Thursday 06/02/20

1. In CORONAVIRUS NEWS, markets rise on the prospects of a virus cure
2. In CAR NEWS, Tesla takes a tumble, GM and Ford take stock, more Brits ask about electric cars and the Nissan Leaf breaks a self-driving distance record
3. In CONSUMER/CONSUMER GOODS NEWS, contactless payment may get troublesome, Imperial Brands has a profit warning and Nike’s Alphafly sneakers survive
4. In INDIVIDUAL COMPANY NEWS, Spotify gets further into podcasts, GSK announces a profit warning and Vodafone counts the cost of stripping out Huawei
5. In OTHER NEWS, I bring you some massive waves…

So it looks like there could be a coronavirus cure…

Virus cure hopes revive the markets (The Times, Callum Jones and Tom Howard) highlights reports that Chinese academics may have found a drug to treat the coronavirus. British scientists also announced a breakthrough for a vaccine. The World Health Organisation’s official stance

remains: that there are “no known effective therapeutics” for the virus. * SO WHAT? *Markets recovered, as did the oil price, while further precautions were coming in thick and fast. LG pulled out of the upcoming Mobile World Congress techfest in Barcelona (incidentally, the organisers are now encouraging a ban on hand-shaking!), Adidas said it was closing down a “considerable” number of its 12,000 outlets across China and now every hospital in England is to create “priority assessment pods” for patients with suspected coronavirus.

Tesla stumbles, GM and Ford face slowing demand, UK electric car interest rises and the Nissan Leaf breaks a self-driving distance record…

Suspicions of investor bubble and China virus ravage Tesla shares (Daily Telegraph, Olivia Rudgard) shows that the Tesla share price fell by up to 20% yesterday. The investor buying frenzy turned into a sell-off as analysts speculated over the potential negative impact of the coronavirus on the company’s Shanghai gigafactory as factories across China have been shut down as part of efforts to contain the virus. * SO WHAT? * Yes, this could well impact first quarter production numbers, but I don’t think this is a long-term concern. I just think that investors were taking some money off the table after a massive rise in the share price. Cynics might even say that the coronavirus could actually be quite useful for Elon Musk (although I’m sure he’d never say this publicly) because if there were any production problems he could just blame any shortfalls on the virus – it’s like his first quarters “get-out-of-jail-free” card.

I touched on this yesterday, but GM and Ford face slowing demand as Tesla revs up (Wall Street Journal, Mike Colias) shows that both traditional car makers are predicting a downbeat 2020 after posting lacklustre results due to slower demand and rising costs. GM reported yesterday that earnings were hit by a 40-day strike that affected dozens of its US factories last year and it isn’t expecting this year to be great either because of a continued slowdown in demand in the US and Chinese car markets. * SO WHAT? * I guess the risk here is on the upside because everyone is expecting demand to slow down. Although I continue to believe that Tesla’s valuation is ridiculous in relative terms, the upcoming Model Y and

Cybertruck will generate a lot of excitement in the meantime – especially if the company delivers on time and addresses quality issues. More hype to come!

Back in the UK, Electric car queries soar over UK plan to ban polluting vehicles (Financial Times, Peter Campbell) shows the immediate reaction to news of the government bringing forward plans to ban the sale of petrol and diesel-powered cars from 2040 to 2035. Online searches for electric cars shot up by 162% versus normal levels while those for hybrids (which could also be banned) rose by an impressive, but more modest, 42%, according to figures from Auto Trader. * SO WHAT? * Data from the Society of Motor Manufacturers and Traders shows that sales of EVs tripled in January and they now make up 2.7% of the new car market – but let’s face it, overall car sales have been weakening for quite some time because of political and economic uncertainty and this tripling is from a laughably low base. Hybrid-powered cars also sold well – but there is now a bit of uncertainty surrounding them as the new targets INCLUDE them in the ban whereas the previous guidelines ALLOWED them if they could drive a reasonable distance using battery-only.

Nissan Leaf breaks UK record for longest self-driving car journey (The Guardian, Joanna Partridge) shows that a self-navigating car drove itself for 230 miles from Nissan’s technical centre in Bedfordshire to its manufacturing plant in Sunderland. The car traveled with traffic and along country lanes and the M1 and had two engineers in the car throughout the journey. It drove itself for 99% of the time, but human drivers stepped in when pulling into four service stations along the way for checks and charging. * SO WHAT? * Interesting, but overall meh IMO. The legal, insurance and ethical problems are just so vast and complicated that I think this is a pipe dream that we are not going to see adopted en masse for YEARS. Don’t get me wrong, I love the concept (it will give independence to those who may not have access) but it’s just so complicated at the moment. Clearly the tech is heading in the right direction but adoption is another matter.

Contactless payment may get troublesome, Imperial Brands warns on profits and Nike’s Alphafly get the OK…

A Brussels contactless crackdown could cost retailers dear (Daily Telegraph, James Cook) highlights the new Strong Customer Authentication (SCA) rules that force banks to verify a customer’s identity every time their payments go over €100. This means that if customers continue to push through this limit via contactless payments, they will have to input their PIN. * SO WHAT? * Sounds good from a consumer point of view, no? However, retailers are getting rather concerned about this because they think that consumers will just abandon their purchases as a report published by 451 Research commissioned by Stripe suggested that €57bn of payments across the European Union will be abandoned due to the extra checks. The new rules are obviously designed to make life more difficult for fraudsters to rack up massive bills on stolen cards – and these rules are likely

to stay in place even after the Brexit transition phase ends in December.

In Imperial brands warns on profit (Daily Telegraph, Simon Foy) we see that the tobacco giant issued a profits warning which it blamed on the US crackdown on vaping and a slowdown in customer demand. * SO WHAT? * All the tobacco companies are blaming poor performance on the vaping crackdown, but I think it is just a convenient excuse for them because they still generate a vast portion of their profits from “traditional” cigarettes. Vaping, up until fairly recently, gave them a potential way forward and an air of aspiration and virtue (they would say that they want a future without cigarettes – chuh, right 🤔) but that avenue appears to be closing down due to a rising number of unexplained deaths. They will, no doubt, be searching for The Next Big Thing in case vaping gets shut down IMO.

Nike Alphafly sneakers will also avoid Olympic ban (Wall Street Journal, Khadeeja Safdar and Rachel Bachman) continues the Nike sneaker controversy as track and field’s world governing body, World Athletics, not only gave the recent Vaporfly wonder-shoe the thumbs up, it gave its approval to the Air Zoom Alphafly – a prototype for which was used by Eliud Kipchoge to beat the 2-hour marathon mark). Rivals will have to rush to provide their athletes with similar shoes in the Tokyo Olympics. Wow!

Spotify buys more into podcasts, GSK has a profit warning and Vodafone counts the cost of Huawei-stripping…

Spotify to buy The Ringer as it steps up podcast push (Financial Times, Anna Nicolaou) shows the music streamer adding to its podcast capability by reaching an agreement to buy the sports-focused digital media group for an undisclosed sum. You may recall that Spotify purchased two other podcast specialists last year as the company continues in its efforts to broaden its content offering and differentiate itself from the likes of Apple and Amazon. Spotify says that it is prioritising a push into podcasts as profitability slows despite a continued growth in user numbers and likens this purchase as being aking to buying the podcast version of ESPN. * SO WHAT? * Spotify is doing the right thing by broadening its content base as it currently has to hand out most of its revenues in royalties to the music industry. Podcasts offer the company cheaper content that users value and so having the ability to offer exclusive quality content is a good thing.

GSK warns profits to fall as it steps up R&D spending (Financial Times, Sarah Neville and Sarah Provan) highlights tough times for UK drugmaker GSK as it said yesterday that profits would take a hit as they invest in research and new product launches. CEO Emma Walmsley also unveiled a two-year plan to split the company into two separate entities (pharmaceuticals/vaccines being one – and consumer health being the other). The company also indicated that it could make further asset sales to mitigate the costs of a break-up. On the plus side, its shingles vaccine, Shingrix, put in a solid performance. * SO WHAT? * Tough times, but this may ultimately be better for investors as they can focus more on specific areas of the business.

Following on from the recent UK government decision on the Chinese telecoms equipment giant, Huawei switch set to cost Vodafone €200m (The Times, Alex Ralph) shows that Vodafone has done its sums on how much it will cost to cut Huawei out from the most sensitive parts of its network. * SO WHAT? * For the moment, Vodafone’s CEO says that this would only necessitate minor changes BUT the problem is that if other European telcos have their own “market share” quotas imposed like the the UK, delays and big prices could ensue.

And finally, in other news…

I used to love surfing (one of a number of things I used to enjoy pre-kids!) and thought that this just looked incredible: Nazaré: the biggest waves in the world (Stars Insider, https://tinyurl.com/ubb9ekf). Just 😱😱😱