The Rundown - Tesla Reports Bumpy Quarter, Google Posts Mixed Earnings with AI in Focus

Episode Date: July 24, 2024

Stock market update for July 24, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Wednesday, July 24th. In today's episode, we talk about the Ethereum Spot ETF's big debut in the impact on the price of Ether. We also recap earnings from Tesla and Google and explain why investors weren't happy with the numbers. Then stick around to the end of the show to find out how much TV viewing time Apple TV Plus accounts for. The numbers compared to Netflix are true. shocking. All right, let's go. Stox had a very up and down day yesterday. The day started off great. Stocks were in the green, but then they did the most relatable thing ever. Had a bit of a post-lunch

crash. We've all been there, right? Stocks were starting to recover a bit, but ultimately finished the day slightly in the red. The S&P dropped 0.2% while the NASDAQ was down 0.1%. Yesterday was also the first trading day of Ethereum spot ETFs, and they had a pretty strong debut. Over $1 billion in shares were traded among the nine Ethereum Spot ETFs yesterday. Now, $1 billion in trading activity is a pretty solid debut. It's still much less than the $4.6 billion worth of trading volume that happened for the Bitcoin ETF on its first trading day back in January. And the debut of the Ethereum Spot ETF had very little impact on the price of Ether. Ether was essentially flat yesterday. It was actually down slightly. So solid debut,

not much impact on the price so far, but to be fair, Ether's price is up about 50% this year. So it's had a pretty good year. Let's run through some headlines. And we have to start with Tesla earnings. Tesla shares are falling after they reported a drop in profit for the second straight quarter missing Wall Street estimates. Tesla's profits dropped by 45% in Q2 due to slower EV demand and increased competition, which is resulting in an all-out price war. Tesla's having to cut prices to stay competitive, especially in the Chinese market. Like, the price of the Tesla Model Y in China is selling for the equivalent of $34,000, compared to the nearly $45,000 that it's selling for in the U.S. So because Tesla's having to cut prices,

it's affecting their profit margin, which is dropped to around 6%. It was nearly 10% last year, so this price war is having an impact on their business. Still, Tesla delivered 444,000 cars in Q2, beating expectations for the quarter. And Tesla does have some plans to boost itself out of this price for slump. Tesla plans to release an affordable model, which is expected to go into production in the first half of 2025, according to Elon Musk. Tesla hasn't released a new car since 2020, so that would be pretty big. In the meantime, Tesla announced new trims and paint options for its current model. I guess they're hoping that that would be enough to spark some interest in Tesla vehicles. The company also cut 10% of its workforce, which is expected to save them

about a billion dollars annually in expenses. Finally, we have to talk about Tesla's AI plans. Tesla plans to hold a Robotaxy event in October to show off their autonomous Robotaxie. The event was originally scheduled for August, but they pushed it back a couple months to be better prepared. Oh, and don't forget about Tesla's autonomous robot, too, Optimus. Tesla is using more Optimus robots in one of their factories to handle batteries, and Elon expects Optimus to do more tasks next year. And at some point, Tesla plans to sell these humanoid robots to customers, maybe even by 2026. Personally, don't think that's going to happen anytime soon, but we'll see.

So Tesla does seem to have a lot in their pipeline to be optimistic about. But still, the initial reaction from investors is not optimistic. Shares were down 7% in reaction to these earnings. But if you take a step back, though, it's been a good summer for Tesla stock. In fact, the stock is up more than 70% since the last time Tesla reported earnings back in April. I'm sure Tesla investors are feeling much better now than they did after the Q1 earnings. Let's shift gears and talk about the other Mag 7 company to report earnings last night. that would be Google's parent company Alphabet.

They dropped their earnings and the numbers were pretty decent. Alphabet topped sales and profit estimates for the quarter due to strong results in their search advertising revenue and cloud computing growth. Their search revenue was up 14% year over year. And their cloud revenue jumped 29% year over year, which surpassed $10 billion in quarterly revenue and $1 billion in operating profit for the first time. So their cloud business is growing like crazy right now. There was one weak spot though. YouTube. YouTube's advertising revenue came in at $8.6 billion, which is up 13% from a year ago,

but it was 3% shy from estimates. But it's pretty clear that the search business is Google's breadwinner. It accounts for 76% of their revenue. But I think investors are really trying to find out how AI will supercharge Google's revenue. Google's investing a lot in AI without much returns to show for it yet. Google's capital expenditure in the second quarter was $13.2 billion, which is up 91% from a ago. Again, I bet a lot of that's going towards AI investment. Google's CFO warned that third quarter operating margins would be reduced because of investments in technical infrastructure

and also the launch of new products like the pixel phone. And I think that's one of the reasons why Google's stock is down more than 4% in the pre-market in a reaction to these earnings. So we'll see if Google's AI bets pay off. Right now, investors, nah is optimistic. Let's talk about some stocks making moves today. AT&T shares are up this morning after the company beat subscriber growth estimates after adding 419,000 wireless phone users compared to the 284,000 that was expected. AT&T has been offering some pretty good deals for its plans as competition rages on. Now, even though the phone giant showed signs of higher demand for its products, the company missed on both earnings and revenue estimates for the quarter.

I think these deals by AT&T might be a little too good because they may not be making any profit from them. Still, these results were good enough for investors and AT&T shares are up 3% in the pre-market on this news. On the flip side, a couple EV stocks are down this morning in reaction to Tesla's lackluster report. Rivian and Lucid shares are trading lower because investors are probably worried the impact of slower EV demand and these price wars will have an impact on Rivian and Lucid's business. The EV industry grew by 6.8% in the first half of 2024 compared to 50% in 2023. This is according to the Wall Street Journal.

So there's a significant slowdown in EV growth. We've already had one EV company filed for bankruptcy this summer. That would be Fisker. I wonder if we'll see more. Rivian and Lucid shares are down 3% in the pre-market. All right, let's wrap the show with a fun fact. Apple TV Plus accounts for just 0.2% of total viewing in the U.S., compared to about 8% for Netflix.

To put that into perspective, Apple TV Plus attracts less viewership in an entire month than Netflix does in a single day. This is despite Apple spending over $20 billion on original content. But we mentioned a couple days ago that Apple is starting to rain back on all this content spend. This is according to Bloomberg. I mean, Apple has produced a few hits and collected some Hollywood trophies, but the ROI

is still questionable. I mean, I'm sure Tim Cook gets invited to all the best Hollywood parties, but is that worth $20 billion? Maybe it is. Who might have judged? Well, all right, guys, that's the rundown for today. Action-packed episode, so much to talk about. Things aren't slowing down, though.

We're going to have more earnings come out this week. We're going to have more earnings come out next week. So we are locked in right now. enjoyed today's show, don't forget to hit us with that five-star rating on Apple or Spotify, wherever you listen to your podcast. And if you are listening on Spotify, don't forget to vote in today's poll. That engagement really does help the show. So thank you guys so much. Shout out to Connor and Mike for all the help behind the scenes. We'll see you guys back here tomorrow. This is the rundown, your real-time resource for news events and trends in the markets.

All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respective professionals. Learn more at public.com disclosures. In partnership with Zaidadmani, brokerage services for U.S. listed, registered securities are offered by open to the public investing incorporated, member FINRA and SIPC.