Editor’s Note: This article was first published on September 30, 2018.
New York
UJ Business
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1. Resuming operations: The SEC has stepped back from its scrutiny of Elon Musk, allowing him and Tesla to focus on their primary concern — the production and sale of vehicles.
On Tuesday, Tesla will submit an essential production report that will indicate whether the company can maintain and exceed its previously stated goal of manufacturing 5,000 Model 3 vehicles each week.
This report will significantly influence whether Tesla (TSLA) can achieve Musk’s promise of profitability in the third and fourth quarters.
Since its public debut, Tesla has only reported two profitable quarters. The company experienced its largest loss ever in the second quarter as it ramped up production to reach the 5,000-unit mark in the final week of June.
That seems like ages ago. In early August, Musk posted a tweet that led to regulatory issues — an ambiguous statement claiming he had “secured funding” to take Tesla private at $420 per share.
The SEC countered that he had no such assurances and sued Musk last week for misleading investors.
Following a settlement announced on Saturday, Musk agreed to step down as chairman for three years and both he and Tesla consented to pay $20 million in fines. Musk did not admit to or deny any wrongdoing in the agreement.
While the SEC lawsuit may be settled, Tesla still faces significant debt obligations. According to Goldman Sachs, $2.7 billion of Tesla’s debt is maturing this year and the next.
This underscores the importance of production and profitability targets: Tesla requires sufficient cash to service its debts.
Market sentiments have echoed investors’ concerns. Tesla bonds maturing in August 2025 were trading at 84.5 cents on the dollar last Friday, nearing a record low, while Tesla’s stock has plummeted 31% from its peak shortly following the infamous tweet.
The stock could rebound on Monday now that the uncertainty surrounding Musk’s future has dissipated. However, Wall Street continues to seek one crucial element — results.
2. Employment trends: Analysts anticipate another month of robust growth when the US Labor Department releases its jobs report for September on Friday.
Of particular importance will be the wage growth data: Will it reach 3% for the first time since April 2009? If it does, could that cause unease among investors concerned about a potentially aggressive Federal Reserve?
3. Goldman Sachs succession: Lloyd Blankfein concludes his tenure as CEO of Goldman Sachs (GS) on Monday, succeeded by the firm’s president and part-time DJ, David Solomon.
The investment bank’s stock has fallen over 10% since the beginning of the year. Solomon will face the challenge of grappling with decreased revenue from Goldman’s trading operations, which generate fees for buying and selling bonds, commodities, and currencies.
4. Earnings preview: This week is relatively quiet for corporate earnings, but notable reports will be released by Pepsi (PEP), Stitch Fix, Bon-Ton, and Costco.
For Pepsi, this will be Indra Nooyi’s final earnings report as CEO, as she hands over the reins to the company’s global operations chief, Ramon Laguarta. The stock could use a boost: it has dropped 7% this year.
5. Revamping business news: This Thursday, UJ will transition into the all-new UJ Business, focusing on the companies, individuals, and innovations propelling business forward.
This new initiative aims to cover the most significant financial narrative of our time: how technology reshapes every aspect of the global economy, compelling businesses, workers, and society to adapt swiftly or risk falling behind.
6. Upcoming events this week:
Monday: Earnings from Stitch Fix and Wage Works; David Solomon steps in as CEO of Goldman Sachs; Eurozone unemployment statistics released.
Tuesday: Earnings from PepsiCo; US auto sales data for September become available.
Wednesday: Reports from Lennar; ADP employment statistics are published.
Thursday: Earnings from Costco (COST); launch of UJ Business.
Friday: Release of the US jobs report.
