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Tesla falls on autopilot probe, Walmart earnings preview, Sonos jumps on patent case win

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  • WMT
  • SONO
  • TSLA

Yahoo Finance’s Jared Blikre reports on the day's trending tickers.

Video Transcript

ALEXIS CHRISTOFOROUS: Want to head to Jared Blikre now for a look at some stocks he has his eye on. And Jared, I know that this week was supposed to be a big one for Tesla's Elon Musk. He was gonna have his Artificial Intelligence Day. But now it looks like there may be some cold water poured on all of that. Tell us about it.

JARED BLIKRE: This relates to a federal probe involving 11 incidents over the last three and 1/2 years that caused 17 injuries and one fatality, all relating to the autopilot version of Tesla vehicles. And I want to get to the YFi interactive because in our EV heat map today, we can see quite a bit of weakness here-- Tesla, on the bottom row there, down 4 and 1/2%.

Let's take a look at what's happened recently in stock. So this is a year-to-date chart, and I've been pretty constructive on Tesla on this fledgling rally here-- doesn't look like a lot due to the scaling. But if we dial this back to a three-month look, we can see we have a series of higher lows and higher highs. So that is the definition of an uptrend. We just don't want this pullback to go too much farther, especially don't want to take out these levels here. But this could be considered a healthy correction.

Now, I will say that losing 700, kind of a big deal psychologically. So we'll have to see if that factors in. But yeah, not the best-- not the best beginning to a week when that Thursday, we do have Elon Musk, as you mentioned, his AI Day for Tesla. And it's an inside look. This is from his materials, an inside look of what's next for AI at Tesla beyond their vehicle fleet.

And so we know how analysts are looking beyond the production capacity of Tesla. They're looking five, 10 years down the road into all the disruption that is going to be had from these-- from Tesla and others that are engaging with autopilot. Nevertheless here, I think this is kind of a shot off the bow that maybe not all is well in Teslaland.

Also, I do have a quick update on Nio-- kind of similar situation here. Nio is down even more, down 5% following a report of a vehicle accident in China. This is a 12-car accident involving a Nio vehicle, and one fatality was reported in the incident.

ALEXIS CHRISTOFOROUS: All right. Wow, all right. Well, that's an ongoing, unfolding story for sure. Want to get to our earnings, though. We're still in earnings season. And we've got Walmart, a big one, out tomorrow. We'll see if they were able to beat. I think the expectation on the Street is that they were. And, you know, this is a high bar, I think, investors have set for Walmart, Jared.

JARED BLIKRE: Yes, and you can't get any higher than their previous quarter results. But fortunately, that's not a year-over-year comp issue just yet. I want to go to some of the numbers here. This is a chart of Walmart over the last three months, a consumer staple.

Admittedly, this is not a stock that moves a lot over the last year-- pretty much gone sideways. Nevertheless, these are the numbers that the Street is looking for. Total US comp sales, taking out gas, they expect that to be 3 and 1/2%. Adjusted EPS expectations are for $1.57 in revenue, 137.1 billion. That always gets me when I hear a number that large.

Also, looking at some of the commentary here, we have Morgan Stanley, which recommends the stock with an overweight rating-- price target 164. They see reason to be constructive, including conservative fiscal 2022 guidance, grocery share recapture, uplift from child care tax credit-- we know another $15 billion was sent out over the weekend-- the Delta variant improving sentiment around Walmart+ and advertising, Flipkart optionality, and one more thing, Algo EPS growth potential in fiscal 2023. These outweigh bearish reasons, including investment spending and inflationary cost pressures.

Just getting back to this chart here-- with the price so close to the upper end of this range that we've seen over the last year, if we get an acceleration above, we'll probably get some momentum off of that. Otherwise, probably gonna head back into some lower levels here, perhaps there or there, Alexis.

ALEXIS CHRISTOFOROUS: All right. Also, I'm noticing Sonos shares having a pretty good day here after it won the first round of its patent case against Google. What else do you know?

JARED BLIKRE: That's right. This is a big win for Sonos, and there is some other lawsuits that may have been pending or may have yet to be filed. And so this is probably going to juice the forward earnings potential of Sonos because of that factor.

Now, here is a chart going back to the very beginning-- their IPO in 2018. And we can see that they've been flagging here, just kind of basing for most of the year, not unlike the Walmart chart that we just saw. And they are fairly close to the upper end of this range here. So, uh, have to see if we can eventually punch through or simply end up, you know, trading back down to the bottom.

I do have some analyst commentary from this ruling-- Jefferies, which upgrades the stock to a buy from a hold, increasing the price target to $50 from $43, saying the ruling validates Sonos's strong patent portfolio and should help to boost its high-margin licensing business over time.

Jefferies expects other companies are also infringing on Sonos's patents. This is what I alluded to earlier. And the ruling, quote, "will set a precedent for other infringers." Also, Morgan Stanley holds it with an overweight price target of $51. The ruling was a best-case scenario for Sonos, an important milestone because it confirms the validity of Sonos's patents and brings Sonos one step closer to potentially better monetizing its industry-leading intellectual property. Alexis.