Today in the Market (8/1/2023)

Good Evening! Stocks exhibited differing movements at the beginning of August, retracting from a previous rally in July due to earnings reports that presented a variety of outcomes.

The S&P 500 experienced a 0.27% decline, while the Dow Jones saw a small increase of 0.20% during the day. The Nasdaq Composite fell the most by 0.43%.

LESS STARBIES?

Starbuck’s (SBUX) quarterly sales did not meet analysts’ estimates, indicating a potential deceleration in momentum for the coffee giant due to increased prices and constrained consumer spending.

  • Revenue: $9.2 Billion vs. $9.3 Billion Expected
  • Same Store Revenue: $10% vs. 11.12% Expected
  • Earnings Per Share: $1.00 vs. $0.95 Expected

Huge Growth Internationally though! The same-store results were enhanced by the growth in international sales. Consistent with anticipated results, there was an impressive rise of 24% in international same-store sales, which fell slightly short of the projected estimate of 24.5%. China significantly enhanced these outcomes by achieving a sales growth of 46%, surpassing the projected increase of 41.8%.

Going Forward… The earnings of Starbucks indicate a potential trend among American consumers to reduce their expenditure on non-essential services, such as getting their Starbies. However, the Starbucks loyalty app experienced an upsurge in popularity, despite a number of changes that became effective on February 13th. The total number of active members experienced a year-over-year increase of 15%, reaching a total of 31.4 million.

A POTENTIAL PROBELM

The National Highway Traffic Safety Administration (NHTSA) initiated an investigation into specific Tesla (TSLA) vehicles following complaints related to the loss of steering control and power steering. Consequently, Tesla shares experienced a decline of 2.38%.

Who should be worried? Based on the preliminary investigation report by the NHTSA, 12 distinct vehicle owners have reported instances where their Tesla Model 3s and Model Y SUVs encountered “loss of steering control.” These incidents were followed by warning messages indicating a reduction or complete disability of the power steering assist system. Among the group of 12 owners, five individuals reported experiencing a lack of ability to steer the vehicle, while the remaining seven owners indicated a loss of power steering, leading to an increased work of effort in controlling the vehicle.

What does this mean for Tesla? According to the NHTSA, the scope of the investigation covers approximately 280,000 sedans of the Model 3 and Model Y, specifically from the 2023 model year. There is a possibility that Tesla may encounter challenges in fixing a steering issue solely through a software update, potentially requiring a costly recall initiative involving the replacement of components.

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