To The Moon

At the start of the trading week Mon, 07 Aug - stocks bounced back as the market’s fear gauge cooled down on a quiet day for traders.

I like to believe that last Friday’s data released by the Bureau of Labour Statistics, on a mixed but encouraging jobs report that showed (a) a lower unemployment rate, (b) higher wages and (c) moderate payroll growth; still have some residual effect on the market.

The data eased some concerns about the pace of economic recovery and inflation.

Lastly, as the saying goes “no news is good news”, this kind of led market to close higher; all the while with eyes glued to coming Thur, 10 Aug official release of July consumer price index (CPI) data.

By the time market closed:

• Dow Jones Industrial Average rose around +1.16%, or more than 400 points.

• S&P 500 gained +0.9%.

• Tech-heavy Nasdaq recovered from earlier losses to climb +0.6%.

Yesterday’s marginal performance marked a turnaround from a rough start to August 2023, typically a lacklustre trading month.

• Berkshire Hathaway high profile quarterly earnings helped to boost market morale.

• Mr Buffet’s shares rallied to record highs as its strong quarterly report showed a rebound in insurance operations.

• More importantly, Berkshire’s massive cash hoard swelling to nearly $150 Billion is the attractive proposition.

• With that, $Berkshire Hathaway(BRK.A)$ Class A shares gain a further +3.4%, hitting an all-time high of $551,920 per share.

• $Berkshire Hathaway(BRK.B)$ Class B had a similar gain of +3.6% hitting a new high of $362.58.

DataTrek Research co-founder Nicholas Colas had shared the following observations:

• In current earnings season, companies have turned to (a) cost containment and (b) margin management to keep their results credible.

• This is less exciting than stronger-than-expected revenue.

• Last week’s dip would be Fitch’s downgrading of US Treasury credit rating; that was a bummer.

• However, US market’s fear seemed to be fading.

• Yesterday, the CBOE Volatility Index (VIX) was down -6.4%.

Time For $Li Auto(LI)$ - Chinese EV Maker To Shine?

Chinese EV maker - Li Auto delivery

Of the 3 musketeers (Li Auto, $XPeng Inc.(XPEV)$ and $NIO Inc.(NIO)$ ), Li Auto is first of the trio to report its quarterly earnings.

Actually, if investors have been following their weekly/monthly PHEV delivery (see above), it is not even a challenge to predict that this charmingly quiet but rock-solid EV maker will turn in a stellar report card.

True to form, it did!

• Revenue: came in at RMB27.97 Billion (US$3.983 Billion), that is a +228.1% gain YoY.

• Net income: was RMB2.31 Billion (US$318.6 million) vs -RMB 641 Million (net loss) YoY.

• Earnings per share (diluted): was $0.36 per share versus $0.0237 per share YoY.

• Gross margin: came in at 21.8%; that is a +0.3% gain YoY.

• Free cash flow: was RMB9.62 Billion (US$1.33 Billion) versus RMB451.7 Million YoY.

Li Auto Q3 2023 Business Outlook

The Company expects:

• Deliveries of vehicles to be between 100,000 and 103,000 vehicles.

• This represents an increase of +277.0% to +288.3% YoY.

• Total revenue to be between RMB32.33 billion (US$4.46 billion) and RMB33.30 billion (US$4.59 billion).

• This represents an increase of +246.0% to +256.4% YoY.

Qualifier:

• Business outlook reflects Li Auto’s current and preliminary view on the business situation and market condition, which is subject to change.

My Viewpoint:

• Despite a stellar performance, Li Auto stock price fell by -8.83% (at time of writing).

• To be fair, Nasdaq composite index has fallen by -1.43% as well (at time of writing).

• On 25 July 2023, I have also posted that US market is bias to non-US EV maker. I still believe this holds true. Click here! to read about it.

• Given Li Auto stellar performance, it stock price should soar; just like Tesla did when it cracked the code to produce EV sedans in volume.

• I can only hope that when market sentiments improve, market & analysts will not fail to upgrade their target price and recommend a “Buy”.

• Do you think Li Auto’s Q2 2023 performance is commendable?

• Do you think Li Auto’s stock price deserved to be revised upwards by another +10% to 15%?

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