The non-farm payrolls report released by the US Labor Department on Friday showed that US non-farm payrolls increased by 943,000 in July, with a previous increase of 850,000, much higher than expected; showing a local slowdown or even stagnation affected by the recurrence of the mutated virus, but the overall situation continues to improve.
As of July, the number of unemployed had fallen to 8.7 million from 9.5 million in June, the lowest since March 2020, and job openings may have exceeded the number of unemployed. The unemployment rate was 5.4%, the previous month was 5.9%, also much better than expected, and the Federal Reserve is expected to send a taper signal in August. FEB’s target unemployment rate is 3.5% pre-pandemic level.
Senior Fed officials have begun to outline in more detail the path to eventual QE reduction, saying that despite the resurgence of the epidemic, the economic recovery is strong. Fed laid the groundwork last Wednesday for the Fed to scale back its $120 billion asset purchase program and raise interest rates in 2023.
Some US equity strategists, bear on the US stocks right now, expecting the S&P 500 to fall 10% by the end of the year, and the decline will begin as early as next month. Suggest investors to focus on companies with strong cash flow and sound balance sheets. Rising interest rate is unfavorable to growing tech companies that needs massive funding for the growth ahead.
Biden’s ongoing new round of infrastructure progress is also noteworthy, with a key vote in the Senate next week. The USD1.2 trillion infrastructure bill includes funding for electric car charging stations, and the upcoming budget adjustment is expected to include electric vehicle-related incentives, bringing more catalysts to the rally in related stocks. Although the scale is significantly smaller than previously expected, the expected changes that may be brought about by the breakthrough are still noteworthy.
In fact, Biden announced a $174 billion development support plan for the electric car industry on March 31, 2021. These include a $100 billion discount for consumers to buy cars, a $15 billion charging pile construction, a $45 billion school bus and bus electrification program, and subsidies for new battery plants in the United States. It also provides a subsidy of $14 billion for the conversion of closed car factories into electric vehicle and parts factories.
GM has previously announced plans to invest $35 billion in electric vehicles between 2020 and 2025, of which about $8 billion will be used to produce batteries and will sell 1 million electric vehicles a year in the future.
Ford spends about $5 billion to $7 billion a year to maintain and upgrade its car plants with a capacity of between 5 million and 6 million. By contrast, over the past few years, Tesla has spent about $5 billion on new factories with a capacity of 1.5 million electric cars in Shanghai, Germany and Texas, which is roughly equivalent to $3 billion for every 1 million electric cars produced. According to this calculation, Ford will need to spend an additional $22 billion to upgrade its existing plants and increase the production capacity of electric cars.
If it costs $8 billion to produce batteries to sell 1 million electric cars, it would cost $64 billion to sell 8 million electric vehicles, or about 50 per cent of annual US light vehicle sales, by 2030, according to Mr Biden’s plan.
To achieve the goals set by Biden, this is equivalent to the need to invest nearly $100 billion over the next nine years (only in the United States). There are a lot of industries and companies that will be involved over the years, which is good news for electric car charging companies such as ChargePoint (CHPT).
In addition, lithium is needed to produce batteries, so the lithium mining industry must also increase production capacity. In 2020, global lithium mining is about 400000 tons, enough to be used for the production of 2 million to 3 million electric vehicles a year. If the United States is prepared to increase production to 8 million vehicles a year, coupled with production demand from other countries, the world will need to mine an additional 5 million tons of lithium a year over the next few years, which means a huge 13-fold growth for the lithium industry as a whole. The growth in demand is good news for mining companies.
The company will report results on August 12.
We saw some analysts raise its financial forecasts on the second quarter, the full year, and next year.
For the full year, consensus is $5.5 billion in revenue and $738 million for Ebitda) which will exceed its 2019 revenue level of $5bn with CARG of 50% historically. Some see higher revenue projection of $5.8 billion and Ebitda of $1.1 billion. This quarter results will give a good indication of the recovery pace of the company.
For 2022, we see a 30% CARG, so projects revenue of $7.7 billion and Ebitda of $1.7 billion, an even bigger gap above consensus, which stands at $7 billion and $1.2 billion, respectively.
The company’s “unit economics” advantages are going to begin to emerge more clearly in reported results. We note that 90% of Airbnb’s traffic comes direct to the site, with the company spending much less than peers on digital advertising. Airbnb CEO Brian Chesky addresses that question in a recent interview with Barron’s, noting that a recent recovery in the business from pandemic lows came with almost zero ad spending.
“Not only does this make Airbnb more insulated from digital ad inflation, it also provides more room for margin expansion when revenue accelerates, which we believe leads to significant revenue and Ebitda revision potential versus peers.
There was some further evidence last week of the ‘socialized growth’ or quality of life model that the Chinese government is aspiring for. The authorities announced additional measures to protect minors – a reduction in time and spending on gaming, whilst the idea was floated about taxation on gaming. We would expect further noise about regulations and taxation of industries that would be termed as ‘Vice’ in the west, such as tobacco and alcohol, going forward. In turn, this should have the benefits of improving the budget deficit Coincidentally, a new five-year (2021-2025) mass fitness program was announced last week with the intention of raising the proportion of people who regularly participate in physical exercise to 38.5% from 37.2% previously. China July CPI number was just out, up 1% vs 0.8% estimate. It is still trending high. We see any sectors that affects minors’ life and costs of living that drives up CPI would be the key areas that the authorities would eye on cracking down. They see it a more efficient and practical way to use administrative measures to condemn inflation. Investors have to be cautious on taking risk to bargain hunt post the sell-off. Markets will be volatile on these unpredictable policies headwind.
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