Nike blasts estimates; Tesla feels post pandemic reality

Equities 8 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  Nike shares are up 12% in pre-market trading as the sports apparel maker blasted earnings expectations last night with 17% revenue growth and good cost discipline. The company's outlook for the current fiscal year was stronger than estimated with Nike expecting low teens growth excluding currency effects suggesting healthy growth adjusted for inflation. Tesla is feeling a different vibe these days declining another 8% yesterday in an otherwise positive equity session as investors are increasingly nervous about Elon Musk's Twitter distraction, lower EV demand due to elevated electricity prices, and stubbornly high battery prices.


High expectations were no match for Nike

Expectations for Nike had steadily been increasing into last night’s earnings release with analysts increasing their price targets and expectations for margins next year. We speculated in yesterday’s podcast that the bar was maybe too high for Nike, but the US sports apparel maker proved that their business is indeed going strong for the FY23 Q2 quarter that ended in November. Nike grew revenue 17% y/y with revenue at $13.3bn est. $12.6bn and delivered EPS of $0.85 vs est. $0.65, and inventories grew 43% y/y to $9.3bn. The fast rising inventories reflect Nike’s positive outlook for the current fiscal year in which it sees revenue growing in the low teens excluding effects from currencies. The big rise in inventories also reflects constrained supply chains a year ago, and on that note, Nike says that supply chains are becoming more smooth and predictable again. While Nike surprised against expectations the sports apparel maker is not immune to the pressures on the economy and is expected gross margin to decline 200-250 basis points in the current fiscal year. Nike shares are up 12% in pre-market trading bringing this year’s decline in the share price to -30% which is significantly worse than the general market.

Nike share price | Source: Saxo

Tesla decline intensifies amid worries over Musk, EV demand, and battery costs

The biggest story right now in the market evolves around Elon Musk and Tesla. The shares tumbled another 8% yesterday to $137.80 taking this year’s decline to 61% and 55% alone this the high in September. Three months ago Tesla sounded confident on its outlook but since then more and more information is suggesting that the demand for EVs is cooling in both Europe and China amid high electricity prices and weak economies. At the same time prices remain high on the input materials for EV batteries which have forced EV makers to raise prices this year; EV battery costs rose in 2022 for the first time since 2010. If the commodity market does not cool then EV makers including Tesla might be forced to cut prices in 2023 to keep demand up to avoid unused production capacity.

Many investors have also begun questioning Elon Musk’s ability to be a good CEO for Tesla following his acquisition of Twitter which is taking up the majority of his time as the social media company is struggling to become profitable due lost revenue from abandoning advertisers and excessive financing costs due to the debt load that Musk has used in the acquisition. The recent poll of whether he should step down as Twitter CEO, which showed 58% voted yes, seems like a convenient way to take a less time-consuming role at Twitter and get back to Tesla to improve its operations and profitability. One could actually argue that it is a sign that Tesla’s operational performance is deteriorating. Based on trade flows among our client base we would argue that the net sellers are currently institutional investors while private investors are still net buyers of Tesla shares.

While Tesla shares have had a disastrous year the company is still valued at $435bn which is $190bn more than Toyota, the second most valued carmaker in the world. In the event that the share price declines 40% more to $82, Tesla would still be valued at around $261bn making it the most valuable carmaker in the world and thus priced for the biggest market share. Let that sink in. One thing is for sure, the honeymoon of the pandemic and ultra-low interest rates is over for Tesla and the new physical reality is now becoming apparent for investors.

Tesla share price | Source: Saxo

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

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. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

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

The information or the products and services referred to on this site 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 are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

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