American and Black employees that were in the meeting, that it was heartbreaking to see that.”After the first meeting, Katsoudas and her team discussed the comments so they could address what went wrong. The following week during a worldwide videoconference with staff, she read some of the most offensive posts and explained what the San Jose, California-based company considered legitimate debate.“You have a framework where red absolutely is crossing the line,” Katsoudas said. “But if someone has a question or they don’t understand something, there’s a way for them to ask that question. We went through and just placed things on that spectrum.” In 2019, 3.8% of Cisco’s U.S. workforce and 2.2% of leaders and people managers were Black, according to the company’s diversity report.“A few” employees who had written some offensive posts during the video meetings sent notes acknowledging their mistakes and said they were learning, Katsoudas said. But the remarks remained seared in the minds of some Black employees, who were shocked by the audacity of the display.“Wow…and these people work at Cisco?” one outraged employee wrote. “If they are bold enough to say those things at work for all to see, imagine what is said behind closed doors.”Several employees said Cisco was guilty of hypocrisy because it wanted to silence those who disagreed with the movement to improve Black lives. “No place for contradictory opinions or feelings,” one wrote. “Wow. This is my first and last comment, then.”LinkedIn, a social network for professionals, also held an all-employee meeting about racism last month that ended up mired in bitterness, an event that was reported earlier by the Daily Beast. The company had an anonymous comment section, which some workers filled with vitriol against Black people. Among the posts were those saying Black people weren’t hired as much because they weren’t qualified; that LinkedIn was trying to foist White guilt on workers; and that law-enforcement killings of Black people weren’t important because more African-Americans were murdered by members of their community.The meeting devastated many Black employees, who were outraged by the remarks and became suspicious of some of their White colleagues, according to people familiar with the situation. Since the meeting, some Black workers at LinkedIn have been angered by what they see as a failure by senior executives to adequately respond to the incident, said the people, who weren’t authorized to speak publicly about the internal communications.Executives at LinkedIn didn’t seek to unmask those making the offensive statements because they had pledged anonymity for the online comments section to create a “safe space” and felt they needed to honor that pledge, a spokeswoman said. LinkedIn’s leaders also suggested the incident was the result of a few bad apples rather than any larger issues with the culture at the Mountain View, California-based company, the people said. LinkedIn has one Black executive in its C-suite, Chief People Officer Teuila Hanson, who joined in June. The company’s workforce is 3.5% Black -- in line with its tech peers -- according to its most recent diversity report.After the meeting, LinkedIn CEO Ryan Roslansky said the display was “appalling,” apologized to employees and promised anonymous feedback wouldn’t be allowed in future virtual gatherings.Building AccountabilityThe spokeswoman pointed to other subsequent executive blog posts for the company’s response. Chief Marketing and Communications Officer Melissa Selcher said in June that LinkedIn would redouble efforts to diversify its people managers, teach employees through a companywide curriculum and develop an “accountability framework.”“We will do the hard work to build an anti-racist culture at LinkedIn, hiring and growing employees from under-represented groups and investing in a diverse and inclusive environment where all talent thrives,” Selcher wrote in the post.The company said it has donated $500,000 to the National Urban League, Southern Poverty Law Center, NAACP, Joint Center for Political and Economic Studies and other groups that work on advocacy and economic justice for the Black community. LinkedIn is also matching employee donations of as much as $15,000 to these types of organizations.The company is soliciting feedback from employees on what it should do next, the people said.Even before Floyd’s death, some tech companies had been forced to deal with contentious internal debate about gender, race and politics. Alphabet Inc.’s Google fired engineer James Damore in 2017 after he wrote a memo claiming the internet company was an ideological echo chamber that discriminated against men in favor of less talented women. Pundits such as Tucker Carlson of Fox News, then-Republican U.S. Representative Dana Rohrabacher and media outlets including Breitbart News came to Damore’s defense, pointing to the dismissal as an example of the company’s political bias against conservatives.Higher ExpectationsNow, with greater focus on issues facing the African-American community, Black tech workers have higher expectations for their employers. HashiCorp Inc., a software startup valued at more than $5 billion, recently announced a donation pledge to the Minnesota Freedom Fund, which gives bail money to low-income people awaiting trial, and the Southern Poverty Law Center in response to protests against policy brutality and racism in May and June. A vocal minority of its 1,000-person workforce complained in memos to human-resources executives, saying the company was supporting “looters and rioters,” according to a person familiar with the matter. Many other staffers told executives in written messages and calls that they wanted HashiCorp to go even further in support of Black lives, said the person, who wasn’t authorized to speak publicly about the situation.“Overwhelmingly, our employees have been supportive of the company’s actions and donations of support to the Black Lives Matter movement,” a HashiCorp spokeswoman said in a statement. “We heard from a couple of employees who expressed their disagreement through internal private channels. While we understand that some employees might have differing opinions, we stand by our actions.”As this debate plays out at their workplaces and across the country, some Black tech employees have been left feeling adrift -- unwanted by some colleagues, unsupported by some employers.“We still have work to do as a nation,” one Cisco employee wrote on an internal message board seen by Bloomberg. “I pray my daughters have a better world to live in soon.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- It was sold as an all-or-nothing moonshot into space, the boldest pay package in corporate history.Now, with Tesla Inc.’s stock on a seemingly unstoppable rise, Elon Musk is poised to collect the second tranche of his pay award, worth $2.4 billion.Barring a sudden drop in the electric-car maker’s shares, the final performance threshold tied to market value should be met in a matter of days. That would unlock 1.69 million stock options, yielding Musk the 10-figure sum if he were to exercise and immediately sell the shares.The remarkable payout follows an equally remarkable ride for Tesla, whose shares have more than quadrupled this year and ballooned Musk’s net worth to $70.5 billion, making him the seventh-richest person on the Bloomberg Billionaires Index. The automaker is currently worth more than Toyota Motor Corp., Volkswagen AG and Hyundai Motor Co. combined.Read more: Elon Musk Soars Past Warren Buffett on Billionaires RankingThe rally has left Wall Street analysts struggling to make sense of the firm’s valuation, which topped $300 billion on Monday. Some have focused on the company’s work to improve batteries or the prospect that it may soon start selling cars in India.Tesla is scheduled to release second-quarter results July 22. If it reports a profit, it would be the fourth consecutive such quarter -- a milestone needed to be considered for inclusion in the S&P 500 Index.Ambitious TargetsMusk, 49, has never accepted a salary, with his pay instead consisting of option awards that he can collect only if the California-based company meets ambitious targets.The most recent iteration, unveiled in early 2018, was the largest-ever corporate pay deal struck between a company’s board and its chief executive officer. It includes 20.3 million options, split into 12 tranches, that could yield Musk more than $50 billion if all goals are met, according to Tesla’s estimates.Getting all of it, however, is far from certain. Each tranche is tied to specific targets for revenue, adjusted earnings before interest, taxes, depreciation and amortization, as well as Tesla’s average trailing market capitalization over 30 days and six months. The first market-value threshold was set at $100 billion, with the others following in $50 billion increments.Tesla reached its first milestones for sales and Ebitda -- $20 billion and $1.5 billion, respectively -- last year. And its 30-day market value average has been well above the $150 billion threshold for some time. Once the six-month average exceeds that level, Musk will claim the 1.69 million options and can exercise them at will.Musk said on Twitter last week that he could cash in on some of his stock eventually to further the mission of his other most high-profile company, Space Exploration Technologies Corp.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
One of the most mysterious stocks on the market these days is Tesla (NASDAQ: TSLA). Let's see if we can sort through all the contradictions and figure out whether Tesla's stock is a buy right now. With Tesla, though, there's a problem: The company hasn't posted an annual profit in 10 years, and only began generating positive free cash flow in the third quarter of 2019.
Amid the coronavirus mayhem, which has caused motor show schedules go haywire, automakers are now aggressively switching from in-person reveals to online events.
(Bloomberg Opinion) -- It doesn’t take much imagination to see the Federal Reserve supporting the stock price of Apple Inc.The central bank’s Secondary Market Corporate Credit Facility recently released details about its “Broad Market Index,” which is a roadmap for which individual bonds it will buy for its portfolio after changing the rules to avoid forcing issuers to certify they’re in compliance with the Coronavirus Aid, Relief, and Economic Security Act. Just looking at the 13 companies with weightings of at least 1%,(2)which collectively make up almost one-fifth of the index, a few things stand out. First, there are six automobile companies, with subsidiaries of Japan’s Toyota Motor Corp. and Germany’s Volkswagen AG and Daimler AG as the three largest issuers overall. In fourth is AT&T Inc., the largest nonfinancial borrower due in no small part to its $85.4 billion takeover of Time Warner Inc. Then there’s Apple. As a reminder, it’s the largest U.S. company by market capitalization at $1.57 trillion, edging out Microsoft Corp. and Amazon.com Inc. Its shares have easily rebounded from the selloff caused by the coronavirus pandemic, rallying 24% so far in 2020. Yes, Apple has about $100 billion of debt outstanding, but it’s also known for having one of the largest cash piles in the world. It’s so big, in fact, that the company could repay all its obligations and still have roughly $83 billion left over.With so much cash, that naturally raises the question: Why does Apple take on debt in the first place?In each of Apple’s past three dollar-bond sales, in November 2017, September 2019 and May, the company said it would use proceeds at least in part to repurchase common stock and pay dividends under its program to return capital to shareholders. In total, the company has doled out more than $200 billion since the start of 2018. It’s easy to see why company leadership would see it as too cheap not to borrow. Apple has the second-highest investment-grade credit ratings from Moody’s Investors Service and S&P Global Ratings, allowing it to issue $2.5 billion of 30-year bonds in May that yielded just 2.72%. Its $2 billion of three-year debt, within the Fed’s maturity range, priced to yield less than 0.85%.Luca Maestri, Apple’s chief financial officer, said during the last quarter’s earnings call that the company has more than $90 billion in stock buyback authorization left, adding that it plans to continue the same capital allocation policy going forward.Obviously, cash is mostly fungible for large enterprises, and any number of American companies in recent years surely issued bonds for reasons other than buybacks and also repurchased shares. Goldman Sachs Group Inc. estimated some $700 billion of shares were acquired by U.S. companies in 2019, which would make them the biggest net buyer of equities.Still, Apple openly using debt sales to help finance share repurchases puts the Fed in a somewhat awkward position. Chair Jerome Powell has consistently framed questions about its secondary-market facility in the context of supporting the central bank’s full employment mandate. Workers are “the intended beneficiaries of all of our programs,” he said in a hearing last month. It’s possible Americans “are able to keep their jobs because companies can finance themselves.”And yet, the Fed’s secondary-market facility comes with no strings attached. In fact, as I noted last month, its maneuver to create Broad Market Index Bonds circumvented the CARES Act requirement that any company must have “significant operations in and a majority of its employees based in the United States.” Rather than focus on the American worker, the stated goal is to “support market liquidity for corporate debt,” and, by extension, keep borrowing costs down for creditworthy firms. So there’s every reason to expect that Apple can and will issue bonds again in the near future, at an even cheaper rate, to fund stock buybacks and dividends. That, in turn, would most likely support share prices.That shouldn’t sit well with many people. Even President Donald Trump, who has used the stock market as a barometer of his economic policies, has signaled a preference for capital projects over buybacks. On March 20, just before the S&P 500 Index fell to its lowest level of the Covid-19 selloff, he lamented that companies used the money saved from his 2017 tax cut to repurchase shares rather than build factories. He said at the time that he would support a prohibition on buybacks for companies that receive government aid.“When we did a big tax cut and when they took the money and did buybacks, that’s not building a hangar, that’s not buying aircraft, that’s not doing the kind of things that I want them to do,” Trump said. “We didn’t think we would have had to restrict it because we thought they would have known better. But they didn’t know better, in some cases.” The Fed’s strategy for buying corporate bonds is passive enough that few would equate it to receiving direct assistance from the federal government. The same can’t be said about the central bank’s Primary Market Corporate Credit Facility, which as of last week is open for business. Companies that want to place bonds directly with the Fed must certify that they have “not received specific support pursuant to the CARES Act or any subsequent federal legislation” and “satisfy the conflicts-of-interest requirements of section 4019 of the CARES Act.” As my Bloomberg Opinion colleague Matt Levine described in detail last week, there’s a huge amount of paperwork for issuers, and the Fed has the right to demand its money back if the forms are wrong and companies use funds for unapproved reasons.In all likelihood, these constraints will turn almost every company away from the Fed’s primary-market facility. Instead, finance officers will reap the benefits of the central bank’s broad secondary-market interventions to issue new debt to private investors at rock-bottom rates and with no such rules, as they have for the past three months. And Wall Streeters will be happy with business-as-usual in the credit markets.To put it plainly one more time: The Fed didn’t have to loosely interpret the law to create this index of corporate debt. It was already following through on its pledge to buy exchange-traded funds and had a system in place for companies to become eligible for individual purchases. It chose this third route, encouraging headlines like “Buying Corporate Bonds Is Almost Easy Money, Strategists Say.” What could go wrong?Now that it’s scooping up individual bonds issued for share buybacks without any stipulations, policy makers should be asked again why this program is the right way to go about supporting the recovery. The truth is likely that corporate America needs low-cost debt to survive. Apple and its shareholders are more than happy to tag along for the ride.(1) The Fed's facility has not yet purchased debt from all the companies in the index, at least according to its disclosure, which only covers the$429 million in bonds it bought on June 16 and 17. Its largest purchases were Comcast Corp., AbbVie Inc. and AT&T Inc.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Back when Tesla Inc. delivered 95,000 cars to customers during the spring quarter of 2019, the stock price was languishing at about $235 and Elon Musk’s electric car company was valued at “only” $40 billion. Fast forward a year and the shares are now priced at more than $1,200. With a market capitalization of $224 billion, Tesla has surpassed Toyota Motor Corp. as the world’s most valuable automaker.Yet in the second quarter of 2020, Tesla delivered 91,000 vehicles — about 5% fewer than the same period last year. That’s pretty underwhelming for a company whose fans view it as a fast-growing technology company in the mold of Amazon.com Inc., rather than a sluggish metal-bashing carmaker. So how is the massive recent jump in its market value justified?In fairness, it shows resilience to sell this many cars when the company’s main California plant was shut by the pandemic for much of the spring period. Doubtless, Tesla’s new Shanghai plant picked up the production slack, which suggests the expense and effort of getting that China factory up and running was worth it. The launch of Tesla’s new Model Y crossover vehicle will have helped. Ford Motor Co. and General Motors Co. both saw their U.S. deliveries decline by a third in the same quarter. Nevertheless, Tesla’s stock market acolytes pushed the shares up another 8% on Thursday, adding $16.5 billion to the market value. Such exuberance is hard to understand. Musk’s company sold 7,650 more vehicles than analysts expected during the second quarter, and the stock price jump equates to about $2 million of added shareholder value for each of those additional sales. This seems a little excessive given that a Tesla Model 3 sells for less than $40,000, and the profit margin on those cars is pretty slim. The shareholder reaction makes even less sense when you consider that Tesla investors aren’t really meant to buying the stock because of the company’s current sales, which are less than 4% of Volkswagen AG’s. Rather, the investment case is a long-term one: that it will come to occupy a dominant position in clean transport and energy in the years ahead. That explains why the shares trade at 320 times its analyst-estimated earnings this year. Viewed through this lens, Tesla’s ability to shift a few thousand extra cars in recent weeks shouldn’t matter so much for the valuation. Investors’ tendency to overreact to Tesla news made more sense when its survival was open to doubt. A year ago it was laying off workers, U.S. sales were slowing and its retail strategy was confused. Senior staff kept heading for the exit. The company was burning through cash and ran pretty low on financial fuel. It had just $2.2 billion of cash in March 2019, compared with more than $8 billion now.But subsequent evidence that Tesla can sell cars for more than it costs to produce them has transformed the mood — and with it Tesla’s stock price.Instead of “killing” off Tesla, the tepid electric offerings of established carmakers such as Audi and Mercedes have only underscored the quality of their rival’s battery and powertrain technology (the same can’t be said of Tesla’s build quality). Volkswagen’s software problems with its forthcoming ID.3 electric vehicle suggest catching Tesla won’t be straightforward, even with the Germans’ vast resources.Tesla’s stratospheric valuation appears to have become self-reinforcing. Should it require more money to fund its roughly $9 billion of capital expenditure over the next three years, it can raise it from shareholders without worrying about diluting them too much.Similarly, holders of more than $4 billion of convertible bonds that Tesla issued to fund its expansion should be happy to convert them into stock, rather than demand cash repayment, taking some of the pressure off the company and its balance sheet. Still, Tesla’s valuation remains impossible to justify by any standard metrics. Analysts’ average price target is more than 40% below the current level. Even Musk has suggested that the share price, which has almost trebled since the start of 2020, is too high — although, as with his taunting of the U.S. Securities and Exchange Commission and his comments about “fascist” lockdowns, it’s usually better to tune out what Musk says and focus on his actions instead. The skeptics might have more faith in Tesla’s new position as the leader of the automaker pack when Musk stops his provocations and his shareholders stop getting giddy over modest good news.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Marketing research firm Kantar and advertising giant WPP (NYSE: WPP) have released their 2020 Top 100 Most Valuable Global Brands report, and Tesla (NASDAQ: TSLA) is climbing the ladder. The electric-vehicle maker's brand value has jumped 22% versus 2019, according to the report. While Tesla's market capitalization has now surpassed Toyota's (NYSE: TM), the Japanese automaker still leads the auto category for overall value.
In 10 years, Tesla has gone from public market newbie to the most valuable automaker in the world by market value. The electric automaker had long since passed the valuations of Ford and GM, and in January became the most valuable U.S. automaker ever when its market cap hit $81.39 billion. Tesla shares popped Wednesday after the market opened, rising nearly 4% to $1,129.18 — hitting a new 52-week high.