We Are So Back…

After ten years of research and development, Tim Apple is finally pulling the plug on Apple’s electric vehicle (EV) project. Because as we all know, EVs have lost their luster and given way to the business world’s new savior…artificial intelligence (AI). 😇

Bloomberg broke the news today, saying the tech giant disclosed the strategy shift internally and surprised the nearly 2,000 employees working on the project. Executives told staffers the project would begin winding down and that many of the car team’s employees would be shifted to its artificial intelligence division, focused on generative AI. 

Tesla CEO Elon Musk subtly celebrated the move with a post on X after years of doubting the company’s efforts would bear fruit. Shareholders also applauded, with the 1-minute chart below showing a price surge after the announcement, with the stock holding onto its gains into the close. 

While some investors are happy that Apple is shifting resources to the new AI “gold rush,” others view them throwing in the towel on electric vehicles as a contrarian signal for the space. Electric vehicle stocks, including Tesla, have been hit hard over the last two years amid demand challenges. 🪫

That’s caused many automakers to throttle their approach to the space, with traders waiting for a big news event like this to help form a short-term bottom in these stocks. We’ll have to see if their contrarian view pays off or if Apple’s retreat is just another data point signaling that the industry’s problems are here to stay. 🤷

One thing’s for sure: this move sums up the current market environment as well as anything else. 😵‍💫

Animal spirits have been a big theme of this newsletter since October, and boy, are things getting wild. While the mainstream media continues focusing on tech giants like Nvidia, investors and traders are searching far and wide for new opportunities to squeeze the shorts and make a killing. 🕵️‍♂️

Today’s surefire sign of this speculative fervor building in the market is everyone’s favorite non-meat meat stock, Beyond Meat. 🫨

The company’s share price is soaring despite reporting a $2.40 per share net loss and a nearly 10% YoY revenue decline to $73.70 million. While revenues beat expectations, its net loss was far wider than expected. 

Even the company’s net revenue guidance of $315 to $345 million for 2024 was lackluster compared to analyst estimates of $344.40 million. But management’s focus on cost-cutting and forecast for gross margins in the mid to high teens range sent investors into a frenzy. That would be a crazy difference compared to 2023, where gross margins were firmly in negative territory. 🤯

However, traders (and algos trading the news) do not care how the company plans to meet that outlandish forecast. All they heard was a 20-point increase in gross margin is coming this year, which would be an absolute game-changer for the company.

Objectively, this is a crazy measure the company is unlikely to meet, but with 36% of the float short, there’s a ton of squeeze potential. That’s why shares are up over 75% after hours and will likely remain on traders’ radars in the days and weeks ahead. 📈

And if you need more evidence that this “pain trade” for shorts is back in action, take a look at the charts of stocks like Carvana, Big Lots, Robinhood, and more. You’ll get the gist real quick. 😆

We all know how this will eventually end, but for now, the Bulls are partying like it’s 2021 all over again. Enjoy responsibly. 🍻

With the upcoming presidential election looming, the current administration is itching to accomplish more before a potential shakeup. While antitrust regulators have had a field day with big tech, airlines, grocery chains, and others this year, they’re taking another look at UnitedHealth, especially given its recent cybersecurity issues. 🕵️‍♂️

The Justice Department is poking around to figure out the relationship between the company’s UnitedHealthcare insurance unit and its Optum health-services division. They’ve asked how UnitedHealth’s acquisitions of doctor groups might affect competitors and consumers. 🤔

With UnitedHealth being the dominant U.S. health insurer in commercial markets, this isn’t the first time regulators have scrutinized the company. The Justice Department sued to block its acquisition of Change Healthcare Inc. in 2022 but ultimately failed in court.  

However, it’s still investigating the company’s planned acquisition of home-health company Amedsiys, among other relationships.

Given the recent aggressive nature of antitrust regulators, further scrutiny of UnitedHealth makes investors feel a bit uneasy. $UNH shares had already been under pressure because rising medical costs were hurting margins, so this added another layer of risk to the stock. ⚠️

As the image below shows, the Stocktwits community is currently negative on the stock. We’ll have to see if their negative approach continues to pay dividends. 🐻