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Major Risks for Tech Giants: Tesla

Tesla is unique in terms of its share price. TSLA stocks rallied long before the company established the production of viable and steady electric vehicles (EV) and also thanks to the reputation of its leader Elon Musk. It is true that Tesla sometimes misses its mark and deadlines to launch new models and products but it seems that the crowd invests in Tesla not for its hit-and-run strategy but because of their belief in Musk’s ability to transform our everyday life in the long run.

Tesla stocks are trading 60% off their peak prices thanks to the market correction that has been squeezing the market since the end of 2021. Nevertheless, market participants are discussing some drivers that may hit the company’s business. For example, lower gasoline prices may hamper EV sales. It is true that Americans are now paying around $3.6 per gallon compared to $5 a few months ago. But this driver is largely exaggerated as gasoline prices is not the major reason for someone to buy an electric car. A move towards green energy and minimising carbon footprints is not a short term affair, but a sustainable long-term trend that is supported by governments, including the United States and China. Besides. oil producers forecast global demand will outweigh the supply side over the coming years while also betting on higher prices of fuel. So, no short-term movements of gasoline prices would affect EV buyers, as well as TSLA stock buyers.

The more serious issue is the declining prices for Tesla’s second-hand EVs. Tesla used cars are now 15% cheaper after a summer peak. If this downtrend is sustained pressure on sales of new model could mount. Tesla is planning to increase EV’s quarterly production to 500,000 by the end of 2022 and it is likely to increase production further after launching new production facilities in Berlin and Austin. But Tesla is not a mass market. So, Tesla fans are unlikely to pay much more to get a brand-new Tesla.

The Most Generous Corporates: eBay

eBay stocks are trading 50% off their peak prices despite significant progress in key businesses that increase the possibility of an increasing turnover of the auction platform. The dividend yield of the company is at 2.2%, while its buyback yield is at an impressive 24.4%. So, the overall reward for investors is at 26.6% in 2022, a record among public corporates. eBay has bought back shares for $5.3 billion during the last four quarters. So, outstanding shares have been reduced to 551 million from 685 million a year ago.

The company is actively developing collectable trading, including an acquisition of TCGplayer, a marketplace where enthusiasts exchange their collectables like Pokemon, Magic: The Gathering and others. The most important service that the platform provides is guaranteed authenticity of the collectables that ensures the buyers will not be subject to scams and also protect sellers from any malicious fraud. eBay has recently made this service available for jewellery above $500.

The company has published strong forward guidance for Q4 2022 with turnover at $17.8 billion, revenues at $2.46 billion, and EPS at $1.06. The EPS in the Q4 2021 was at $1.05. So, considering the tense situation in the retail market this year, any figures above record values of 2021 should be considered an achievement. eBay stocks will be able to recover rapidly to their peak prices once the market reverses to the upside, and that would mean 100% profit from the current values.

Major Risks for Tech Giants: Apple

Apple stocks have had a very impressive performance amid a clearly bearish market while losing only 20% of their peak values. However, investors should be prepared for elevated turbulence in these stocks considering the situation in China.

China’s zero-tolerance policy to COVID-19 led to a massive exit of employees from Zhengzhou city plant amid fears over tightening curbs. Over 200,000 workers are rumoured to have left the plant. If this is true, the production of iPhone 14 Pro and iPhone 14 Pro Max would be very complicated with no clear outlook on when it could be resumed. The delivery delay shown on Apple’s website has already hit six weeks. Americans who ordered the brand new IPhone for Thanksgiving Day will only receive it for Christmas now. Meanwhile the last two months of the year are very valuable for any mass-market company in terms of holiday sales.


Apple is planning to move iPhone production to India. But that would require years. The company has already invested $75 billion in the Chinese market and now this investment may be at risk as the ruling Communist party in China may put a local ban on the sale of Apple products. China is the third largest market for Apple with the United States at the first place with $153 billion and Europe at the second with $95 billion. Wall Street is expecting Apple’s earning to go up by five percent over the next three years. So, any troubles with production in China may alter these forecasts. 

The Most Generous Corporates: Capital One

Capital One Financial corporation shares are trading at 50% off their peak prices. This has inspired the management of the company to deliver a massive buyback program bringing the buyback yield to 19.3%. Together with 2.7% dividend yield, this has made the company one of the most generous in the market. COF shares are in great demand among investors that are focused on value stocks, such as Oakmark Fund with more than $45 billion in assets under management.

The specialisation of Capital One is mostly credit cards, auto loans provided to substandard borrowers, or in other words, people with high credit risk profiles. This business is highly profitable, although it does bear high risks too. The company says it has a reliable risk assessment model in place to run the business. The lender generates not only higher margins compared to its peers, but overruns regulators’ requirements of capital adequacy with 13.6% vs required 6%. Considering these criteria, the company is in line with some of the largest banking institutions in the world, like JP Morgan with 14.1% and the Bank of America with 12.8%.

The company’s capital base, which is built on clients’ deposits, is enough to conduct high-margin lending. Such a model of cheap resources is not only profitable but it is also stable. Capital One has a margin of 10-15% on its tangible equity. The interest for the company’s services is unlikely to decline in the foreseeable future considering the current economic environment. So, COF shares could be selected for long term investments with the upside potential of 30-40% once the market starts recovering.

Perspective Peers of Ethereum: Avalanche

Avalanche is ranked by Coinmarketcap at the 12th position by market cap with $7.8 billion, which is 4% less than Ethereum’s market cap. AVAX prices dropped by 82% of its peak values, allowing investors to buy it at early 2021 prices. Avalanche’s infrastructure consists of three logically isolated networks, each of these with their own processing, validators, and own set of rules.

This platform is often compared to the existing internet web infrastructure with core connection protocols like HTTP, surrounded by a huge number of networks to their apps. Avalanche allow for the creation of public and private systems as a blockchain or DAG (Directed Acyclic Graph) and for the use of different virtual machines for apps, including EVM engine (Ethereum Virtual Machine) that allows Enthereum network programs to be developed.

Avalanche includes C-chain to create smart contracts that are processed on an advanced EVM engine, P-Chain that coordinates validators that process transactions and also allows for the creation and management of new subnetworks, and X-Chain which is a directed acyclic graph regulating issuance and trade of cryptoassets. DAG systems record new transactions on top of the old ones, allowing for processing speed to be increased and for capacity substantially. It is quite different to other blockchains, where transactions are compiled in blocks in order to be processed.

The advantage of Avalanche is that it provides anyone with the opportunity to create his or her own isolated blockchain with its own set of parameters, including access to apps and the programming language with which it will work. Every subnetwork can process around 4,500 transactions per second compared to 14 processed by the Ethereum network.

How Deep May It Dive Due to Major Outages

You may be aware that CrowdStrike has been an essential part of my personal stock portfolio for many months. This cybersecurity firm provided good profit, nearly doubling its market value since last autumn. However, today CrowdStrike's management had to accept its responsibility for its faulty update to trigger a "super weird happening" which will become "the largest IT outage in history", according to Troy Hunt, an Australian Microsoft Regional Director. As a matter of fact, millions of Windows-equipped laptops and PCs around the world were suddenly BSoD’ing (showing the so-called Blue Screen of Death). Surely, shares of CrowdStrike immediately plummeted (by nearly 15% at some moments of pre-market trading today), as soon as the Windows outage quickly disrupted a bulk of global services like Visa and MasterCard transactions or airports' automatic check-in systems damaging of a lot of lowcosters, broadcasters and even supermarkets.

One may find much more detailed information on the issue in newswires, so that I just limit myself here with a single line saying that the latest software update of CrowdStrike's Falcon Sensor (actually an antivirus platform) led to crashes on Windows hosts, including Azure clouds, related to Falcon. Lingering degradation impact for Microsoft 365 and other applications is here, yet there is a little doubt that CrowdStrike will simply come back to its previous version of Falcon for a while, to fix the problem in the course of the weekend or even before this Friday evening. Getting more time to test all of its new programming codes Microsoft is also unlikely to abandon its cooperation with now-not-almighty but still extremely powerful and experienced CrowdStrike in the future, exactly as most users cursing Windows are not going to stop using it forever.

Everyone likes to grumble, but the share price would probably recover, sooner than later. This week's wave of AI and chip-based stocks' correction with a sectoral rotation may worsen the situation to some extent, but not in a fatal way, I believe. Therefore, my choice is slightly reducing the volume in some of my other favourite stocks from the AI segment, like Broadcom, Oracle, Micron, to fix some of my big profits in Google and Amazon (thus, temporarily exit from some positions, with a thought of re-buying after two or three weeks). Not reducing my stake in Microsoft, for now, as it lost only 1.5% as a first response to the outage news today, thus drifting from almost $470 in early July to below $440, yet I don't think Microsoft correction would go well below $420, in the worst possible case. At the same time, I am going to purchase even more of CrowdStrike later today, probably just 30-40 minutes before today's regular session's closure, as market conditions and circumstances are giving a great price discount. In the worst scenario, the current downside move in CrowdStrike may reach a technical support area between $250 and $275 per share, which is clearly marked by lows of late December and mid-February (look at the chart). But most likely the price rebound will happen already on Monday or Tuesday.

Even Citigroup sceptical analysts, who recommended rotation from skyrocketing IT segment to smaller caps and broader markets to their customers earlier last week, said they foresee further S&P 500 upside during the second half of 2024, even though at a moderate pace vs the first half. Goldman Sachs sees a "risk of a setback in the summer" for the S&P 500, shifting to a "neutral stance across assets on a three-month horizon" but remaining "mildly pro-risk for 12 months', favouring overweight positions in equities. There can be a higher risk of a market correction rather than a bear market for the second half of the year, the group's letter said, given that "with only some [economy] growth slowdown, a healthy private sector and a buffer from central bank easing, equity drawdown risk should be limited".

Rafael Quintana Martinez
Money Manager de alto rendimiento, con una sólida formación académica, profesional y de campo. Más de 9 años de experiencia especializada en el comercio de mercados financieros internacionales. La devoción, la fiabilidad, la responsabilidad y la ética impulsan mi vida. Actualmente me desempeño como Analista Senior para Metadoro. https://metadoro.com/es https://mx.investing.com/members/contributors/235587671/ https://es.tradingview.com/chart/EURUSD/rE9gVips/
Monero is Looking to the Upside

Monero (XMR) has been trading mostly neutral around $159.38 this week, though it reached $164.05 on July 17. The token's retreat aligns with the broader crypto market trends. Since June 18, 2022, XMR has been moving within an uptrend, having surpassed the resistance level of $155.00 in June and maintaining its position above this uptrend in July, despite administrative pressures from U.S. authorities. This resilience enhances its upside potential.

The nearest resistance for XMR is at $175.00. If Bitcoin (BTC) rises to the $70,000-$72,000 range, XMR could breach this resistance, paving the way for a potential rise to $225.00. Given the current market trends, Bitcoin reaching these levels by August seems plausible, which in turn would support XMR's upward movement.

Rafael Quintana Martinez
Money Manager de alto rendimiento, con una sólida formación académica, profesional y de campo. Más de 9 años de experiencia especializada en el comercio de mercados financieros internacionales. La devoción, la fiabilidad, la responsabilidad y la ética impulsan mi vida. Actualmente me desempeño como Analista Senior para Metadoro. https://metadoro.com/es https://mx.investing.com/members/contributors/235587671/ https://es.tradingview.com/chart/EURUSD/rE9gVips/
DOGE Rallies on Rising Crypto Perspectives with Possible Trump Election

Dogecoin (DOGE) is adding 5.5% to $0.1205 this week, slightly retreating from $0.1274 on July 17. DOGE's movements are synchronized with the broader crypto market. Bitcoin (BTC) prices rose by 5.2% to $64,525 over the same period and are also slightly retreating.

Investors are speculating about the future prospects of the memecoin, considering Donald Trump's rising chances for victory in the upcoming presidential election this November. Elon Musk, a well-known advocate of Dogecoin, has committed $45 million to back Trump. If Musk's political bet pays off and Trump wins, DOGE could see significant gains. This strongly supports the memecoin in its upward movement towards $0.1400.

What Is Behind the Current Chip Correction Move?

Dutch-rooted lithographic equipment maker ASML has kicked off a corrective wave of decline in European and Asian markets on July 17, which quickly echoed in the chip segment on Wall Street as well. The EU technology sub-index dropped by 4.5% marking the most substantial one-time fall for the last 18 months and the U.S. tech-heavy Nasdaq Composite index plummeted by 2.75% to challenge the area below 18,000 technical support, which was an all-time resistance level before July. American Depositary Receipts (ADRs) of ASML suddenly shed almost 12% of its market value, sparking concerns of a massive rotation away from tech stocks to industrials and smaller caps.

It was amazing that the Dow Jones index (DJIA) closed above 41,000 for the first time ever (228 points, or 0.6%, of daily rise) at the very moment when the broader S&P 500 and its AI-related flagships including NVIDIA lost their upside steam. This fact emphasizes the reallocation of money, and not the outflow from equities to the cash, as it happens in times of crisis or stock crashes. Nominally, ASML posted quite decent second quarter figures on both equity per share (EPS) of $4.01 ($0.02 better than consensus forecast) and somewhat lower revenue of $6.24 billion vs the average expectations of $6.49 billion. Yet, the weak point by this giant chip-making equipment manufacturer was its disappointing forward guidance, with supposed Q3 sales between $6.70 billion and $7.30 billion, compared to higher Wall Street expert pool estimates of $8.32 billion. At the same time, ASML's stock price was clearly overheated after rallying nearly 25% during the recent three months, and now it only returned to its levels of late May. Thus, downstairs sliding is fast, but it's not a disaster yet.

A double-digit drop in ASML shares could go rather smoothly for other AI leaders, if not the synchronous news came from U.S. government sources, as whistleblowers said regulators might consider more severe trade restrictions in order to suppress China's access to advanced chip know-hows. If firms such as ASML, NVIDIA and AMD continue to send advanced semiconductor decisions to Asian markets, the White House subordinates may impose a measure called FDPR (the foreign direct product rule) to control on foreign-made products, which use even the tiniest amount of U.S.-licensed technology.

This kind of threat could be how the U.S. wants to push European and Japanese companies to restrict their contacts with Chinese firms, and the spectre of a trade war is here again, inside investing minds. Again, the sectoral leaders like NVIDIA and AMD have already learned to bypass most of the former restrictions. However, in combination with moderate demand concerns and covering a big distance in a short time by hyping AI stocks, this prompted an immediate profit taking, so that NVIDIA and Micron (MU) lost nearly 6.5%, Broadcom (AVGO) dropped by 8%, while AMD corrected by more than 10% in one trading session.

Further price developments in the nearest couple of days will show how deep the correction may go, but the major fundamental conception suggests that too rapid decline is typically temporary and short-lived on such an advanced stage of the lasting uptrend, as it has the solid AI-related nature.


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