Good morning. In today's newsletter: what's driving a recent rally in Tesla shares — and what could deflate it; an exclusive peek at a ranking of A.I.-savvy banks; and a major retailer is close to naming a new C.E.O. (Was this newsletter forwarded to you? Sign up here.) |
 | | The Tesla bulls are back.Josh Edelson/Agence France-Presse — Getty Images |
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Investors are once again optimistic about Tesla |
Tesla investors are feeling heartened by the electric carmaker's earnings announcement yesterday, which had plenty for them to like: a 59 percent year-on-year gain in quarterly profit and rising demand for its vehicles. Shares in Tesla were up nearly 7 percent in premarket trading this morning. |
Still, even by the company's own admission, it's facing a lot of challenges, from growing competition to rising interest rates. (And, some critics would add, its chief Elon Musk's work in his other jobs, including running Twitter.) |
The results cap a wildly uneven year for Tesla. The stock price sank 65 percent last year — wiping out about $685 billion in market value — amid investor concerns about a global economic slowdown, the end of cheap car financing and a loss of market share in key markets like China. Shareholders also worried whether Musk would sell more of his stake in the carmaker to prop up Twitter. |
 | | The New York Times |
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But Tesla pointed to its results as proof that it's pursuing a successful strategy. It reported $3.7 billion in profit and $21.3 billion in car sales for the quarter. Price cuts have helped lift demand, giving investors hope: Tesla shares have risen 33 percent since the beginning of the month, making it one of the best performers on the S&P 500. (The Morgan Stanley auto analyst Adam Jonas, a longtime Tesla bull, named the company his top pick among car stocks for the year.) |
There are still warning signs. Though price cuts have helped sales, they are eroding Tesla's profit margin. And while vehicle deliveries rose to 405,000 in the fourth quarter, that fell short of forecasts by both Tesla and Wall Street. While Musk predicted that the company would make 1.8 million new vehicles this year — including its long-awaited Cybertruck — that pace is well below his long-term production goal. |
Investors are paying attention to other risks as well: |
- Established rivals such as Hyundai, Ford, G.M. and Volkswagen are selling more battery-powered vehicles and at lower prices, while upstart challengers like China's BYD are coming on strong.
- Though Tesla will begin producing its Cybertruck this year, it won't make the pickup in meaningful numbers until 2024, giving Rivian and Ford more time to establish a bigger lead with their offerings.
- Meanwhile, efforts by Senator Joe Manchin, Democrat of West Virginia, to delay new tax credits for electric vehicles could dampen demand for battery-powered cars.
- And Musk appears unwilling to step back from running Twitter in addition to Tesla, or even to dial down his often-provocative presence on the platform, as some critics have demanded. "Twitter is actually an incredible tool for driving demand," he told analysts, touting his 127 million followers.
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Meta will reinstate Donald Trump's accounts. In letting the former president back onto Facebook and Instagram, the company cited the end of a two-year suspension imposed after the Jan. 6 attack on the Capitol. But Trump's return will come with new guardrails meant to "deter repeat offenses," Meta said. |
U.S. economic data is expected to show continued growth. Economists expect that fourth-quarter gross domestic product grew by 2.8 percent on an annual basis, a slight decline from the previous quarter, as inflation eased and the jobs market remained relatively strong. (The report is scheduled for release at 8:30 a.m. Eastern.) Still, an increasing number of economists expect a recession in the second half of the year. |
Southwest Airlines reports a $220 million quarterly loss. The airline chalked up the huge loss to expenses tied to its catastrophic holiday season, when it canceled about 16,700 flights. Southwest forecast a loss in its first quarter as well. |
The White House closes in on its next top economic adviser. Among those up for director of the National Economic Council are Lael Brainard, the Fed's vice chair; Wally Adeyemo, the deputy Treasury secretary; and Gene Sperling, who previously held the position under Bill Clinton and Barack Obama. The current director, Brian Deese, is expected to step down soon. |
Adani Group reels after being targeted by a short seller. Shares and bonds in companies belonging to the Indian conglomerate fell after Hindenburg Research accused the group of fraud; the group's founder, Gautam Adani, saw $5.5 billion wiped off his net worth in one day. Still, analysts say a $2.5 billion stock sale by Adani Group's flagship company is likely to go through. |
Exclusive: Ranking banks on their A.I. prowess |
Artificial intelligence is one of the buzziest topics right now, thanks to developments like the chatbot ChatGPT. But it's also being embraced by global banks for a wide variety of uses, from market and trading analyses to regulatory compliance. |
A new data intelligence start-up, Evident, is set to debut an index showing how the top 23 banks in North America and Europe stand in incorporating and advancing the technology. Evident gave an exclusive first look at its findings to DealBook. |
How Evident compiled its rankings: The company analyzed publicly available data sources — from news releases to research papers to job data on sites like LinkedIn and Glassdoor — to judge companies on four areas: innovation, leadership, transparency and talent acquisition and development. Some 50 A.I. experts were also consulted. |
The approach is rooted in the experience of Evident's co-founders, Alexandra Mousavizadeh and Annabel Ayles, who previously worked on an index that benchmarks A.I. efforts of countries at Tortoise Media. (Evident's backers include Scott Galloway, the N.Y.U. professor and podcaster, and Gary Ginsberg, the former political operative and communications executive.) |
Who's ahead? Here are the top 10 banks: |
- JPMorgan Chase
- Royal Bank of Canada
- Citigroup
- UBS
- Wells Fargo
- Toronto-Dominion Bank
- ING Group
- Bank of America
- BNP Paribas
- Morgan Stanley
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JPMorgan dominated in all four categories, thanks to what Mousavizadeh called a yearslong commitment by the banking giant to invest heavily in the technology, including by publishing hundreds of research papers and integrating it into its businesses. |
Ayles added that banks — and their regulators, investors and potential new hires — would benefit from seeing how they're performing relative to their peers on A.I. and where they could improve. |
There were several surprising trends, Evident told DealBook. Among them: |
- Canada's top banks ranked highly, beating out the likes of Goldman Sachs and Morgan Stanley, thanks largely to their senior leaders' commitment to advancing A.I.
- Wells Fargo is punching above its weight class, and has poached a number of A.I. specialists from rivals like Bank of America.
- European banks rank low. While they draw on their continent's deep pool of A.I. talent, they don't appear to be keeping up on innovation and transparency about their approaches to A.I. development and ethics.
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What's next? Evident's founders told DealBook that they're working on indexing banks in other regions, notably China. That could lead to some interesting comparisons, they said, given the country's strength in developing and using A.I. across a vast swath of businesses. And the company is also preparing indexes for other sectors, including insurance. |
"Jeff is extremely dedicated to his workouts. I mean, you have no idea. He really puts in the work." |
— Lauren Sánchez, the former news anchor, in her first solo interview since it emerged that she was involved in a romantic relationship with Jeff Bezos, the Amazon founder. |
Kohl's nears a deal for a full-time chief |
The retailer Kohl's is close to naming Tom Kingsbury, its interim C.E.O., as its permanent leader, DealBook's Lauren Hirsch and The Times's Jordyn Holman report. (The company hasn't yet made a final decision.) Appointing him could provide a measure of stability for the department store chain, whose shares have fallen nearly 50 percent over the past year — and fend off further pressure from investors. |
Kohl's faces several challenges, including moving on from an unsuccessful effort to sell itself that ended last year and pressure from activist investors. In December during the critical holiday season, its former C.E.O., Michelle Gass, left to join Levi Strauss & Company. |
Perhaps most important, middle-income Americans, Kohl's core customers, have pulled back on shopping as they grapple with rising inflation. In November, the company withdrew its full-year guidance for 2022, citing the uncertain economy and Gass's departure. |
Kingsbury may focus on improving sales, not selling the company. He has four decades of retail experience, including running Burlington Stores for just over a decade; Kohl's chairman, Peter Boneparth, has praised him as a "highly regarded and an exceptional operator with a keen focus on inventory management." |
Kingsbury might also help avert a proxy fight with activist investors, say analysts at Morningstar. In October, Kohl's faced the prospect of a new battle with the activist investor Macellum Advisors, which sought board seats and Boneparth's ouster. But Kingsbury is a known quantity to Macellum, having joined the Kohl's board in 2021 as part of a settlement with the activist fund. |
Thanks for reading! We'll see you tomorrow. |
| | | Andrew Ross Sorkin, Founder/Editor-at-Large, New York @andrewrsorkin | | Ravi Mattu, Managing Editor, London @ravmattu | | Bernhard Warner, Senior Editor, Rome @BernhardWarner | | Sarah Kessler, Deputy Editor, Chicago @sarahfkessler | | Stephen Gandel, News Editor, New York @stephengandel | | Michael J. de la Merced, Reporter, London @m_delamerced | | Lauren Hirsch, Reporter, New York @LaurenSHirsch | | Ephrat Livni, Reporter, Washington D.C. @el72champs | |
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