GM Takes On Tesla With $27 Billion EV Investment | Sonos Is Making Noise With Near 30% Gain

MarketBites Investment Newsletter for 11/20/2020

Your daily dose of stock market commentary and most important investment and business news. written by investment professionals at Taylor Hoffman Capital Management.

Today’s Top Investment Stories
  1. GM Bets Big On Electrification
  2. Sonos Earnings Crescendo
What is driving the stock market today? – November 20th, 2020

– The tech-heavy NASDAQ index outperformed the overall market, as the stay-at-home trade came back into favor. Investors are more concerned about the economic impact of lockdowns, than the possibility of a Covid-19 vaccine. In a report published Thursday, the International Monetary Fund said elevated asset prices point to a disconnect of the real economy and a potential threat of financial stability.

– Claims for unemployment benefits rose to 742,000. According to OpenTable, the total number of seated restaurants has fallen nearly 59% from a year earlier; the worst tally in several months.

Coronavirus tracker: Per Johns Hopkins, the U.S. reported 176,580 new cases yesterday, while Europe had 251,160 new cases. United States Covid hospitalizations are at 79,410. The CDC urged Americans not to travel for Thanksgiving, as a spike in cases threatens to overwhelm hospital capacity. New York City is contemplating putting a halt to dining indoors.

– By Raymond Kanyo

Top Story 1: GM Bets Big On Electrification 

What is Happening?
GM will spend $27 billion on all-electric and autonomous vehicles. The investment will support GM’s plans to release 30 new EVs globally, with hopes of 1 million sales, all by 2025. More than 20 models are headed for North America. Will this help GM catch up to Tesla?

Why does this Matter?
More than half of GM’s capital spending and product development team is now devoted to electric and electric-autonomous vehicle programs. The investment seems to be working. Most new GM EVs will launch with a redesigned “ultium” battery cell, with a 450-mile range. GM hopes to lower battery costs in order to make EVs comparable in price to gas-powered vehicles.

“We are transitioning to an all-electric portfolio from a position of strength, and we’re focused on growth,” GM CEO Mary Barra said in a statement. “We can accelerate our EV plans because we are rapidly building a competitive advantage in batteries, software, vehicle integration, manufacturing, and customer experience.”

The first vehicle with the new batteries will be the GMC Hummer EV pickup, which is expected to debut next fall.

The Takeaway:
GM is betting big on electrification, to catch up to market-leader Tesla. While the electrification story sounds very exciting, GM will have to deal with the issue of cannibalizing its existing gas-powered vehicles. As a pure-play on electric vehicle technology, Tesla doesn’t face similar issues. Will GM pull off its ambitious transformation?

– By Raymond Kanyo

Top Story 2: Sonos Earnings Crescendo

What is Happening?

Sonos stock sees its best rally since IPO. Shares soared after a dynamic earnings report. The trend of in-house upgrades continues, as Covid-19 lockdowns don’t appear to be ending anytime soon.

Why does this Matter?

Investors have had many reasons to be concerned about Sonos in recent years. Big-tech was undercutting them on price, Sonos’ approach was retail heavy, and the firm was not turning a profit. Over the course of a year, things have changed.

Consumers have been staying at home more, and privacy concerns around smart-speakers have patrons concerned. Sonos’ unique ‘land and expand’ approach in consumer hardware is paying off. Return customers currently account for 41% of product registrations and 2% growth from the year prior. In addition, Sonos acquired 1.8M net-new households, which bodes well for future revenue growth.

The stock rallied 29.84% Thursday- its largest single-day gain ever.
The Takeaway:
Consumers will pay for quality sound, connectivity, and convenience. Sonos has built exceptional brand-loyalty. As data privacy continues to remain in the spotlight, expect Sonos to continue to flourish.

– By Jack Dunne

What else is happening:
The National Flood Insurance Program is $20B in debt – (read here)
Macy’s pleads case for not shutting down – (read here)
Qualcomm overhauls what it values for valuation – (read here)
Desire for secondary homes drives housing boom – (read here)
Deals & IPOs:
  • BuzzFeed acquiring HuffPost in stock deal  – (read here)
  • Chinese cosmetics firm ‘Yasten” seeks $617M IPO – (read here)
  • Russian dollar store ‘Fix Price’ to IPO – (read here)
  • Robinhood seeks advisers ahead of IPO – (read here)
Earnings Calendar:
Foot Locker ($FL), Hibbett Sports ($HIBB)
No earnings tomorrow! Enjoy your weekend 🙂
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