Tesla’s going private is questioned by analysts

Tesla consolidates as analysts debate if Musk should take carmaker private

Shares of Tesla (TSLA) jumped yesterday after CEO Elon Musk said he would like to see the company go private, but have since stepped into negative territory as analysts debate the idea.

 

https://stockwinners.com/blog/
Tesla’s going private is questioned by analysts, Stockwinners
While Jefferies analyst Philippe Houchois believes going private “feels like the right thing to do,” his peer at Morgan Stanley questions the feasibility of Musk actually being able to achieve that goal.

TAKING TESLA PRIVATE

Yesterday, Tesla CEO Elon Musk tweeted that he is considering taking the electric carmaker private.

 

In an email to the company’s employees, the executive explained: “Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. […] As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
Tesla gets a boost from Bud. See Stockwinners.com
Tesla’s going private is questioned by analysts

Meanwhile, members of Tesla’s board said on Wednesday that they have “met several times over the last week” and are “taking the appropriate next steps to evaluate” Musk’s desire to take the company private. Their talks with Musk, which started last week, included “discussions as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur,” the board members stated in a press release.

‘RIGHT THING TO DO’:

Commenting on the news, Jefferies’ Houchois told investors in a research note that the move “feels right” even if Musk is downplaying how supportive public markets have been. With Tesla unable to take on more debt, the analyst wonders who may fund the potential deal and end up as a new large shareholder. While the second quarter de-stressed the near-term outlook, Houchois pointed out that Tesla did not reassure about sustained demand for Model 3 at high prices and that profitability can support organic funding of investments in future products and manufacturing capacity.

He continues to think Tesla will need additional capital to fund these or risk being caught with a narrow and ageing product range within 2 years. Noting that his discounted cash flow fair value points to $300 per share, the analyst raised his price target on the stock to $360 from $250, “bridging the gap” to the $420 potential going private bid. The analyst reiterated a Hold rating on Tesla.

BUT WILL IT BE FEASIBLE?:

While Morgan Stanley analyst Adam Jonas sympathizes with Elon Musk’s argument that Tesla could be better off as a private company, he questions the feasibility of the CEO actually being able to achieve that goal.
Taking the company private would assume either that the company is on the verge of generating self-sustaining cash flows or that it can tap into a range of strategic sources of capital not previously at its disposal, said Jonas, who sees strategic value at Tesla, but thinks the “LBO math required to support [a price of] $420 is extremely aggressive.”
Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year
The benefits of being private are outweighed by the risks of added financial leverage, which could be even more strategically limiting, added Jonas, who reiterated an Equal Weight rating and a $291 price target on Tesla shares.
Meanwhile, his peer at JPMorgan raised his price target for Tesla to $308 from $195 to reflect the possibility of the company going private. However, analyst Ryan Brinkman told investors that he still believes that Tesla’s valuation based on fundamentals alone “is worth no more than $195” per share.
The analyst added that he is not as certain as CEO Elon Musk on Tesla going private, and assigns only a 50% probability to such a scenario, while reiterating an Underweight rating on the shares.

PRICE ACTION:

In Wednesday afternoon trading, shares of Tesla have dropped 1.6% to $373.63.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Amazon.com launches new delivery business

Amazon.com launches new offering to help entrepreneurs start delivery businesses

Https://stockwinners.com/
Amazon.com launches new delivery business

Amazon (AMZN) announced the launch of a new offering that helps entrepreneurs build their own companies delivering Amazon packages.

Amazon will take an active role in helping interested entrepreneurs start, set up and manage their own delivery business.

Successful owners can earn as much as $300,000 in annual profit operating a fleet of up to 40 delivery vehicles.

Individual owners can build their business knowing they will have delivery volume from Amazon, access to the company’s sophisticated delivery technology, hands-on training, and discounts on a suite of assets and services, including vehicle leases and comprehensive insurance.

Over time, Amazon will empower hundreds of new, small business owners to hire tens of thousands of delivery drivers across the U.S., joining a robust existing community of traditional carriers, as well as small-and-medium-sized businesses that already employ thousands of drivers delivering Amazon packages.

The offering provides technology and operational support to individuals with little to no logistics experience the opportunity to run their own delivery business.

To help keep startup costs as low as $10,000, entrepreneurs will also have access to a variety of exclusively negotiated discounts on important resources they’ll need to operate a delivery business.

The deals are available on Amazon-branded vehicles customized for delivery, branded uniforms, fuel, comprehensive insurance coverage, and more.

Amazon is constantly looking for hands-on leaders who think big and deliver results for our customers. These principles are very familiar to those who have served our country in the armed forces.

The company is committing $1M towards funding startup costs for military veterans, offering $10,000 reimbursements for qualified candidates to build their own businesses.

AMZN closed at $1,660.51.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tariffs kill jobs

European Union raises tariffs on Harley-Davidson to 31% from 6%

Harley-Davidson to move productions overseas to avoid tariffs

Harley-Davidson moves some productions out of U.S., Stockwinners
Harley-Davidson moves some productions out of U.S., Stockwinners

The European Union has enacted tariffs on various U.S.-manufactured products, including Harley-Davidson motorcycles (HOG).

These tariffs, which became effective June 22, 2018, were imposed in response to the tariffs the U.S. imposed on steel and aluminum exported from the EU to the U.S. Consequently, EU tariffs on Harley-Davidson motorcycles exported from the U.S. have increased from 6% to 31%.

Harley-Davidson expects these tariffs will result in an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.

Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses.

Therefore, Harley-Davidson will not raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs. In the near-term, the company will bear the significant impact resulting from these tariffs, and the company estimates the incremental cost for the remainder of 2018 to be approximately $30M-$45M.

On a full-year basis, the company estimates the aggregate annual impact due to the EU tariffs to be approximately $90M-$100M.

To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete.

Harley-Davidson maintains a strong commitment to U.S.-based manufacturing which is valued by riders globally.

Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harley-Davidson.

In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the EU countries is second only to the U.S.

Harley didn’t specify which international plants will boost output for EU markets. The company operates manufacturing facilities in Brazil, India and Australia, and is beginning production in Thailand this year.

HOG closed at $44.21, it last traded at $42.50.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

GE creates new company to develop unmanned traffic management

GE creates  AiRXOS to develop unmanned traffic management 

GE introduces new company AiRXOS, Stockwinners
GE introduces new company AiRXOS

GE (GE) introduced AiRXOS a new company helping to accelerate the safe, efficient, scalable integration of air and ground space for manned and unmanned vehicles.

AiRXOS helps government agencies, regional aviation authorities and private sector operators manage and meet the increasing demand for sophisticated and safe Unmanned Aircraft Systems operations. AiRXOS is a wholly-owned subsidiary of GE.

The Department of Transportation recently announced the UAS IPP to help government agencies, municipalities, regional aviation authorities and private sector operators manage and meet the increasing demand for sophisticated and safe UAS operations.

Of the ten pilot programs, AiRXOS was selected as a partner for three: The City of San Diego, the City of Memphis, and the Choctaw Nation of Oklahoma. AiRXOS will work with these program partners in safely demonstrating capabilities such as operations over urban settings, night operations, beyond visual line of sight, as well as developing overall UTM systems.

Drive Ohio’s UAS Center announced an investment of $5.9M for UTM research that will include both air and ground vehicles and will complement Drive Ohio’s current efforts for autonomous and connected vehicle testing along the U.S. 33 Smart Mobility Corridor. AiRXOS has been selected as a partner, along with Gryphon Sensors, CAL Analytics, and Ohio State University’s College of Engineering to implement a UTM solution for the U.S. 33 Smart Mobility Corridor. AiRXOS has also formed a collaboration with NUAIR Alliance for an unmanned testing and rating initiative that will combine NUAIR’s new National Unmanned Systems Testing and Rating capability with AiRXOS’ Autonomous Service Platform.

While NUSTAR will objectively measure UAS performance and test systems against industry consensus standards, AiRXOS will automate the processes used by commercial operators, pilots, organizations, and drone manufacturers to engage in commercial flight operations.

To support this effort, AiRXOS plans to open an office in the Syracuse, New York Tech Garden offices. To keep pace with innovation, NASA’s Technical Capability Level testing and the expansion of the Low Altitude Authorization and Notification Capability service program continue to move the industry forward.

AiRXOS is a TCL partner and has recently applied for a LAANC application in support of bringing a broad range of UAS operations safely to scale.

GE closed at $13.64.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tesla higher on Model 3 production

Tesla jumps after Musk keeps dual role, voices optimism on Model 3 output

https://stockwinners.com/blog/
Tesla jumps after Musk keeps dual role, voices optimism on Model 3 output

Shares of Tesla (TSLA) are higher as much as 4% on Wednesday morning following the company’s annual meeting in California.

At the meeting, shareholders rejected two proposals, including one that would have separated the roles of chairman and chief executive officer. Additionally, Elon Musk said the company will likely reach its goal of producing 5,000 Model 3 sedans “by the end of this month.”

SHAREHOLDERS REJECT SEPARATION OF CHAIRMAN, CEO ROLES

Tesla shareholders rejected two proposals that would have changed the company’s board, including one that would have removed CEO Elon Musk from the chairman role.

According to a CNBC report, Jiang Zhao, a shareholder who owns 12 shares of Tesla stock, brought forward the proposal to have an independent chairman, as he believes it is necessary to prevent conflicts of interest.

In May, proxy advisory firm ISS recommend that investors split the role of chairman and CEO, saying shareholders would “benefit from the strongest form of independent board oversight in the form of an independent chair.”

Shareholders also rejected a proposal to remove three Tesla board members up for re-election this year, which was brought by the CtW Investment Group.

CtW, which works with pension funds for unions, said in a letter last month that board members Antonio Gracias and Elon’s brother Kimbal Musk were too close to the CEO to ensure needed independence, while 21st Century Fox (FOX, FOXA) CEO James Murdoch lacked relevant experience.

According to Bloomberg, which viewed a copy of the letter, CtW said that “instead of recognizing the need for independent and effective board leadership, Tesla has re-nominated three directors who exemplify the company’s failure to evolve.”

‘QUITE LIKELY’ TO MEET MODEL 3 OUTPUT GOAL

At the meeting, Musk said that the carmaker’s goal of making 5,000 Model 3 vehicles per week by the end of June was “quite likely” as the car maker’s production lines were now demonstrating the ability to build 3,500 vehicles a week, Reuters reported. “This is the most excruciating hellish several months I’ve ever had… but I think we’re getting there,” Musk said.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

OTHER ANNOUNCEMENTS

Robin Ren, Tesla’s head of worldwide sales, announced at the meeting that the company intends to build its first factory outside of the U.S. in Shanghai, China, CNBC reported.

Unlike Tesla’s first U.S. factories, the company’s new “Dreadnought” factories should produce both batteries and assemble vehicles in one place.

Additionally, according to Business Insider, Musk said the company plans to reveal the Model Y next March and will likely go into production in early 2020. The report also said that the Semi will go into production in 2020 and that it will be slightly different than what was revealed in 2017 because the company has made improvements.

The Tesla Roadster will follow the same timeline for production and will have a SpaceX option package available, BI also said.

WHAT’S NOTABLE

Musk has said that Tesla plans to be profitable and cash flow positive in Q3 and Q4, tweeting in April that there is “obviously no need to raise money.”

Musk previously said that the company was not planning to raise any capital before the end of 2019. He reiterated that during the shareholder meeting and said he is still confident that Tesla will become profitable in Q3 or Q4, BI reported.

Tesla originally sought to build 5,000 Model 3 vehicles a week by the end of 2017, but later revised its target to making 5,000 Model 3 cars by the end of the second quarter.

ANALYST COMMENTARY

Citi analyst Itay Michaeli told investors this morning that while he appreciates the bull case of ramping Model 3 deliveries and Tesla achieving profitability in the second half of the year, thereby easing cash concerns and cementing the carmaker’s electric vehicle lead, he “can’t get there on risk/reward at this point.” Michaeli cut his price target for Tesla to $313 from $347 and maintained a Neutral rating on the shares.

Baird analyst Ben Kallo, who remains bullish on Tesla, said the body language at the meeting was positive, noted that shareholders approved the board of directors by a significant margin and expects management to achieve positive GAAP net income and positive cash flow in Q3 and Q4. Kallo keeps his Buy rating and $411 price target on Tesla.

PRICE ACTION

Tesla is up about 5% in early trading to $305.76.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

SoftBank to invest $2.25B in GM

SoftBank Vision Fund to invest $2.25B in GM Cruise 

 

Stockwinners.com
SoftBank Vision Fund to invest $2.25B in GM Cruise 

General Motors (GM) announced that the SoftBank Vision Fund will invest $2.25B in GM Cruise Holdings, further strengthening the company’s plans to commercialize AV technology at large scale.

GM will also invest $1.1B in GM Cruise upon closing of the transaction.

“Our Cruise and GM teams together have made tremendous progress over the last two years,” said GM Chairman and CEO Mary Barra.

“Teaming up with SoftBank adds an additional strong partner as we pursue our vision of zero crashes, zero emissions and zero congestion.”

“GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion,” said Michael Ronen, managing partner, SoftBank Investment Advisers.

“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”

The SoftBank Vision Fund investment will be made in two tranches.

At the closing of the transaction, the Vision Fund will invest the first tranche of $900M. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35B, subject to regulatory approval.

Together, this will result in the SoftBank Vision Fund owning a 19.6-percent equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.

The GM and SoftBank Vision Fund investments are expected to provide the capital necessary to reach commercialization at scale beginning in 2019.

GM (GM) Chairman and CEO Mary Barra confirmed the automaker’s plans to launch an autonomous ride-hailing vehicle in 2019.

President Dan Ammann noted that talks with SoftBank occurred over the course of several months. He said GM wasn’t looking for a partner, but found one that was “uniquely aligned” with it.

Ammann added that the Cruise team has grown to over 800 since the acquisition two years ago. He said the decision to report GM Cruise as a standalone segment is intended to enhance transparency around this part of the business.

ANALYST COMMENTS

Evercore ISI analyst George Galliers upgraded General Motors (GM) to Outperform from In Line after SoftBank’s (SFTBF) Vision Fund agreed to invest in the company’s Cruise autonomous driving unit in a deal that values the unit at $11.5B.

Galliers said he had been assigning no value to the Cruise assets before the announcement.

Under his new sum-of-the-parts valuation, Galliers applies a 6.0x multiple on GM’s core, attributes a value of about $8 per share for the Cruise assets and about 60c per share for GM’s stake in Lyft before applying a 25% discount to both of the latter. He raised his price target on GM shares to $50 from $47.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Wabtec higher on potential GE Transportation deal

Wabtec rises as analyst says buy on potential GE Transportation deal

Wabtec higher on potential GE Transportation deal, Stockwinners
Wabtec higher on potential GE Transportation deal, Stockwinners

Shares of Wabtec (WAB) are on the rise after Stifel analyst Michael Baudendistel upgraded the stock to Buy following a media report saying the company was in discussions to acquire GE Transportation from General Electric (GE).

Also commenting on the deal, Stephens analyst Justin Long told investors the transaction could be a significant catalyst for Wabtec.

POTENTIAL GE TRANSPORTATION SALE

On Friday, Bloomberg reported that General Electric was in talks to sell its century-old locomotive business to rail-equipment maker Wabtec.

The transportation unit could be worth as much as $6.8B in a sale, the report noted, adding that a deal has not been reached and talks may still fall apart. GE may also pursue an initial public offering or other strategic option for the business, sources said.

BUY WABTEC

In a research note to investors, Stifel’s Baudendistel upgraded Wabtec to Buy from Hold, while raising his price target on the stock to $99 from $75, citing Bloomberg’s report on a potential acquisition of GE Transportation.

While acknowledging that a standalone IPO or an acquisition by a machinery company are also possibilities, the analyst argued that a deal would be transformative for Wabtec.

Further, Baudendistel pointed out that he believes there is strategic rationale for the deal and the possibility improves his perspective on the reward-to-risk ratio for the shares. Wabtec would be buying the business at a cyclical low point, he contended.

Additionally, the analyst noted that Wabtec’s recent results have improved on growth in the aftermarket revenue, an area that held back 2017 results.

‘SIGNIFICANT’ CATALYST FOR WABTEC

Meanwhile, Stephens’ Long told investors in a research of his own this morning that he is “a bit surprised” by the news given the potential size of the transaction, which he estimates to be around $8B.

That said, the analyst noted he thinks it would be a “great strategic fit” primarily due to GE Transportation’s services business that features technologically advanced rail-related products.

Additionally, Long believes the deal could be “highly accretive” to Wabtec earnings per share, with his “best guess” putting the deal probability at over 50%. The analyst reiterated an Overweight rating on Wabtec’s shares.

PRICE ACTION

In Monday’s trading, shares of Wabtec have gained almost 2% to $88.98, while General Electric’s stock has advanced about 1% to $14.62.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Barron’s is bullish on GM and Delta

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy

BULLISH   MENTIONS:

Delta, GM look cheap, with growth potential – While a solid start to earnings season helped push share prices higher earlier this week, some remain deeply discounted, Jack Hough writes in this week’s edition of Barron’s. Despite Delta Air Lines’ (DAL) pessimistic valuation, consolidation has left only a handful of key players and the company faces less competition in key markets than some of its peers, the report adds. Additionally, Goodyear Tire (GT), General Motors (GM) and Lincoln National (LNC) also made the valuation cutoff, Hough says.

General Mills shares fall to ‘bargain territory.’  – General Mills (GIS) has fallen 27% so far this year and while the drop seems deserved because earnings growth has stalled, a closer look suggests sales trends are improving, thanks in part to new-product launches, Jack Hough writes in this week’s edition of Barron’s.

Cruise operators can offer ‘nice’ yields, solid dividend growth – Cruise operators, like Carnival (CCL), Royal Caribbean (RCL) and Norwegian Cruise Line (NCLH), can offer nice yields and solid dividend growth, but economic downturns can pressure payouts, Lawrence Strauss writes in this week’s edition of Barron’s. Another option for investors looking for yield among cruise operators is Walt Disney (DIS), the report added. The entertainment company has a wide variety of holdings, and while its cruise business did not account for a large portion of its $55B of sales last year, it is not insignificant either.

Tech giants may make own custom chips to get edge on one another. – There has been a tension between the world’s largest tech companies- Alphabet (GOOG; GOOGL), Amazon (AMZN), Facebook (FB), Apple (AAPL), Microsoft (MSFT), Baidu (BIDU), and Alibaba (BABA)-and the chip companies they rely on, especially Intel (INTC) and Nvidia (NVDA), Tiernan Ray writes in this week’s edition of Barron’s. While the giants buy massive quantities of Intel’s microprocessors, and Nvidia’s graphics chips, or GPUs, to power their data centers, they are also in an arms race to have the best artificial-intelligence-based machine-learning functions, the report noted, adding that there was always the possibility they may decide to buy fewer off-the-shelf parts and make their own custom chips to get an edge on one another.

 MPL valuations look cheap – Master limited partnerships’ valuations appear cheap, and U.S. energy production is thriving, lifting cash flows for pipeline firms, Darren Fonda writes in this week’s edition of Barron’s. MLP, such as Enterprise Products Partners (EPD), Magellan Midstream Partners (MMP), MPLX (MPLX), Plains All American Pipeline (PAA), could reward investors with higher yields as cash flows rise, Fonda adds.

OTHER MENTIONS

Trump’s tweets politicize U.S. markets, Barron’s says – With President Donald Trump, both politics and business appear personal as he continues his tweets aimed at individual companies, Vito Racanelli writes in this week’s edition of Barron’s. Before and after the election, he consistently aimed arrows at Amazon.com (AMZN) and at the proposed acquisition of Time Warner (TWX) by AT&T (T), the report noted. The President is not alone in singling out companies, Racanelli points out, adding that Democratic candidate Hillary Clinton also took issue with Mylan’s (MYL) price increases for its EpiPen. Maybe it is a sign of the times, but the rise of powerful social-media platforms is the key enabling factor, the report said.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tenneco to buy Federal-Mogul for $5.4 billion

Tenneco to buy Federal-Mogul from Icahn in deal valued at $5.4B

Tenneco to buy Federal-Mogul, Stockwinners
Tenneco to buy Federal-Mogul

Tenneco (TEN) will acquire Federal-Mogul (IEP) for $5.4 billion through a combination of $800 million in cash, 5.7 million shares of Tenneco Class A common stock, 23.8 million shares of Non-Voting Class B common stock and assumption of debt.

Under the agreement, Tenneco can reduce the number of shares of Class B Non-Voting common stock by up to 7.3 million shares and increase the cash consideration proportionately at the closing.

Tenneco has put in place committed debt financing to fund the transaction, which will replace Tenneco’s existing senior credit facilities and certain senior facilities at Federal-Mogul.

Upon closing, Tenneco expects a pro forma net debt-to-adjusted EBITDA ratio of approximately 3x.

The company is targeting a net debt-to-adjusted EBITDA ratio of approximately 2.5x by the end of 2019.

Tenneco expects that the transaction will generate significant value for shareholders. Upon completion of the acquisition, Tenneco will operate the combined businesses under a structure designed to begin concurrently the successful integration of Tenneco and Federal-Mogul and the separation of the aftermarket & ride performance and the powertrain technology companies.

“The strategic combination of Tenneco’s Ride Performance business with Federal-Mogul’s Motorparts business will establish a global aftermarket leader with an impressive portfolio of some of the strongest brands in the aftermarket including Monroe, Walker, Wagner, Champion, Fel-Pro and MOOG.

The powertrain technology company will be one of the largest pure play powertrain suppliers through the combination of Tenneco’s Clean Air product line and Federal Mogul’s Powertrain business, bringing together market leaders with reputations for innovation in meeting the changing needs of customers.

The combined business will offer a robust portfolio of products and systems solutions – from the engine to the tailpipe – to improve engine performance and meet tightening criteria pollutant regulations and fuel economy standards.

With its global scale, the company will drive content growth due to the demand for improved engine performance, tightening emissions regulations, light vehicle hybridization and expanded market opportunities with commercial truck and off-highway customers.”

TEN closed at $55.55. IEP closed at $59.69.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tariffs sink stocks

Boeing, others drop after China retaliates with 25% tariffs on U.S. products

Tariffs sink stocks. Stockwinners
Tariffs sink stocks.

Shares of companies including Boeing (BA) and Tesla (TSLA) dropped in Wednesday’s pre-market trading after China retaliated against President Donald Trump’s proposed penalties on Chinese goods with plans for 25% tariffs on American products, including airplanes, automobiles and soybeans.

stockwinners.com/blog
Tariffs sink stocks

BACKGROUND

On Thursday, U.S. President Donald Trump signed an executive memorandum imposing retaliatory tariffs on up to $60B in Chinese imports, according to CNBC.

The new measures are designed to penalize the country for trade practices that the White House says involve stealing American companies’ intellectual property, the report noted, adding that the tariffs will primarily target certain products in the technology sector.

Trump’s plan levies 25% tariffs on a wide range of goods — about 1,300 categories in all — and includes steel, Chinese-made solar panels, dishwashers, medical equipment and machine tools.

Shares of Alibaba (BABA), Tencent (TCEHY) and Baidu (BIDU) were under pressure following the news.

CHINESE TARIFFS

On Tuesday, China’s Ministry of Commerce announced plans to levy 25% reciprocal tariffs on critical U.S. exports, covering over 106 categories of products and impacting around $50B of Chinese imports of U.S. products.

China has targeted the largest American exports to China, airplanes and soybeans, as well as automobiles, chemicals, wheat, corn, cotton and tobacco.

People familiar with the plans tell The Wall Street Journal that many of the other goods on the list, including beef and sorghum, “intentionally affect the U.S. Farm Belt, where voters supported President Trump.”

Neither the U.S. nor Chinese tariffs will take effect immediately.

“Those who attempt to make China surrender through pressure or intimidation have never succeeded before, and will not succeed now,” Foreign Ministry spokesman Geng Shuang told reporters.

PRICE ACTION

Boeing is down 6.6%, Tesla dropped 5%, Ford (F) is down 3.4% and General Motors (GM) is down 4% in pre-market trading.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tesla falls after NTSB rebuke about fatal crash

UPDATED with Model 3 Production Data

Tesla falls after NTSB rebuke about fatal crash, CEO jokes about bankruptcy

https://stockwinners.com/blog/
Tesla falls after NTSB rebuke about fatal crash

Shares of Tesla (TSLA) are lower after the company acknowledged that its autopilot function was involved in a fatal crash that occurred with one of its vehicles and its CEO Elon Musk tweeted on April Fool’s that “Tesla has gone completely and totally bankrupt.”

With the quarter coming to an end, Tesla is expected to report production and deliveries results within a few days.

AUTOPILOT INVOLVED IN FATAL CRASH

In a blog post late Friday, Tesla acknowledged that its autopilot function was involved in a fatal crash that occurred with one of its vehicles.

“In the moments before the collision, which occurred at 9:27 a.m. on Friday, March 23rd, Autopilot was engaged with the adaptive cruise control follow-distance set to minimum. The driver had received several visual and one audible hands-on warning earlier in the drive and the driver’s hands were not detected on the wheel for six seconds prior to the collision.

The driver had about five seconds and 150 meters of unobstructed view of the concrete divider with the crushed crash attenuator, but the vehicle logs show that no action was taken.

The reason this crash was so severe is because the crash attenuator, a highway safety barrier which is designed to reduce the impact into a concrete lane divider, had been crushed in a prior accident without being replaced.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

We have never seen this level of damage to a Model X in any other crash.

Over a year ago, our first iteration of Autopilot was found by the U.S. government to reduce crash rates by as much as 40%.

Internal data confirms that recent updates to Autopilot have improved system reliability.

In the US, there is one automotive fatality every 86 million miles across all vehicles from all manufacturers. For Tesla, there is one fatality, including known pedestrian fatalities, every 320 million miles in vehicles equipped with Autopilot hardware.

If you are driving a Tesla equipped with Autopilot hardware, you are 3.7 times less likely to be involved in a fatal accident.

Tesla Autopilot does not prevent all accidents – such a standard would be impossible – but it makes them much less likely to occur.

It unequivocally makes the world safer for the vehicle occupants, pedestrians and cyclists,” the company said.

Over the weekend, Reuters reported that the U.S. National Transportation Safety Board was “unhappy” that Tesla made public information about the crash of its Model X vehicle that killed the driver last month.

APRIL FOOL’S

After teasing on Twitter that important news was coming, Tesla CEO Elon Musk tweeted on April 1, “Tesla Goes Bankrupt Palo Alto, California, April 1, 2018 — Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it… There are many chapters of bankruptcy and, as critics so rightly pointed out, Tesla has them *all*, including Chapter 14 and a half (the worst one)…Elon was found passed out against a Tesla Model 3, surrounded by “Teslaquilla” bottles, the tracks of dried tears still visible on his cheeks.

This is not a forward-looking statement, because, obviously, what’s the point? Happy New Month!”

WHAT’S NOTABLE

In a research note to investors this morning, Jefferies analyst Philippe Houchois upgraded Tesla to Hold from Underperform with an unchanged price target of $250.

The analyst noted that Tesla shares are down 32% from their September 2017 peak and that he sees a “high probability” that management and the board, when releasing first quarter unit data this week, take “more drastic action” on guidance and funding to “restore credibility.”

At the current stock price, either would be positive, Houchois contended.

The analyst believes “higher than consensus” dilution from a capital raise could be positive for the shares, if it “credibly de-risked” the Model 3 production ramp up.

Stockwinners believes this is a good place to open a position in Tesla.

MODEL 3  PRODUCTION DATA

In an email to employees today, Tesla CEO Elon Musk said the Model 3 passed a production rate of 2,000 per week in Q1, Ryan Felton of Jalopnik reports.

In January, Tesla projected it would make 2,500 Model 3s per week by the end of the quarter, Felton points out.

It has been “extremely difficult” to pass the 2,000 vehicle per week rate for the Model 3, “but we are finally here,” Musk wrote in the email obtained by Felton.

PRICE ACTION

In Monday morning’s trading, shares of Tesla have dropped 7% to $247.39.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Barron’s is bullish on Tesla, bearish on Deutsche Bank

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS:

Comcast a bargain despite risk – Comcast (CMCSA; CMCSK) has fallen from favor with investors following its the proposal to buy SKY (SKYAY) as they fear it will get into a bidding war with Fox (FOXA) and overpay for Sky, Andrew Bary writes in this week’s edition of Barron’s. Now the stock trades at a discount to rival Charter (CHTR) and yields 2.2%, he notes.

Investors may want to look at Microsoft to play tech-stock downdraft  – For the past two weeks, large-cap technology stocks have sold off on investor concerns following the data crisis at Facebook (FB), Bill Luby writes in this week’s edition of Barron’s. One collateral-damage victim has been Microsoft (MSFT), and it is “easy to argue” that the downturn in its shares is overdone, Luby contends, adding that the tech giant’s strong fundamentals, combined with good technical support for its shares just below their recent price, make the company’s stock a strong candidate for a rebound.

Oil refiners primed for profits – The outlook for companies that turn crude oil into gasoline has looked better and demand for refining is poised to grow faster than supply in the years ahead, leading to a surge in profits and share prices across the industry, Jack Hough writes in this week’s edition of Barron’s. Refiners include Andeavor (ANDV), Marathon Petroleum (MPC), Philips 66 (PSX) and Valero (VLO), the report notes.

New AI era for chip makers– Artificial intelligence is about to become a lot more pervasive as the computer circuitry to perform AI grows more prevalent, Tiernan Ray writes in this week’s edition of Barron’s. The desire to embed AI in just about anything has meant that more chip makers are racing to diffuse their designs for circuitry that processes the algorithms that drive the software, he note, adding that relevant companies spanning the semiconductor industry include Nvidia (NVDA), CEVA (CEVA), Synopsys (SNPS) and Cadence Design Systems (CDNS).

Tesla stock may rally later this year – In a follow-up article, Barron’s notes that investors have had fun following Tesla’s journey, reaping stock gains of 600% in the last five years, but some wonder if “the music is going to stop.” The key question is whether Tesla (TSLA) can raise enough cash to keep going, the report notes, arguing that Tesla should “live to fight another day” to produce cars, and may even start to turn a cash profit next year. Barron’s believes later this year, its shares will most likely rally as clouds lift.

BEARISH  MENTIONS:

New CEO may not save Deutsche Bank stock – News that Deutsche Bank (DB) Chairman Paul Achleitner has been looking for another CEO grabbed the financial industry’s attention, but just as it may be premature to organize farewell drink for current CEO John Cryan, it may also be too soon to turn bullish on the shares, Victor Reklaitis writes in this week’s edition of Barron’s. There are plenty of reasons to stay bearish on the stock and the latest escalation of tensions between Achleitner and Cryan is just “a piece of Deutsche Bank puzzle,” he adds.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tesla Model 3 named Popular Mechanics’ Car of the Year

Tesla Model 3 named Popular Mechanics’ Car of the Year

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

Popular Mechanics has named Tesla’s Model 3 as its Car of the Year.

Automotive editor Ezra Dyer said, “The demand makes sense. I try to reserve judgment on any car until I drive it, but the Model 3 sure looks good on paper.

Tesla (TSLA) claims zero-to-60 miles in the five-second range-unofficially, the first owners  are getting into the fours…

The autonomy is reliable and pleasantly novel, but I learn that it’s more fun to do the driving myself, sandbagging in the middle lane and then mashing the throttle to revel in that gush of acceleration.

With 271 horsepower, the Model 3 doesn’t quite rearrange your internal organs like a Model S, but it’s still ferocious… It’s thrilling, but the Model 3 isn’t perfect. I’d like a heads-up display, some way to put the speedometer in my line of sight.

And there are some places where you can see the cost-cutting, like in the rear trunk, where there’s no trim panel up top, just bare metal and cutouts for the speakers that would be there if you had ordered the premium sound system. But I think I could live with such compromises.

In fact, I know I can, because when I get home, I do something that I’ve never done with any of the other thousands of cars I’ve tested: I put down a deposit.”

TSLA closed at $257.78


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Volkswagen to buy back diesel cars amid German bans

Volkswagen offers to buy back diesel cars amid German bans

Volkswagen offers to buy back diesel cars amid German bans. Stockwinners.com
Volkswagen offers to buy back diesel cars amid German bans.

The Volkswagen (VLKAY) brand is starting a diesel campaign for its customers in Germany in April.

The new Germany Guarantee gives the buyers of new and year-old vehicles with diesel engines purchased from a Volkswagen dealership additional security and will keep them on the road in the event of a driving ban.

The Volkswagen Group’s successful environmental incentive has already taken some 170,000 old diesel vehicles from the road since August 2017 and replaced them with efficient and clean current models.

Approximately 120,000 of these customers have chosen a Volkswagen brand model.

The Volkswagen brand continues its effort to rejuvenate the vehicle population by offering the diesel environmental incentive with the purchase of a new diesel vehicle beginning in April.

Volkswagen’s new Germany Guarantee is free of charge and will apply to the purchase of a new or a year-old car with a diesel engine from a Volkswagen dealership from 1 April throughout 2018.

It is valid for three years from the date of purchase and offers customers who would be affected by possible driving restrictions at their home or working address the opportunity to exchange vehicles.

The affected customer will receive an offer that the participating Volkswagen dealership will buy back the original model for the current value determined by the independent institution, Deutsche Automobil Treuhand, if the customer then buys from the same dealership a new or year-old vehicle which would not be affected by driving restrictions.

The participating Volkswagen dealership will give the customer a model-dependent trade-in premium with a maximum value corresponding to the previous environmental incentive. The vehicle exchange will be dealt with the involved Volkswagen Partner and in addition via Volkswagen’s digital ecosystem at volkswagen-we.de.

The Volkswagen brand has already taken some 120,000 old diesel vehicles with Euro 1 through Euro 4 emissions standards from the road since August 2017 with its successful environmental incentive, thus making a substantial contribution to improving the air quality of German cities.

Therefore, the measure will be continued as a diesel environmental incentive for new diesel vehicles until 30 June 2018.

The previous model-dependent premiums will continue unchanged.

VLKAY closed at $38.63.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tesla in focus ahead of shareholder vote on CEO compensation

Tesla in focus ahead of shareholder vote on compensation

https://stockwinners.com/blog/
Tesla in focus ahead of shareholder vote on compensation

Shares of Tesla (TSLA) are in focus amid the upcoming shareholder vote on a proposed $2.6B compensation package for chief executive officer Elon Musk.

SHAREHOLDER VOTE

Tesla shareholders will vote on the package for Musk at a special shareholder meeting on Wednesday, Bloomberg reported.

The package, which would give Musk an unprecedented ten-figure award of stock options, is linked to Tesla meeting a number of goals and needs support from investors holding a majority of the share.

Shareholders Baillie Gifford & Co. and T. Rowe Price (TROW) have signaled they’re likely to support the plan.

PAY PLAN DETAILS

On January 23, Tesla announced a new ten-year performance award for Musk with vesting entirely contingent on achieving market cap and operational milestones.

In order to fully vest, Tesla’s market cap would have to grow to $650B, an increase of almost $600B, and important revenue and profitability goals would also have to be achieved.

Musk will receive no guaranteed compensation of any kind — no salary, no cash bonuses and no equity that vests simply by the passage of time. Instead, his only compensation will be a 100% at-risk performance award. The performance award consists of a ten-year grant of stock options that vests in 12 tranches.

Each of the 12 tranches vest only if a pair of milestones is met. To meet the first market cap milestone, Tesla’s current market cap must increase to $100B.

For each of the remaining 11 milestones, Tesla’s market cap must continue to increase in additional $50B increments.

For Musk to fully vest in the award, Tesla’s market cap must increase to $650B.

To meet the operational milestones, Tesla must meet a set of escalating revenue and adjusted EBITDA targets designed to ensure that as Tesla’s market cap grows, the company is also executing well on both a top-line and bottom-line basis.

For each of the 12 tranches that is achieved, Musk will vest in stock options that correspond to 1% of Tesla’s current total outstanding shares. If none of the 12 tranches is achieved, Musk will not receive compensation.

For vesting to occur when the milestones are met, Musk must remain as Tesla’s CEO or serve as both executive chairman and chief product officer with all leadership reporting to him.

PROXY FIRM RECOMMENDATIONS

Proxy advisory firm Glass Lewis has recommended Tesla stakeholders vote against the proposal, saying if Musk were to receive the full grant, he would own 28.3% of the car maker, Reuters reported in March.

“The cost of the grant is staggering relative to executive compensation levels among public companies worldwide,” Glass Lewis said. In addition, proxy firm ISS recommended shareholders reject the pay package, saying the “unprecedented” stock award is too rich, Reuters reported.

The award “locks in unprecedented high pay opportunities for the next decade, and seemingly limits the board’s ability to meaningfully adjust future pay levels in the event of unforeseen events or changes in either performance or strategic focus,” ISS said.

TESLA UNDER PRESSURE

Tesla has also seen executives depart the company in the last month with Susan Repo, corporate treasurer and VP of finance, leaving to take on a chief financial officer position at another firm and chief accounting officer Eric Branderiz departing for “personal reasons”.

Additionally, the company lost Jon McNeill, president of global sales and service, in February and former CFO Jason Wheeler in 2017. Tesla is also expected to report production and deliveries results for its Model 3 Sedan, which has faced challenges including quality issues and a production halt. Musk has delayed manufacturing goals several times for Model 3.

PRICE ACTION

Tesla rose 2.6% to $318.54 in Wednesday’s trading.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.