Tesla Tears & Nio’s Next, Sonos Breaks The Silence, China’s Tech Terror
Go Home, Tesla … You’re Drunk?
Oh oh, here they come. Watch out, Tesla (Nasdaq: TSLA), they’ll chew you up. Oh oh, here they come…
The National Highway Traffic Safety Administration (NHTSA) is far from a maneater … sorry, Hall & Oates … but it is about to make Tesla’s life much more complicated.
This morning, the NHTSA announced it will investigate 11 different crashes since 2018 involving Tesla’s Autopilot or Traffic Aware Cruise Control. The investigation isn’t just for one or two Tesla models … it’s for all of them.
The NHTSA is looking at Models Y, X, S and 3 with production runs between 2014 and 2021.
The problem isn’t just that Teslas hit things while on autopilot or assisted-driving mode … it’s that they hit bright, flashy things. You know, like hazard lights, flares, construction arrow boards and orange cones and barrels?
While I’m all for giving those orange barrels hell … there’s a safer way than Tesla’s self-driving software unilaterally deciding to take barrels out. I’ve seen Terminator and read iRobot. I know how this ends…
But seriously, this isn’t a new development from the NHTSA. The organization has investigated 31 different crashes involving driving-assist systems since 2016. Tesla’s Autopilot was involved in 25 of those accidents, which resulted in 10 deaths.
Now, I can already hear you typing up that email out there:
Only 10 deaths since 2016! So many more accidents are caused by regular vehicles! Leave Tesla alone!
I hear you. I, too, know that traditional vehicles cause many more deaths. But there’s a bit of a difference we need to sort out when it comes to Tesla’s Autopilot.
You see, typical drivers don’t cruise on the interstate while in the backseat. Neither do they typically drink while driving — I said typically. According to NHTSA data, Tesla Autopilot “drivers” have been caught doing exactly these things.
Those are clearly special cases, and there probably isn’t much that either the NHTSA or Tesla can do about those morons … at least until fully self-driving systems come out. Maybe you can fix stupid?
Anyway … this doesn’t change the fact that some stupid drivers abuse Tesla’s Autopilot. And the government isn’t very happy about that at all.
That said, I think we all know how this will play out: The investigation will drag on. Tesla will fight it tooth and nail. And, in the end, the most Tesla will get is a slap on the wrist … if that.
It’s not that Tesla is “too big to fail.” It’s that the incident rate for Autopilot accidents is so low that I just don’t see this becoming anything major.
In other words, I don’t see the NHTSA investigation having much of an impact on Tesla’s operation or TSLA stock. The shares fell more than 5% on today’s news, leaving TSLA with a 24% decline from its all-time highs near $900.
If you happen to be a TSLA bull, this sell-on-the-news event could be a buying opportunity. It’ll take more than one NHTSA investigation to sink Tesla at this point.
Here’s Where This Gets Even More Interesting…
A former Tesla employee just released a brand-new innovation promising to make every EV out there instantly obsolete.
Some call this man “Employee No. 7.” Even the “Godfather of the EV Revolution.” He created the first working Tesla battery. Now he’s about to change everything again.
The Good: The Sound Of Silence
And the vision that was planted in my brain … still remains. The sound … of Google’s silence. We’re talking Simon & Garfunkel levels of silence — not that new Disturbed stuff. Get it right.
Confused? Let me explain: Back in January 2020, Sonos filed a patent infringement suit against Alphabet’s Google over the usage of Sonos technology in Google’s smart speakers.
While Sonos holds about 2,149 different patents, there were five in particular that Google uses in its devices, such as Nest home speakers, Pixel smartphones and Chromecasts. Basically, everything Google makes with a smart speaker uses Sonos’ technology.
You can see why Sonos would be unhappy with that. Well, the company was vindicated today after the International Trade Commission sided with Sonos, ruling that Google had, in fact, infringed on the company’s patents.
The official ruling doesn’t come down until mid-December, but analysts and investors are already jumping at SONO stock to get in ahead of the new patent licensing deals that should significantly boost Sonos’ revenue.
“Today, less than 5% of Sonos’ revenue comes from licensing, but believe it can become a larger portion over time as infringers cut deals with Sonos. Licensing revenue should provide further tailwinds to margins as it becomes a larger mix of overall revenue,” said Jefferies Tech Analyst Brent Thill. Thill upgraded SONO to buy with a $50 price target — a 31% premium to Friday’s close.
SONO jumped nearly 10% on the news and is on the verge of new all-time high territory. Personally, I’m intrigued by the revenue potential this ruling brings about, but I’ll have to see it in action before I take the SONO plunge. I don’t trust Google any further than I can throw it.
The Bad: Ni … Oh, No.
Nio (NYSE: NIO) is often called the “Tesla of China.” Today, it came one step closer to earning that moniker.
You see, Nio is now under investigation by the Chinese government after a fatal crash involving a Nio ES8 SUV this past week. As you probably already guessed, everyone wants to know if Nio’s driver-assist features were involved.
Like Tesla, Nio has its own self-driving package called NIO Pilot, which uses camera vision, radar and laser-enabled lidar. That said, these software packages aren’t available on every Nio vehicle, including the ES8.
Currently, there’s no word on whether the particular ES8 involved in the fatal crash had self-driving features or not. Furthermore, Nio has yet to comment on the news. But you can be sure the Chinese government will get to the bottom of this … one painful way or another.
If NIO Pilot was involved in the crash, that’s bad news for Nio … but it could also impact Intel (Nasdaq: INTC), whose self-driving division Mobileye contributes tech to NIO Pilot.
If Nio were an American company, I wouldn’t be all that worried. (See my reasoning on Tesla above.) However, this is China we’re talking about. We have no way of knowing just how hard the hammer will fall — if at all.
In short, this could be a buying opportunity for NIO bulls, but I urge you to use caution given the unknowns surrounding potential regulatory fallout from the Chinese government. It’s on a warpath lately, it seems…
That said, a better buying opportunity might be lidar tech itself — I mean, better lidar tech would keep both Nio and Tesla out of this mess to begin with. And to think that Tesla even passed on lidar tech? Please.
Almost every other car company is betting on this new tech: Audi alone is investing $16 billion … GM, $27 billion through 2025 … BMW, $35 billion… Click here to see why.
The Ugly: Workin’ For The Clampdown
Riddle me this, Great Ones: How do you make a Chinese tech crackdown even worse?
Is this a rhetorical question Mr. Great Stuff? Is a CCP clampdown not bad enough?
As Tencent (OTC: TCEHY) is finding out, if you really want to get under the Chinese Communist Party’s skin … you try and list your stock in Hong Kong, apparently. Or you make “addictive” online video games. Or you make games that go against the CCP’s official narrative of history.
Frankly, I’m not sure which of those factors landed Tencent in hot water, but China is fed up with its video game stocks … on top of its spat with Nio and countless other beefs.
Less than a fortnight ago, Tencent was accused of slinging “spiritual opium” since the CCP couldn’t stand the thought of gamemakers hoarding the attention of rapt young gamers all across China. While the Chinese media quickly walked back its opium-related comments, it clearly wasn’t done sounding off.
Today, state media sources (i.e., the CCP’s mouthpieces) reported that online games should be regulated to “ensure they don’t misrepresent history.” That is to say … the version of history the CCP agrees with. No creative license, no historical reimagining — nada. Verboten.
And I was so looking forward to that Tiananmen Square tank simulator…
Pretty much every gamemaker across the board sank today on the news, and just like past Chinese crackdowns, the sell-off quickly spread to other non-gaming stocks. Tencent’s own music entertainment division had planned to list shares on the Hong Kong exchange, but now that $5 billion listing is halted.
Honestly, my takeaway here is much the same as it was for Nio: We simply don’t know how far the CCP wants to flex its regulatory muscles in the name of saving face and maintaining the façade of control.
And if Wall Street hates uncertainty, its ire for Chinese stock uncertainty due to unpredictable government clampdowns rages like a dying sun.
It’s retail week here in the earnings confessional — hey, wait! I see you scrolling by. This is interesting, I promise.
We’ve harped on about “consumer confidence this” and “the Great Reopening that,” … but what better way to gauge public sentiment than the weekly shopping trip?
Take a look at this week’s retail roundup (and then some) in this Chart of the Week, right from our compatriots over at Earnings Whispers on Twitter:
Not only do the big-box big shots show how much the average American is spending, but both companies bulked up and bragged up their online shopping strength during the pandemic. We all know that analysts have expected the Moon all earnings season long, and if Target or Walmart can’t meet these ever-increasing digital-shopping demands … watch out below.
Up next, the retail small fry: Kohl’s (NYSE: KSS), TJX (NYSE: TJX) and Ross Stores (Nasdaq: ROST) represent the discount shopping front this week. This should be a good time for these retailers too, since their heavy focus on clothing could help earnings what with everyone re-doing their “outside world” wardrobes…
Aside from the strip mall stalwarts, Great Stuff Picks readers should keep an eye on Applied Materials’ (Nasdaq: AMAT) report this week. AMAT’s one of our totally 100% free portfolio’s biggest gains, but I’ll admit that we don’t talk about the stock as much as, say, Roku or Disney.
But this sucker’s the bedrock of the modern semiconductor market — the chipmaker’s chipmaker. Applied should have some insight on the chip market’s general malaise with its report on Thursday. Keen investors (that’s you!) will take AMAT’s report as an indicator of how much other chip-based companies will fare in their reports.
By the time you read this, we’ll know if Roblox’s (NYSE: RBLX) pandemic-propelled boom was all a big nothing like last quarter’s report hinted … or if the game platform can retain its captive audience as more kids go outside.
Though, with Reopening in flux with the delta variant’s surge … there’s a chance Roblox’s main target audience will spend a lot more of their after-school time at home going forward (womp).
John Deere isn’t my usual kinda earnings report (much to Kenny Chesney’s dismay, apparently). But farm and construction equipment is hot right now, which could bode well for DE investors if Deere’s manufacturing capabilities are up to snuff.
As for Krispy Kreme, well … it’s donuts. Where do you go wrong with that? DNUT returned to the public markets on July 2 to much fanfare, “deez donuts” jokes and ultimately valuation concerns. I’m interested to see if Krispy Kreme has any whispers of growth ebbs in its post-IPO sell-off … or if everyone’s valuation concerns were warranted.
As for Sharps Compliance? Well, this little baby’s all about disposing medical waste and biohazardous material — like that half dozen of Krispy Kremes you just polished off. The stock doesn’t get much coverage, but its dirty-work reports are fascinating nonetheless.
What about you, though? What earnings reports have you enthralled this week? Are any of your personal portfolio picks set to report? Got any earnings trades in your sights?
Let me know in the inbox: GreatStuffToday@BanyanHill.com. We’d love to hear from you! In the meantime, here’s where else you can find us:
- Get Stuff: Subscribe to Great Stuff right here!
- Our Socials: Facebook, Twitter and Instagram.
- Where We Live: GreatStuffToday.com.
- Our Inbox: GreatStuffToday@BanyanHill.com.
Until next time, stay Great!
Editor, Great Stuff