Tesla Rallies, C3.ai Bombs Earnings

Good morning. It’s September 5th, and in today’s edition, we’ll look at Tesla’s rally after news of FSD launch plans, a massive $20 billion deal in the telecom space, and a tiny distillery stock that has nearly tripled in premarket trade.

Previous Close 📈

The recent market movements follow a second consecutive day of losses for the S&P 500 and Nasdaq Composite. Investors await critical employment data as growth concerns continue to dominate sentiment.

Futures

Stock futures remain mostly unchanged this morning as Wall Street aims to recover from a bumpy beginning to the month. S&P 500 futures are dipping by less than 0.1%, Nasdaq 100 futures are edging down 0.11%, and Dow Jones Industrial Average futures are dropping 16 points, or less than 0.1%.

What to Watch

Several important economic numbers are set to come out today, so keep a close watch. The July ADP Employment numbers will be released at 8:15 a.m., followed by the August Initial Jobless Claims data at 8:30 a.m.

The second quarter U.S. Productivity and Unit-Labor Cost (revision) figures will also be released at 8:30 a.m. while the S&P final U.S. Services PMI for August will come out at 9:45 a.m., followed by ISM Services for August at 10:00 a.m.

On the earnings front, Nio (NYSE: NIO) and Science Applications International Corporation (NASDAQ: SAIC) will share their results before the market opens.

After hours, Broadcom (NASDAQ: AVGO), Samsara (NYSE: IOT), Docusign (NASDAQ: DOCU), and Braze (NASDAQ: BRZE) are also set to come out with their earnings.

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Technology

Tesla Set to Roll Out Full Self-Driving in Europe and China

Tesla shares are up 2% in premarket trade today following the company's reaffirmation of its plans to introduce its Full Self-Driving (FSD) software in China and Europe, pending regulatory approval.

This move comes weeks before Tesla unveils its new robotaxi product, Cybercab. This product will rely on FSD technology to assist drivers in navigating city streets and highways under human supervision.

CEO Elon Musk has previously indicated that Tesla expects to secure regulatory green lights for FSD in both regions by the end of this year. He mentioned that the rollout could start in right-hand-drive markets by late Q1 or early Q2 of 2024.

Despite Musk's history of setting ambitious timelines that sometimes go unmet—such as with FSD, the Semi, and Cybertruck—investors are reacting positively to the potential expansion of Tesla's advanced driver assistance features.

In June, Shanghai permitted 10 Tesla vehicles to conduct tests of the FSD software, setting the stage for its broader release in China.

The company also plans to introduce new features, including "Actually Smart Summon," FSD for the Cybertruck, and the thirteenth version of the software, which is expected to require fewer driver interventions.

Tesla's push into autonomous technology comes as the electric vehicle (EV) market faces challenges such as rising borrowing costs and concerns over fast-charging infrastructure and driving range.

A stronger focus on innovations like FSD, robotaxi, and humanoid robots may help Tesla stay ahead in the competitive EV sector.

Technology

C3.ai Shares Plunging 20% After Revenue Estimate Miss

Shares of C3.ai are falling by nearly 20% in premarket trading today. The company announced a disappointing quarterly report with weaker-than-expected subscription revenue.

It reported $73.5 million in subscription revenue for the first quarter, falling short of the $79.1 million anticipated by analysts.

The firm attributed the dip in subscription revenue largely to slower conversions of pilot customers, influenced by a high-interest-rate environment and economic uncertainty that has led enterprises to tighten their spending.

For C3.ai, subscription revenue includes income from software licenses, Software-as-a-Service (SaaS) offerings, trials of its AI applications, and consumption-based pricing, which is recognized over time.

C3.ai's management indicated that the company expects continued pressure on gross margins due to a higher proportion of pilot projects, which typically have a greater cost of revenue in their initial phases.

Additionally, it anticipates short-term pressure on its operating margins due to increased investments in sales, research and development, and marketing.

Despite the challenges, it reported a 21% year-over-year increase in total revenue to $87.2 million, slightly beating analyst estimates of $86.9 million.

However, the weaker subscription revenue outlook is overshadowing this growth, potentially wiping out over $600 million from its market valuation of $2.97 billion if the stock losses persist.

Telecommunications

Verizon Announces $20B All-Cash Deal to Acquire Frontier

Verizon announced that it will acquire Frontier Communications in an all-cash deal valued at $20 billion as part of its strategy to expand its fiber network across the United States.

The acquisition, which offers $38.50 per share of Frontier, represents a 37.3% premium to Frontier’s closing price on September 3, prior to news of the potential acquisition.

Frontier’s stock is rallying by 9% in premarket trade today. Verizon is also trading at 1% higher than yesterday’s closing.

Verizon's acquisition of Frontier will significantly enhance its fiber capabilities, allowing the wireless giant to deliver high-speed broadband services to a broader customer base and better compete with rivals like AT&T.

Frontier Communications currently has 2.2 million fiber subscribers across 25 states, complementing Verizon’s existing 7.4 million Fios connections in 9 states and Washington, D.C.

Verizon's CEO, Hans Vestberg, emphasized the strategic fit of the acquisition, noting that it builds on the company's two decades of leadership in the fiber sector and provides an opportunity to strengthen its presence in more U.S. markets.

The deal, expected to close in about 18 months, will not only expand Verizon's geographical coverage but also generate at least $500 million in annual cost synergies.

The transaction is anticipated to contribute positively to Verizon's revenue and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) upon completion.

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Eastside Distilling, Inc. [EAST] - Last Close: $0.76

Eastside Distilling shares are surging by more than 200% in premarket trading today.

The company announced a merger with Beeline Financial, a digital mortgage technology company that uses AI to streamline home buying and investing.

As part of the deal, Eastside also completed a debt-for-equity exchange and sold its Craft Canning + Digital Printing assets to private investors.

In exchange for the merger, Beeline shareholders will receive a mix of common and preferred stock from Eastside. The merger is set to close later this year, signaling a major shift in Eastside's business focus.

Modular Medical, Inc. [MODD] - Last Close: $1.96

Modular Medical's stock is up by 23% before the opening bell today, continuing from a 6% surge before yesterday's close.

The rally came after the firm announced that it has received FDA clearance for its new MODD1 insulin pump, which is designed for adults with Type 1 and Type 2 diabetes.

This is a simpler, more affordable patch pump that aims to expand access to insulin pump technology, particularly for underserved communities.

Commercial availability of the MODD1 is expected in early 2025.

Volato Group, Inc. [SOAR] - Last Close: $0.42

Volato Group is up 23% so far in premarket trading after the company announced a strategic agreement with flyExclusive to manage its fleet operations.

This move will reduce Volato's operational costs and allow it to focus on high-growth areas like aircraft sales and its proprietary software, including the Vaunt empty leg program.

FlyExclusive will handle all aspects of Volato's fleet operations, potentially increasing the profitability of the fleet.

Volato will continue selling new aircraft and benefit from the margins without the burden of operational expenses.

The companies are also discussing a potential merger, which could further integrate their strengths in the private aviation sector, enhancing their offerings and growth prospects.

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Everything Else

• Qualcomm’s CEO revealed new details about its mixed reality glasses project with Samsung and Google.

• Visa A2A aims to enhance consumer protection for bank transfers.

• India and Singapore are boosting their semiconductor and digital technology ties.

• Burberry’s struggles have led to an FTSE 250 demotion.

• Xi Jinping pledged massive financial support to strengthen China-Africa relations.

• Piedmont Lithium is scaling back expansion plans and halted its U.S. government loan request.

• Nippon Steel's acquisition of U.S. Steel is on the brink of being blocked by the U.S. government.

• Consumer safety commissioners have demanded an investigation into Shein and Temu for possible violations.

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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