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June 2019

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About 90% of more than 8,000 Texas-based GOP delegates vote in favor of the direct-sales proposal

Tesla Motors Inc. (NASDAQ:TSLA) has been unsuccessful in gaining support from state regulators in Texas since 2013, as the lobby group of Texas Automobile Dealers Association (TADA) keeps overpowering Tesla representatives time and again. However, the electric vehicle (EV) maker has made some progress this year, following overwhelming support from the Republican Party over the direct-sales matter.

The Dallas Morning News reported recently that the Texas state GOP convention delegates endorsed Tesla for selling its vehicles directly to consumers, as roughly 90% of over 8,000 delegates voted in favor of the Tesla-backed language. In fact, the committee members rejected appeals by two key state GOP officials: former Republican national committeeman, Bill Crocker (D-Austin), and Rep. Roger Williams (D-Weatherford), who wanted the delegates to remove the proposal. While Mr. William is a car dealer, Mr. Crocker is a lawyer for car dealers.

At the convention, the company had a booth where it discussed its situation in Texas with the delegates. Under the existing franchising laws of the state, Tesla cannot conducts its business model or rely on third-party dealerships. It calls its stores “galleries” to bypass the dealership system and educate consumers about EVs in six retail locations in Austin, Dallas, Fort Worth, and Houston. Texans require placing orders at Tesla.com and receive deliveries in California.

David White, a Tesla spokesman in Texas, called for the end of the direct-sales restriction: “If Texas is truly ‘wide open’ for business, our elected officials should take the appropriate steps to end these frivolous regulations in 2017.” The latest support from the strongest party in Texas provides a massive assistance to the EV maker to form a new bill in order to sell vehicles directly via its Stores and Galleries. The company has found the weak link in the apparent impenetrable army of car dealers, which have stopped Tesla from expanding in the state.

Tesla still awaits the green signal from Texas Governor Greg Abbott, who questioned the company’s ability to provide strong customer service last year. Additionally, TADA members are not willing to give up their monopoly in Texas, as they believe that the existing laws “ensure competition and protect consumers.”

Meanwhile, Tesla has four service stations, 10 Superchargers, and 89 Destination Charging locations in Texas. Its service calls require routing through its offices in CA and it a special permit is required every time a customer wants to test drive a Tesla car.

Vale SA stock is down more than 11% during today’s trade, while Deutsche Bank reiterated its Buy rating on the stock

Vale SA (ADR) (NYSE:VALE) stock is trading at $4.24, down about 11.30% during today’s trade at the New York Stock Exchange.

Today, Deutsche Bank analysts’ Rene Kleyweg also commented on the implications for the Brazilian company, after the International Monetary Fund (IMF) announced the seizure of financial aid to Mozambique. Additionally, the government of United Kingdom also suspended the aid.

In his research note released today, Mr. Kleyweg reaffirmed his Buy rating on the stock with a 12-month price target of $6.50.

The analyst mentioned in his report: “These developments are all the more disappointing given the world forgave Mozambique’s tainted historic debt as recently as 2000.” The undisclosed guarantees were taken out by Pro-Indicus and Mozambique Asset Management, both of which have been involved in the activities in the maritime industry.

While sharing his thoughts on the implications for Vale, Deutsche Bank’s analyst said that the Rio de Janeiro, Brazil based logistic operator is in the process of finalizing a $2 billion – $2.7 billion project financial facility for the Nacala Infrastructure corridor which supports the Moatize coal operators along with other coal producers, the agricultural industry in Mozambique and Malawi and other economic activity.

The analyst also shared that the main participants in the facility are African Development Bank, Japan Bank for International Cooperation (JIBC) and the IFC – the private sector arm of the World Bank.

Furthermore, Mr. Kleyweg mentioned that it may be viewed as unacceptable for the IFC to move forward with a private sector transaction in a nation where its parent authority has withdrawn the aid. On the other hand, currently the IMF has not suspended the project finance activities in Mozambique.

Pacific Crest downgraded Skyworks Solutions stock from Overweight to Equal Weight, citing decline in iPhone shipments during the second half of 2016

Skyworks Solutions Inc (NASDAQ:SWKS) stock slipped more than 6% in today’s trading session, after analysts at Pacific Crest slashed rating on the chipmaker from Overweight to Sector Weight, citing concerns about the upcoming iPhone 7. The maker of radio frequency filters and modules has continued to face growing pressure from its investors and shareholders due to the industry-wide weakness stemming from the weak fundamentals in the semiconductor market.

Additionally, the company has also faced hardships due to the concerns originating from its main client, Apple Inc (NASDAQ:AAPL). Skyworks Solutions is known for providing advanced radio frequency (RF) solutions to different smartphone manufacturers. Due to the stagnating smartphone division, the company has continuously failed to stabilize its margins. Analysts at Pacific Crest have also thrown unsettling comments regarding the upcoming iPhone, as the research firm expects 15-20% decline in overall shipments during the second half of the current year.

Last week, analysts at Mizuho Securities also cut rating on the chipmaker to Neutral, down from its previous bullish stance. Mizuho Securities highlighted the growing uncertainties in the overall macro environment after Britain voted itself out of the European Union. Analysts at Mizuho Securities raised caution on the stock based on the seasonal weakness in Chinese smartphone market. The research firm remains confident that Skyworks Solutions will witness a slowdown in the end-market demand, which will in turn makes its second half of 2016 even more challenging.

The downturn in the smartphone sector also played its part in the company’s second quarter results. Skyworks Solutions revealed mixed numbers for its second quarter while providing weaker-than-expected guidance for its current quarter. The company expects to generate $750 million in total revenues in its second quarter, compared to the Street’s estimate of $775.55 million. Skyworks stock has now slumped a little over 25% since the start of FY16 compared to Dow Jones Index, which rose nearly 1.5% in the same period.

The government is requiring a firm commitment from the company before it gives an approval on the launch of Apple Stores

According to a statement given by a senior government official to Bloomberg, India may loosen its policies on local sourcing for the constructions of Apple Stores in India. The requirement for this is that Apple presents a detailed time frame to the government for local manufacturing plans. 

It’s been revealed that the Finance and Commerce ministries are currently engaged in talks with the company to accommodate a launch of the company without active factories. Apple would then be granted the ability to use the partners like Foxconn. 

In order to promote the local market, India currently requires foreign firms to source a minimum of 30 percent of components locally, however Apple sources most of its components from China. Apple only has one private factory owned by the company and the rest is all outsourced to other companies. Only recently has Apple started buying chargers from India.  

But these policies aren’t absolute, as there have been exceptions granted in the past, however Finance Minister Arun Jaitley has waived that possibility by ratifying the Foreign Investment Promotion Board’s decision. 

In order to broaden its hold on the growing market of India, Apple needs to incorporate first-party Apple Stores into the country. Currently, Apple’s devices are sold in the county via resellers. Furthermore, the company has also identified that since India is a developing market, most iPhones are above the buying power of normal citizens. Most phones sold in the country cost less than $150. Due to this, only 2 percent of the Indian phone market has been captured by Apple, and the small yet growing middle class is Apple’s ray of hope.

The Country Caller takes a look why the Brazilian government may allow other companies to operate in the Subsalt Region

The government’s regulation, making it mandatory for Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) to undertake a 30% financial stake in all subsea salt projects, came to an end in July. Now as reported by Reuters, that other oil and gas companies may also be taking a share in these deepwater regions.

As reported by Reuters, Jose Botelho, Head of Exploration and Production Policy at the energy ministry indicated: “Brazil may allow companies besides Petrobras to bid for the right to produce extra oil from areas it sold to the state-led oil company in 2010, the head of the exploration and production policy at the energy ministry.” He also added that the Brazil may allow the Rio de Janeiro based company “To pay with oil for adjustments in the price of the maximum 5 billion barrels of oil and equivalent natural gas it is allowed to produce in the areas.”

Petrobras, two years from now, was considered the backbone of the Brazilian economy. The company’s market capitalization exceeded $250 billion and had ambitious plans to becoming the next Exxon. 

The scandal has derailed the company’s prestige and reputation. The Brazilian federal police are refusing to take a step back and have arrested over 100 individuals in direct relation to the scandal. In addition to the scandal, the Brazilian state-run company isn’t that well off financially.

Petrobras has a debt load of over $126 billion, which is the highest for any energy company in the world. While leverage tends to help companies when the overall environment is good, it tends to haunt them when the industry is going in a downturn. The same is the case with Petrobras as a combination of low crude prices and high debt don’t fair out well. Thus, the initiative taken by the government is a step to relieve Petrobras of some its obligations and give it a breathing space in the current downturn.