Fed Decision and Sell-off, Tesla Reporting and Chip Shortages

27 Jan 2022

The main event of yesterday, and of the week as a whole, was the announcement of the results of the meeting of the Fed's Open Market Committee. Not to say that there were any special surprises, but the general hawkish tone of the Central Bank gave another reason for the sell-off in the US stock market.

Of the main results, it is worth noting the fact that the rate was not changed as expected, but it was noted that it is not far off (March). At the same time, the asset purchase program will end at the beginning of March, and the balance sheet reduction will begin after the start of rate hikes.

Actually there is something cleansing in these sales. On the one hand, they are massive (in the sense they sell shares of almost all companies), but you should not count on a massive recovery of all. In fact, there is a process of cleansing the grains from the tares and that which is dead will have to die. So we do not recommend buying everything in a row and indiscriminately.

Well, you can’t help but pass by Tesla reporting. The electric car market is a topic too hyped to ignore. From the latest forecasts: BloombergNEF analysts predict that 10 million electric vehicles will be sold worldwide this year.

But back to Tesla. Since the company publishes production and sales volumes in advance, no one expected any surprises from these key parameters and all attention was focused on when, for example, factories in Berlin and Austin will open, as well as what the company's vision is for the foreseeable future.

So for the year, revenues grew by 65% ​​(better than expected), profit by 760% (also better than expected), and production in Austin and Berlin will be actively increased in 2022.

Despite all this optimism, the hand does not rise to recommend buying Tesla shares - they are too overpriced, and for years to come.

But as for the threats, they are quite real, but they are not included in the price at all. Take, for example, the main scourge of the automotive industry in 2021 - the shortage of chips. Yes, Tesla somehow managed to get away with it last year, unlike other manufacturers. But the situation continues to be extremely unfavorable - even Musk admits this, calling the shortage of chips the main limiting factor for the company. In general, according to the latest data from the US Department of Commerce, the average stock of chips fell 8 (!) times from 40 days to less than 5. That is, roughly speaking, any even the slightest supply failure, for example, due to bad weather or a pandemic outbreak, and many enterprises will be forced to stop production due to lack of components.