David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

    Netflix 3Q Streaming Paid Net Change Misses Est

    This article by Cara Moffat for Bloomberg may be of interest to subscribers. Here is a section:

    Sees growth reverting back to levels similar to pre-COVID as the world recovers, and sees paid net adds likely to be down year over year in 1h 2021 as compared to the big spike in paid net adds in 1h 2020
    Sees 2021 free cash flow be -$1 billion to break-even
    As productions increasingly restart, we expect Q4’20 FCF to be slightly negative and therefore, for the full year 2020, we forecast FCF to be approximately $2 billion, up from our prior expectation of break-even to positive
    With $8.4 billion in cash on our balance sheet at the end of the quarter plus our $750m credit facility which is undrawn, our need for external financing is diminishing

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    TSMC's Dominance Highlighted in One Single Number

    This article by Tim Culpan for Bloomberg may be of interest to subscribers. Here is a section:

    But things started changing last year, coinciding with some important shifts in both the industry and the global political economy. Once neck-and-neck with Samsung Electronics Co., TSMC has now pulled ahead at the leading edge, while Intel Corp., formerly the world’s most-advanced chipmaker, has fallen further behind. The Hsinchu-based company now commands around 54% of the chip foundry market, according to researcher TrendForce.

    At the same time, the rollout of 5G mobile technology and artificial intelligence ran smack into the tech Cold War (which includes the U.S. effectively banning TSMC from selling to China’s champion, Huawei Technologies Co.). This meant that the queue of companies wanting the best chip manufacturing in the world — such as Apple Inc., Qualcomm Inc. and Huawei — kept growing, while the supply of foundries able to meet their needs faces continued congestion.

    This seems to have emboldened management to keep raising prices. Clients appear undeterred. Chips are generally the most important item in a device — be it a flashy new iPhone or high-end server — and the higher cost is far outweighed by the greater power and efficiency that superior components provide. 

    I’ve warned before that TSMC ought to be careful. Regulators, clients and governments may worry that the company is becoming too powerful. Signs that it’s leveraging its power to raise prices could add those to concerns.

    Right now, though, everybody still needs TSMC. That’s a nice position to be in, while it lasts.

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    NIO, BYD Shares Hit Record on Wall Street Vote of Confidence

    This article by Esha Dey for Bloomberg may be of interest to subscribers. Here is a section:

    Chinese electric carmaker NIO Inc. received confidence votes from at least two Wall Street analysts on Wednesday, after JPMorgan and Citi both upgraded their ratings on the stock.

    While JPMorgan’s action was based on the expectation that the use of new-energy vehicles in China will quadruple by 2025 from last year’s levels, Citi pointed to multiple factors, including a very strong order backlog during the country’s Golden Week national holiday, an increase in NIO’s market share and a drop in battery costs.

    JPMorgan analyst Nick Lai expects the penetration of new- energy vehicles in China to accelerate, jumping to 20% of the market by 2025 from less than 5% in 2019. Shifting customer preferences will help drive the trend, along with an expected drop in the cost of electric-car and battery production, the
    analyst wrote in a note.
     

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    Waymo is opening its fully driverless service to the general public in Phoenix

    This article from Waymo.com may be of interest to subscribers. Here is a section:

    Beginning today, October 8, we’re excited to open up our fully driverless offering to Waymo One riders. Members of the public service can now take friends and family along on their rides and share their experience with the world. We’ll start with those who are already a part of Waymo One and, over the next several weeks, welcome more people directly into the service through our app (available on Google Play and the App Store). In the near term, 100% of our rides will be fully driverless. We expect our new fully driverless service to be very popular, and we’re thankful to our riders for their patience as we ramp up availability to serve demand. Later this year, after we've finished adding in-vehicle barriers between the front row and the rear passenger cabin for in-vehicle hygiene and safety, we'll also be re-introducing rides with a trained vehicle operator, which will add capacity and allow us to serve a larger geographical area.

    We’ve achieved this milestone with the thought and care that our riders expect from us. We’ve enhanced our health and safety policies and procedures throughout our fully-owned fleet, sought the feedback of our team, partners, riders, as well as federal, local, and state authorities, all while continuing to advance the Waymo Driver’s capabilities.

    To our entire community: thank you for being a part of this important journey. And to all the Waymonauts who’ve worked so hard getting us here: thanks for your dedication to our mission. Together, we’re building a safe and more accessible future with every autonomous mile we drive.

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    Tesla Lithium Foray Is Sign of Robust Demand, Top Producer Says

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Rather than a threat to existing producers, Tesla Inc.’s push into lithium mining is a sign of future demand strength, according to the largest producer of the key ingredient in batteries for electric vehicles.

    “They’re kicking the industry in the pants,” Eric Norris, head of lithium at Albemarle Corp., said in an interview. “The market interpreted it as a strong signal of value erosion, but I view it differently. It’s a sign of what needs to come to drive the vision they have for 2030.”

    Tesla’s foray into mining is at the center of the carmaker’s plan to cut battery costs and deliver on a promise to bring a $25,000 electric vehicle to market. Elon Musk told investors last month that Tesla has secured access to 10,000 acres of lithium-rich clay deposits in Nevada and planned to use a new, “very sustainable way” of extracting the metal. That news helped send lithium-producer shares tumbling, with Albemarle falling 16%, the the most on record.

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    High Conviction Calls Amid Cross Currents

    Thanks to a subscriber for this report from UBS which may be of interest. Here is a section on Amazon:

    Email of the day on my investments

    Hi Eoin, could you please state what your APPROXIMATE price objective is for XXX to know whether you see this more as an opportunistic trade or more of fundamental return to e.g., the 200dma? Thank you

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    U.S. Boosts Crude Sales to China, Forcing Saudis to Find Other Markets

    This article from Dow Jones Newswire may be of interest to subscribers. Here is a section:

    Earlier this year, China agreed to buy U.S. crude as part of a broader deal meant to ease rising trade tensions between the two world powers. The Trump administration agreed to cut some tariffs on Chinese goods in exchange for purchases of American farm, energy and manufacturing exports. ~

    China's buying so far is a long way from fulfilling commitments made in that deal, and to some extent it is simply restoring crude flows that were cut off amid the earlier U.S.-China trade tensions. As part of a deal, Beijing agreed in January to buy $52.4 billion worth of oil and liquefied-natural-gas from the U.S. by the end of 2021. The buying was delayed by the outbreak of the Covid-19 pandemic, but has ratcheted up more recently.

    “The Chinese had to catch up," said Petro-Logistics Chief Executive Daniel Gerber. That is now upending traditional oil-trade routes world-wide and further depressing some prices. Global prices have been hammered by falling demand caused by the pandemic.

    Amid the new U.S. shipments to China, Saudi Arabia recently cut prices for its crude for buyers in Asia, a move that could make that oil more attractive to other regional buyers. It is also now resorting to storing unsold oil at home and overseas, including at depots in Egypt, Singapore and China. Saudi Arabia's domestic crude-oil inventories rose 7% to 81 million barrels in the two weeks to Sept. 20, a level not seen since June, said Paris-based commodities-analysis company Kayrros.

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    Compact Nuclear Fusion Reactor Is "Very Likely to Work", Studies Suggest

    This article by Henry Fountain for the New York Times may be of interest to subscribers. Here is a section:

    Scientists developing a compact version of a nuclear fusion reactor have shown in a series of research papers that it should work, renewing hopes that the long-elusive goal of mimicking the way the sun produces energy might be achieved and eventually contribute to the fight against climate change.

    Construction of a reactor, called Sparc, which is being developed by researchers at the Massachusetts Institute of Technology and a spinoff company, Commonwealth Fusion Systems, is expected to begin next spring and take three or four years, the researchers and company officials said.

    Although many significant challenges remain, the company said construction would be followed by testing and, if successful, building of a power plant that could use fusion energy to generate electricity, beginning in the next decade.

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    Regeneron Gets the 'Ultimate Validation' After Trump's Treatment

    This article by Cristin Flanagan for Bloomberg may be of interest to subscribers. Here is a section:

    Regeneron Pharmaceuticals Inc. climbed the most in almost seven months on Monday after U.S. President Donald Trump received the biotech company’s antibody cocktail to treat Covid-19.

    President Trump’s treatment was the “ultimate validation” for Regeneron, according to SVB Leerink analyst Geoffrey Porges. Like Regeneron, Eli Lilly & Co. and AbCellera Biologics Inc. are developing an antibody therapy, not only as a treatment for the virus but also as a preventative.

    When used as a prophylactic, these products could be considered a passive vaccine as opposed to the active shots most people think of as a vaccine, Bloomberg Intelligence’s Sam Fazeli said last week. AstraZeneca Plc, as well as GlaxoSmithKline Plc and partner Vir Biotechnology Inc. are testing similar therapies.

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