Tesla and Google Disappoint

Good morning. It is July 24th, and in today's update, we'll cover Tesla and Google's disappointing earnings, a decline in Q2 profitability for oil refiners, and a biotech stock that’s already up over 80% today.

Previous Close 📈

All three indices fell after Tesla and Alphabet's results disappointed Wall Street.

Futures

The tech-heavy Nasdaq 100–linked futures are seeing a sharp fall, while S&P and Dow Jones–linked futures are also trading slightly lower.

What to Watch

Boston Scientific, Fiserv, and General Dynamics will release their quarterly results today before the market opens.

We will get the S&P flash U.S. services and manufacturing PMI at 9:45 a.m. EST, while new home sales data will be available at 10 a.m.

In the evening, watch out for Fed Governor Michelle Bowman’s opening remarks at 4:05 p.m.

IBM, AT&T, KLA, and Waste Management will also report their earnings after the market closes.

Technology

Google's Increased AI Spending Fails to Impress Investors

Alphabet's stock fell about 3% in premarket trading on Wednesday after the company reported higher-than-expected capital spending on AI, totaling $13.2 billion in the second quarter.

This exceeded analysts' predictions of $12.2 billion. Despite this, Alphabet posted better-than-expected earnings, with a net income of $1.89 per share, surpassing the anticipated $1.84.

The company reported revenue of $71.36 billion, slightly above the forecast of $70.7 billion. However, concerns about the return on investment from Alphabet’s substantial AI spending have left some investors cautious.

Google has integrated AI into its products like Gmail and Google Docs but has faced mixed results, including some notable failures.

Google Cloud performed well, generating $1.17 billion in profit, exceeding expectations. While it trails Amazon and Microsoft, Google Cloud has attracted new business from AI startups.

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Automobiles

Tesla's Mixed Q2 Causes Stock to Fall, Affordable EVs on Track for 2025

Tesla reported mixed second-quarter results, leading to a 7% drop in its stock price in pre-market trading on Wednesday, though it recovered later.

The electric vehicle manufacturer announced Q2 revenue of $25.05 billion, slightly above the expected $24.63 billion, but posted adjusted earnings per share of $0.52, missing the anticipated $0.60.

Tesla confirmed plans to start producing more affordable electric vehicles in the first half of 2025, integrating aspects of both its current and next-generation platforms.

CEO Elon Musk also announced that the unveiling of Tesla's robotaxi has been rescheduled to October 10 to allow for additional features.

The company delivered 443,956 vehicles globally in Q2, exceeding the consensus estimate of 439,302 but marking a slight decline from the previous year.

Production of the Cybertruck has more than tripled compared to Q1, and profitability is expected by year end.

Tesla's battery energy storage system deployment hit a record 9.4 GWh, doubling the previous quarter's figure and surpassing forecasts.

Telecom

AT&T Surpasses Q2 Subscriber Estimates Amid Demand for Unlimited Plans

AT&T exceeded market expectations for second-quarter wireless subscriber additions, driven by its higher-tier unlimited plans. The telecom operator added 419,000 monthly bill–paying wireless phone subscribers, surpassing analysts' predictions of 284,800.

This success helped AT&T retain customers more successfully than its competitors, with a postpaid phone churn rate of 0.70%, the second lowest reported for the quarter.

Shares of AT&T rose 2.4% in premarket trading following the announcement. The company's competitive pricing for unlimited plans attracted budget-conscious customers amidst fierce competition from T-Mobile and Verizon.

Free cash flow increased by over 9% to $4.6 billion, beating LSEG estimates of $4.22 billion. However, revenue for the quarter fell short of expectations, with total revenue at $29.8 billion compared to the anticipated $29.92 billion. Slower phone upgrades in the U.S. contributed to an 8% decline in mobility equipment revenue.

Oil & Gas

US Refiners Likely to See Q2 Profit Decline Amid Low Margins and Weak Fuel Demand

U.S. oil refiners are expected to report significantly lower second-quarter earnings compared to last year due to weaker refining margins and lower fuel demand. Refiners increased their processing capacity to 93.5% in anticipation of higher gasoline and diesel demand, which ultimately did not materialize, leading to reduced profits.

Increased diesel inventories, driven by new refineries in the Middle East and higher exports from China, further squeezed refining margins.

BP and Exxon Mobil have already indicated that weaker refining margins and low fuel prices will negatively impact their Q2 results, which will be reported on July 30 and August 2, respectively.

The gasoline crack spread fell to $22.02 per barrel in June, the lowest since February, while the diesel crack spread hit a two-year low of $22.22 per barrel.

The combination of soft gasoline demand and increased global diesel supply could continue to pressure margins in the coming months.

Hoth Therapeutics [HOTH] - Last Close: $0.97

Shares of Hoth Therapeutics went through the roof in pre-market trade after the announcement that the firm had partnered with LTS Therapy Systems to accelerate novel Alzheimer's treatment.

The company’s HT-ALZ mode of action has shown promising results in the treatment of preclinical subjects, where it might have had a positive effect in reducing brain inflammation and thereby improving cognitive outcomes for Alzheimer's patients.

The stock price has climbed by nearly 85%.

NuZee, Inc. [NUZE] - Last Close $1.03

NuZee, Inc., is the biggest mover in pre-market trade today.

The stock is climbing after news came out that one of its prominent shareholders, Liu Yumei, who owns nearly 10% of the company, has purchased an additional 542,517 shares of NuZee's common stock at $1.47 per share.

The current rally has been caused by the investor's strong show of confidence. As of now, the stock price has jumped by more than 100%.

Allarity Therapeutics [ALLR] - Last Close: $0.17

Shares of Allarity Therapeutics soared after the firm put out a message encouraging shareholders to vote for a reverse stock split.

The company is trying to regain compliance with Nasdaq requirements in order to remain listed on the exchange.

Shares were up nearly 40% during pre-market trading.

Everything Else

• LVMH shares fell by 4% after missing Q2 revenue estimates.

• Deutsche Bank shares fell significantly after its 15-quarter profit streak came to an end.

• Bank Of Canada is likely to cut rates amid poor GDP and inflation data.

• Spanish banking giant Santander reports a 20% increase in net profits.

• CrowdStrike says a defective update caused the worldwide IT blackout.

• German manufacturing slump and French deadlock are weighing down the Eurozone economy.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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