Takeaways:
- Buckle up, we have a big week with Tesla and Apple reporting, along with IBM, Microsoft and Intel.
Aside from the usual variables around quarterly results, this week we get the much anticipated commentary from the Fed that will be shared on January 26th. Bottom line: tech stocks will likely not get the credit the deserve for strong fundamentals given the Fed’s ongoing interest rate mop-up work.
- Tesla already reported impressive deliveries of 71%^ YOY growth in December, compared to Ford down 6.8%.
The focus for Tesla earnings will be on auto gross margin, and it should be a win/win for the company. In September the metric was 28.8%, and we believe in December it will be flat to up slightly despite the component environment along with inflation pressures. If they report increasing auto gross margin, investors will become increasingly optimistic about the potential for 40% long-term auto gross margin. If margins decline sequentially, we expect investors to be somewhat understanding given the broader component environment.
- For Apple, it’s all about the supply chain.
Back in October Apple indicated there would be a greater than $6B revenue headwind in the December quarter related to the supply chain. We believe the actual headwind will exceed $8B based on our weekly lead-time checks. The good news is that Apple’s position as foundational to the ongoing accelerating digital transformation remains intact. We expect after given time to reflect on Apple’s results, investors will leave the quarter optimistic about the company’s long-term prospects. Don’t hold your breath for any commentary regarding the MR headset or ambitions in auto. We expect those new product category questions will come up on the call, and anticipate Apple will opt for the well-traveled response that they continue to look at new markets that leverage their expertise in hardware, software and services.