GOAL IS SMOOTH
This year continues to be a tough one for automakers - unless their name is Tesla Motors Inc. (TSLA) , that is.
Tesla is up almost 6% Thursday, after posting earnings that beat expectations for the second quarter. Meanwhile, Tesla's Detroit rivals at Ford Motor Co. (F) have been struggling this year. Shares of Ford are down 9.4% since the calendar flipped to January, underperforming the S&P 500's massive rally by a very big margin.
In some ways, Ford and Tesla are cross-town rivals. While Ford still calls Detroit home, the firm has a big (and growing) presence in Silicon Valley, where it's working on plans to have fully autonomous vehicles in commercial operation by the year 2021. Simply put, Ford is targeting Tesla and its own autopilot functionality right now.
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At the same time, Ford has been ramping up its own electric car plans, with a plug-in F-150, Mustang and Transit all in the works for 2020.
While Ford is planning a very ambitious future, the present isn't looking quite so hot.
Ford started this week by reporting July sales that missed Wall Street's expectations by a big margin. Analysts had been expecting a 6.2% decline in sales, but Ford's unit sales actually dropped by 7.5%.
While the miss was unwelcome by Ford investors, it doesn't change Ford's price trajectory. Shares are still on the verge of carving out a long-term bottom. Here's how to trade it:
Ford has been forming an inverse head-and-shoulders pattern since mid-March, signaling the potential for a reversal higher. It's an ugly price pattern, but it's tradable.
The inverse head and shoulders is a technical reversal setup that indicates exhaustion among sellers. You can spot this price pattern by looking for two swing lows that bottom out at approximately the same level (the shoulders), separated by a lower low (the head). The buy signal comes on a move through Ford's neckline - that's currently at the $11.70 level.
Getting back to $11.70 will require a little patience but comes with considerable upside room once buyers muster the strength to push shares above that price, namely a push to prior highs set earlier in the year at $12.40. Moving through $11.70 is our signal that buyers are back in control of this stock.
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Ford's price momentum, measured by 14-day RSI up at the top of the price chart, has been in an uptrend of its own, making a series of higher lows on each of the inverse head and shoulder's three price reversals. That's a bullish divergence that signals buying pressure has been building in Ford despite its recent rout.
Wait for $11.70 to get crossed, then pull the trigger on the Ford trade.
Ford's shares fell 0.2% to $10.97 early Thursday afternoon. Tesla rose 6.7% to $347.83.
The feds will soon start helping employers answer tricky labor law questions, a form of technical assistance that was halted by the Obama administration. The Department of Labor plans to revive its old practice of giving opinion letters in response to queries from employers unsure how to comply with the Fair Labor Standards Act, the Davis Bacon wage act, the Family and Medical leave Act or other labor laws. Guidance form the Labor Depart can shield companies accused of violations of federal labor law. Showing that they followed the feds own advice and did their best to comply can limit the damages they are liable for if a court decides they broke the law. The one catch: The official in charge of the guidance letters is not on the job, one of the many presidential appointments that are hobbling federal agencies
Volvo is supposed to be a potent luxury car rival in the United States to Mercedes, BMW and Lexus, which are the market leaders. Its July sales show it is far short of that goal. Sales are actually crumbling. In July, U.S. sales dropped 18.8% to 6,967.July is one of a string of disappointing months for the brand, which is owned by China’s car giant Geely. Volvo represents an early effort by a Chinese company to make inroads into the American market. The attempt’s failure also shows up in Volvo’s sales for the first seven months of the year, with units down 9.2% to 41,072. Even Ford Motor Co.’s (NYSE: F) troubled Lincoln brand has done much better, with sales up 4.5% to 65,212.Sales of Volvo’s flagship, the All-New XC60, dropped 12.7% to 2,521 in July and are down 23% to 14,552. It is Volvo’s best-selling vehicle in the United States. Volvo has put its limited marketing muscle into the SUV, and its struggles show just how deep its troubles in America run.
One of Volvo’s issues is that, based on prominent research, people do not like its cars s much as those built by BMW, Audi, Mercedes, Lincoln, Cadillac, Jaguar and Lexus. All got better grades in the widely followed J.D. Power 2017 U.S. Automotive Performance, Execution and Layout (APEAL) Study. The research firm described the factors that went into its grading:The 2017 U.S. Automotive Performance, Execution and Layout (APEAL) Study measures owners’ emotional attachment and level of excitement across 77 attributes, ranging from the power they feel when they step on the gas to the sense of comfort and luxury they feel when climbing into the driver’s seat.J.D. Power queried 70,000 people to collect data for its conclusions.Volvo is also hamstrung by a limited model line, particularly compared to the top-selling Japanese luxury brand Lexus, owned by Toyota Motor Corp. (NYSE: TM), and the Big Three German car companies — Mercedes, BMW and Audi.Volvo’s reentry into the American market is a failure so far. It probably does not have the model line or brand strength to change that.
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Now that Amazon.com Inc. (NASDAQ: AMZN) has laid waste to traditional brick-and-mortar retailing, leapt to the top of the heap in cloud-storage and invented a whole new sector of voice-controlled home assistants, what can the behemoth tackle next? How about advertising?
The internet advertising duopoly of Alphabet Inc.’s (NASDAQ: GOOGL) Google and Facebook Inc. (NASDAQ: FB) snagged $79 billion and $27 billion, respectively, in 2016 ad sales. Amazon does not break out ad sales, but a report at Digiday cites eMarketer estimating 2016 ad sales at a paltry $500 million, rising to $1.5 billion in 2017 and to more than $2.4 billion by 2019.
London-based creative agency VCCP said that it saw advertisers switching paid search dollars from Google to Amazon over the past nine months and is seeing strong return on investment. Ad agency Group M reckons clients are spending 10 to 15 times more on Amazon paid search ads in every month this year compared with spending last year.
In the not-so-distant past, Amazon focused on search results and banner ads for its ad revenues, but that is changing fast as the company adds coupons, embedded buttons that add items to wish lists, and, maybe most important of all, an ad network that delivers ads to other websites.
The reasoning behind the push into an ad network is probably pretty simple: margins. Retail margins are notoriously slim, with 5% being a healthy level. Advertising profit margins could fall into a range of 20% to 30%.
Amazon Web Services (AWS) grew first-quarter revenue by 42% year over year to $3.66 billion. Operating income rose by 47% to $890, or about 24%. The company’s total reported net income for the quarter was $790 million.
In the second quarter of this year, Amazon reported net profit of $197 million on revenues of $38 billion. AWS revenues totaled $4.1 billion and operating income rose to $916 million.
AWS revenues have fallen for eight consecutive quarters, according to a report at CNBC, as Microsoft Corp. (NASDAQ: MSFT), along with Alphabet and Alibaba Group Holdings Inc. (NYSE: BABA), have continued to poach the cloud.
A threat from Amazon aimed at its paid and programmatic search market is nothing less than an existential threat to Google. The tussle is just getting started, but it bears watching