Tesla Tanks; The constellation turns to Gallo – The ugly fool

Thursday morning, the morning was contrasted on Wall Street. Cross currents in various sectors of the market have prompted stock market indices to move in different directions. Starting at 11:35 am EDT, the Dow Jones Industrial Average (DJINDICES: ^ DJI) was up 144 points to 26,362. S & P 500 (SNPINDEX: ^ GSPC) was unchanged at 2874, while the Nasdaq Composite (NASDAQINDEX: ^ IXIC) fell 17 points to 7879.

Among the leading actions, You're here (NASDAQ: TSLA) fell sharply after the company announced its production and delivery figures for the first quarter of 2019, below what most shareholders of the electric car manufacturer had hoped to see. Meanwhile, Constellation Brands (NYSE: STZ) has taken a new step in aligning its business with changing consumer tastes by selling some of its best-known wine brands instead of focusing on more promising opportunities.

Tesla hits the brakes

Tesla shares fell 9% after the electric vehicle specialist reported its latest statistics for the first quarter. Tesla reported that it produced 77,100 vehicles during the period, including 62,950 model 3 and 14,150 combined model S and model X. However, deliveries amounted to approximately 63,000 vehicles, 50,900 models 3 and 12,100 of the other two models. Although this is more than double what Tesla delivered in the first quarter of 2018, it has dropped by more than 30% compared to deliveries from the period that ended three months ago.

Tesla highlighted the challenges it faced throughout the quarter. A sharp increase in shipments in Europe and China has created new logistical hurdles for Tesla. The company revealed that it had delivered only half the volume of the quarter, just ten days from the end. Despite all efforts, Tesla was unable to deliver all of these vehicles to its customers, stating that there were approximately 10,600 units in transit around the world as of March 31st.

As a result, Tesla warned that its net profit would be negatively affected. The many adjustments to the pricing of Tesla vehicles will also contribute to lower numbers than many expected.

Two major questions remain unanswered, however. First, it's unclear how Tesla will solve the situation in the long run. With only one plant in the San Francisco Bay Area, the electric car maker sees a high probability that production will again exceed deliveries in the current quarter. In addition, shipments of the S and X models have declined considerably, and it is feared that the cheaper Model 3 could not cannibalize sales of higher-priced products, thereby undermining Tesla's long-term profit expectations. term.

The constellation chooses the pot over the wine

Constellation Brands' shares increased 4% following the release of the fourth quarter results of the liquor company. Constellation's results were better than expected, reflecting strong demand from its Corona and Modelo beer brands.

In a larger strategic shift, however, Constellation said it would sell some of its worst performing businesses. In particular, the company has specified 30 different brands of wines and spirits that it will sell to the private company E & J Gallo Winery for $ 1.7 billion. The sale will not completely divest Constellation's wine brand portfolio as many had expected before, but this will help improve the quality of its remaining holdings as the company focuses on its high-end and high-end products. margin.

Constellation's beer business has significantly outperformed its wine and spirits offering, and the company has also recognized the age-old threat that the legalization of marijuana represents more broadly for the alcoholic beverage industry. Many Constellation competitors struggled to get closer to the performances of Modelo and Corona. Meanwhile, Constellation's participation in Cover growth has already been extremely profitable from an investment point of view and the brewer remains optimistic about the prospects for cannabis. Investors are in agreement and appreciate the refinement that they see in Constellation's focus in the future.