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Saturday August 1, 2015



Tesla Delivers Mixed Quarterly Results

Tesla Motors, Inc. (TSLA), a maker of electric automobiles, announced its second quarter results on Thursday, July 31. The company reported a net loss during the quarter as the company made capital additions to its Fremont assembly plant.

Tesla generated revenue of $769.3 million during the quarter. This was nearly double the $405.1 million generated during the same period last year.

“We have had an active first half of 2014, and the rest of the year is expected to be even busier,” said Tesla CEO Elon Musk and CFO Deepak Ahuja in a letter to shareholders. “We have formalized our agreement with Panasonic for cell manufacturing at the Gigafactory and remain on track with the site selection process. In addition, we are adding new production capacity at our Fremont factory that will allow us to meet the growing worldwide demand for our vehicles. The speed at which we are executing this capacity upgrade will allow us to exceed 35,000 Model S deliveries this year. Provided that we execute well and there are no serious macroeconomic shocks, Tesla’s annualized delivery rate should exceed 100,000 units by the end of next year.”

The company generated a net loss during the quarter of $61.9 million or $0.50 per share. This was a larger loss than the $30.5 million or $0.26 per share reported during the comparable period last year. Pre-release estimates called for earnings per share to be $0.04.

Tesla has seen its share price jump considerably over the past couple years as Model S deliveries have increased and revenues have grown. However, the company is currently in a phase where it is spending heavily to update and expand its current assembly plant while at the same time looking to build a $5 billion battery factory in the U.S. Still, the company delivered a record 7,579 Model S sedans during the quarter and is preparing to launch its Model X crossover in early 2015. Following the earnings announcement Tesla’s share price fell from $223.30 per share to below $216 per share.

Tesla Motors, Inc. (TSLA) shares ended the week at $233.27.

SodaStream’s Results Fuel Buyout Rumors

SodaStream International Ltd. (SODA), a manufacturer of home beverage carbonation products, announced its second quarter results on Wednesday, July 30. Although revenues grew, doubts remain about the future viability of the company.

SodaStream generated revenue of $141.2 million during the quarter. This was better than the $132.4 million reported during the same period last year as well as the pre-release estimate of $140.6 million.

“In the U.S., soda maker volumes remained under pressure as we struggled to drive consumer demand and retailers worked through excess inventory carried over from the holiday season,” said SodaStream CEO Daniel Birnbaum. “We are lowering our U.S. soda maker sales projections for the back half of the year while we reposition our brand behind health & wellness and refine our product line and marketing message to better promote this important consumer benefit. We are confident this strategy will have a positive long-term impact on our U.S. performance.”

Net income for the quarter was $9.2 million or $0.43 per share compared to $12.9 million or $0.60 per share during the same period last year. Pre-release estimates called for $0.30 per share.

SodaStream has hit hard times in the past several months. The company’s share price has fallen 43% in the past year on lackluster holiday sales and soda machine backlogs. SodaStream’s share price has begun to rise in the past week as rumors suggest the company is seeking to go private, negotiating a buyout that would be valued at around $40 per share. Following the quarterly results SodaStream’s share price rose 10% to $32.76.

SodaStream International Ltd. (SODA) shares ended the week at $34.05.

3D Systems Results Disappoint

3D Systems Corporation (DDD), manufacturer of 3D printers and products, announced its second quarter results on Thursday, July 31. The company’s share price fell on the news as second quarter results disappointed investors.

Revenue during the second quarter increased 25% to $151.5 million. Despite the increase, revenue was below pre-release estimates calling for revenue of $162.2 million.

3D Systems President and CEO Avi Reichental had this to say about the results: “We are pleased that unit sales of our design and manufacturing printers increased 126% and helped fuel a 30% increase in materials revenue. We believe that the record order book that we exited the quarter with reflects the vibrancy of our business and our organic growth trajectory.”

Net income during the quarter was $16.62 million or $0.16 per share. Analysts expected earnings per share to be slightly higher at $0.18 per share.

3D Systems disappointing second quarter results follow on the heels of an equally disappointing first quarter. During the quarter product and shipment delays hurt revenue. 3D Systems share price got no help from Amazon’s announcement earlier in the week regarding its new 3D Printed Products store. Because of the missed results 3D Systems’ share price took a hit, falling over 10% after the earnings announcement.

3D Systems Corporation (DDD) shares ended the week at $47.93.

The Dow started the week of 7/28 at 16,957 and closed at 16,493 on 8/1. The S&P 500 started the week at 1,978 and closed at 1,925. The NASDAQ started the week at 4,451 and closed at 4,353.

Treasuries Rise on Disappointing Jobs Report

Treasury prices rose on Friday, August 1 as the July jobs report showed the U.S. added fewer jobs than expected in the month. The jobs report came after news earlier this week showed U.S. gross domestic product increased at a 4% rate during the second quarter.

The Labor Department announced that the U.S. added 209,000 jobs during the month of July, which was the lowest level since March. July’s jobs report also indicated that the unemployment rate rose slightly to 6.2% from 6.1% as labor force participation increased. Wages were unchanged during the month.

During early Friday trading the 10-year note fell six basis points to 2.50%. Yields move inversely to prices, so as yields fall prices rise. The 30-year bond yield declined two basis points to 3.29%.

July’s job numbers were especially disappointing in view of the fact that June saw an increase of 298,000 jobs. Further adding to the disappointment was the fact economists had predicted 230,000 jobs to be added during the month. Revised jobs data for May and June showed that an additional 15,000 jobs were added than previously reported.

“It’s a goldilocks report for an economy that is steadily expanding but not lifting off,” said Mohamed El-Erian, Chief Economic Advisor at Allianz in Newport Beach, California. “It will reinforce for now the Federal Reserve’s commitment to a gradualist policy approach.”

A month ago analysts believed there was a 54% chance that the Federal Reserve will raise its benchmark interest rate to 0.5%. Following the latest jobs report, the odds fell to 48%. However, it still seems likely the Federal Reserve will continue to reduce its monthly pace of bond purchases by $10 billion a month. That means the bond buying program is still on track to end in October.

The 10-year Treasury note yield finished the week of 7/28 at 2.50% while the 30-year Treasury note yield finished the week at 3.30%.

Interest Rates Relatively Unchanged

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, July 31. The results show mortgage rates once again remaining relatively unchanged from the prior week.

The 30-year fixed rate mortgage averaged 4.12% this week. This was a slight decrease from last week when the 30-year fixed rate mortgage averaged 4.13%.

This week, the 15-year fixed rate mortgage averaged 3.23%. This was a decrease from last week when the 15-year fixed rate mortgage averaged 3.26%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, had this to say about this week’s rates: “Mortgage rates were little changed this week with the 30-year fixed-rate mortgage rate at 4.12%, just a basis point lower from the previous week. Meanwhile, on Wednesday afternoon the yield on the 10-year Treasury surged as data showed gross domestic product for the second quarter at a 4.0% annualized rate, above expectations.”

The money market fund finished the week of 7/28 at 0.4%. The 1-year CD finished at 0.7%.

Published August 1, 2014

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