In today’s briefing:
- S&P 500 Reverses 4-Month Downtrend; Upgrading Consumer Discretionary to Market Weight
- Tesla Inc.: Capacity Expansion
- Faraday Future (FFIE) Claims It Lined Up Funding but Details Are Vague
- International Business Machines (IBM): The Databand Acquisition & Other Drivers
- Netflix Inc.: Ad-Supported Subscription To Counter Subscriber Losses & Other Developments
- Inari Medical. Company Update: Downgrade To Neutral
S&P 500 Reverses 4-Month Downtrend; Upgrading Consumer Discretionary to Market Weight
- In last week’s Compass (July 26) we discussed positive signals that we believe suggested the lows for this bear market may have already been established, or that downside is limited.
- We continue to see more evidence that supports this claim; as a result, we are upgrading our outlook to neutral.
- The SPX is reversing topside its 4-month downtrend, and the Russell 2000 (IWM), Russell Micro-Caps (IWC), and Russell 2000Growth (IWO) are each reversing topside their 9-month downtrends; the bottom’s in.
Tesla Inc.: Capacity Expansion
- Tesla had been in the process of carrying out upgrades which resulted in a lengthy shutdown of its Shanghai factory.
- The company faced its fair share of challenges but had a highly resilient quarter and managed to produce an all-around beat.
- The most significant accomplishment was setting production records in Shanghai and Fremont in June.
Faraday Future (FFIE) Claims It Lined Up Funding but Details Are Vague
- Fardaday Future (FF) announced it lined up at least $100m in funding from two investors but gave little detail. Deal is set to close on or before August 8th.
- Given that it’s a senior secured convert deal, we doubt more than $100m-$200m can be raised, despite FF’s release saying the deal has capacity for $600m.
- FF only had $222m in cash in April after -$173m in FCF in Q1. They need $1bn to last through 2023. Anything less than $600m in funding would be negative.
International Business Machines (IBM): The Databand Acquisition & Other Drivers
- As a legacy tech company, IBM may have seen a slowdown in its growth trajectory but its acquisition-led growth approach continues to work.
- With this performance, the company is maintaining its model of mid-single-digit revenue growth and a double-digit performance in IBM Consulting.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
Netflix Inc.: Ad-Supported Subscription To Counter Subscriber Losses & Other Developments
- Netflix has had a bad 2022 so far.
- The company continued with its trajectory of subscriber losses in the most recent quarter and lost another million subscribers.
- Given the current uncertainty levels, we give Netflix a ‘Hold’ rating with a revised target price.
Inari Medical. Company Update: Downgrade To Neutral
- We downgrade Inari Medical (NARI US) shares to Neutral and lower a price target to $83.00, implying a ~4% upside.
- We see limited upside to Inari Medical (NARI US) shares due to peer-group multiple compression, slow expansion in Europe and Asia, and rising operating expenses.
- Inari Medical (NARI US) completed SPO, issued 2.3M shares, and raised ~$174M to strengthen the balance sheet in 1Q22.
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