In this briefing:
- Tesla (TSLA): SWOT Analysis Leads To…Rivian
- MODEC: 17% Price Jump as Results Beat, Guidance Is Lowballed
1. Tesla (TSLA): SWOT Analysis Leads To…Rivian
What happens when innovation becomes commoditized? We believe this is a core concern to every Tesla watcher, bulls and bears so we began our Lunar New Year week (or Pro Am 2019 week in Pebble Beach) with a quick and dirty SWOT analysis of Tesla to see where the next potential existential threat can come from…and we ended up looking at Rivian.
Tesla: A SWOT Analysis
Tesla’s key strengths that we see are Elon Musk’s charismatic personality that lends to fund raising capability and marketing prowess. The company’s weakness lies in its collective inexperience in the automotive industry, and the fact that the car business is a mere component in Musk’s vision of a vertically integrated, electrified future. This has created and continues to exert tremendous amount of pressure on management. We believe opportunities for new entrants are that EVs are not as difficult to design and produce, as well as to finance, as Tesla fanboys in the financial industry and media make it sound. A key Threat to Tesla could be companies like Rivian, a U.S. BEV light truck dedicated OEM based in Detroit, which is currently taking customer deposits on 2020 deliveries of its R1S SUV and the R1T pickup truck (https://preorders.rivian.com/2322956400/checkouts/29de1808b812748f8fe476718e460bea).
Rivian is a private company that has not issued public debt so financial information on the company is unavailable in the U.S. public domain, so we poured through strategic investor Sumitomo Corp’s Yuho reports to see if we can find any tidbits in Japan but found nothing there either. Hence, while we cannot make much financial observations about the company at this point, we do see a number of strategic signs from Rivian’s actions that may indicating that it is most likely improving upon the Tesla experience to avoid the hiccups and the bumps on the road to premium EV segment dominance.
From an APAC stock market perspective, we see LG Chem and Sumitomo Corp as two entities that could potentially see financial impact from Rivian in the next several years. Teslerati has made an educated guess on LG Chem as Rivian’s cell supplier which we believe to be reasonable, although Rivian and LG Chem have neither confirmed nor denied the relationship (https://insideevs.com/new-details-rivian-battery-pack-design/, https://www.teslarati.com/rivian-battery-lab-irvine-california-megapack-production/). Current investment in Rivian by Sumitomo Corp is most likely an insignificant amount from the latter’s perspective but could perhaps grow into something bigger at some point in the future.
The Rivian R1S
2. MODEC: 17% Price Jump as Results Beat, Guidance Is Lowballed
Modec Inc (6269 JP) reported strong 2018 results as operations for the year went smoothly and gross margin recovered to double digits in the fourth quarter with the company also releasing its contingency reserves resulting in a large uptick in SPC related earnings below the operating line.
Results vs. Guidance | Results vs. Consensus | Results vs. Consensus High | Guidance vs. Consensus | ||
OP | +24% | +16% | +14% | -42% | |
Current Profit | +31% | +24% | +20% | -30% | |
NP | +46% | +33% | +19% | -32% |
Like last year however, guidance disappointed as the company released what we consider to be lowball estimates. Nevertheless, the stock reacted positively as the strong results offset some of the recent negativity from the large fall in crude prices. We examine the degree of conservatism we see in guidance below.
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