Wall Street Lunch: Tesla’s Q1 Deliveries Disappoint

Summary:

• Tesla’s Q1 deliveries fell short of expectations, with production and deliveries lower than the previous quarter and the same period last year.
• SLB to acquire ChampionX in an all-stock deal valued at $7.8B.
• Check out BofA’s picks for the most crowded stock within each of the 11 sectors of the S&P 500.

Listen below or on the go on Apple Podcasts and Spotify

Tesla Q1 deliveries miss already-lowered expectations. (0:16) After a century, the General Electric stock market era is over. (3:49) See the most crowded stocks in each sector. (4:39)

This is an abridged transcript of the podcast.

Tesla (NASDAQ:TSLA) is under pressure after Q1 deliveries disappointed.

The company said it delivered 386,810 vehicles in the first quarter and produced 433,371 vehicles. The deliveries tally missed the consensus estimate that had already been slashed significantly over the last three weeks. Model 3/Y production was 412,376 units vs. 439,194 consensus. By comparison, Tesla delivered a total of 484,507 vehicles in Q4 and 422,875 a year ago in Q1.

Tesla said the decline in volume was partially due to the early phase of the production ramp of the updated Model 3 at the Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.

On Monday, the EV announced price increases on certain models in China and the U.S. The development was not a surprise, as Tesla had warned a few weeks ago that customers should order vehicles soon in order to avoid higher pricing. The threat of higher prices may have brought in some extra sales at the very end of the quarter.

In today’s trading

Tesla’s decline hit growth stocks and the broader market. The Nasdaq (COMP.IND) is down -1.5%, and the S&P (SP500) is down -1%.

Also weighing on high-valuation stocks is the continued rise in the 10-year Treasury yield (US10Y), which has broken through what strategist Liz Young noted as a resistance level of 4.35% to near 4.4%, the highest level since November.

The February Job Openings and Labor Turnover Survey—or JOLTS—showed openings fairly steady at 8.756 million. That’s basically in line with the 8.76 million consensus and up slightly from a revised 8.748 million in January. The quits rate stayed steady at 2.2%.

Among active stocks

SLB (SLB) agreed to acquire ChampionX (CHX) in an all-stock deal, which it says will strengthen its leadership position in oilfield services with world-class production chemicals and artificial lift technologies.

Under the deal terms, ChampionX (CHX) shareholders will receive 0.735 share of SLB common stock in exchange for each ChampionX share. At closing, ChampionX shareholders will own ~9% of SLB’s outstanding common shares. Based on Monday’s closing prices, the deal values ChampionX (CHX) at about $7.8 billion, or $40.59 per share, a 14.7% premium.

Petco Health and Wellness Company (WOOF) slumped after a double downgrade from Bank of America to Underperform from Buy.

Analyst Robert Ohmes warned that Petco has lost much of its competitive bite, with its market share eroding to 4% from 7% in 2015. He noted that consumers have migrated to online sellers such as Amazon (AMZN) and Chewy (CHWY).

And Eaton (NYSE:ETN) was upgraded to Equal Weight from Underweight by analysts at Barclays, where analysts said the maker of electrical equipment is poised to increase sales as transportation and heating become more electrified while artificial intelligence boosts demand for power-hungry data centers.

In other news of note

It’s the end of the stock market era. General Electric, one of the 12 original companies in the 1896 Dow Jones Industrials, has officially split into three different and separately trading companies.

The GE ticker symbol now represents GE Aerospace (GE) following the completed spinoff of GE Vernova (GEV), the power and renewable energy business. GE HealthCare (GEHC) began trading in January 2023. The plan to split into three entities was announced in 2021.

General Electric was the last name of the original Dow 12, which started trading at 40.94 points, although some others trade publicly in some capacity. National Lead trades as NL Industries (NL), and Tennessee Coal & Iron became part of U.S. Steel (X). Parts of other members were bought up. Only the U.S. Leather Company disappeared completely.

And in the Wall Street Research Corner

BofA analysts screened for the most crowded stocks within each of the 11 S&P sectors. Analysts looked at the average rank score of relative weight and the percentage of funds owning the stock in each sector.

Crowded stocks can be subject to large swings from unexpected bearish news.

Among the names, Netflix (NFLX) was the most crowded in Communication Services (XLC), with 42.3% owing it. Chipotle (CMG) was the crowded name in Consumer Discretionary (XLY), with 26% of funds holding a long position. And rounding out the megacap sectors with Info Tech (XLK), ServiceNow (NOW) has 42% of funds holding shares.

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