stock can’t go up forever and shares are finally falling in premarket trading Tuesday. Reports of recalls and Hertz-deal uncertainties are two reasons the stock might be down. A third reason, however, might be more responsible for the decline than the other two.
Tesla (ticker: TSLA) stock is down about 4.3% in premarket trading.
S&P 500
and
Dow Jones Industrial Average
futures are both little changed.
Tesla stock has been on a massive tear. It’s up eight of the past nine trading sessions and has gained 70% over the last three months. Its shares have been buoyed by signs that the company really has won the EV race as it signed a deal with Hertz (HTZ) for 100,000 electric vehicles and companies like
Ford
(F) and
General Motors
(GM) announced massive spending plans to try to close the gap.
No surprise, then, that the stock would react badly to headlines. First, Musk himself tweeted that Tesla had yet to sign a contract with
Hertz
(HTZZ). Then came the announcement that the company would be recalling 11,700 vehicles.
The Musk tweet, however, was intended as a positive. The Hertz deal is Tesla’s first large fleet sale. Fleet sales tend to be lower margin. Fleet buyers look for volume discounts and don’t often buy all the high-end options individual consumers do. Musk has assured investors, on
Twitter
(TWTR), a couple of times that Tesla is volume constrained—selling all the cars it can make—and isn’t giving any discounts these days.
The recall might be a bigger deal. The cars are being recalled because of a software communication error that can activate automatic emergency braking. The fix is an over-the-air software update. Tesla has faced higher regulator scrutiny over driver assistance features in recent months.
What’s more, Tesla recently introduced a “beta” version of its latest full self-driving software to Tesla drivers who qualified for the upgrade. Tesla believes its software makes vehicles safer. Regulators, however, still need to adjust to cars being improved by software updates and how to handle changes made to software to fix bugs.
Any news, however, could have sparked a sell of it Tesla stock. The stock is extremely overbought. Overbought is a technical term that looks at how fast a stock is rising or falling relative to its own history. When things get extreme stocks can revert to the mean. Tesla’s relative strength reading is at 94. A reading of 50 is, essentially, normal and a reading above 70 is when traders start looking for a drop.
Coming into Tuesday, shares were up about 18% over the past five days. Investors don’t really need an excuse to take profits. Tesla stock has a long way to go before it really starts to take a hit.
The company that has prided itself on its technology to outsource a lot of human work is suddenly referring the work right back to humans. Zillow Group’s automated home-flipping business has stopped pursuing new home acquisitions temporarily, Bloomberg reported on Sunday. In a statement for this article, a Zillow spokesperson said in an email it is “beyond operational capacity in [its] Zillow Offers business.” Zillow said it is now connecting homeowners looking to sell their home to its local Premier Agent partners.
The pause seems to be a case of poor planning—a surprising lapse for a company that has been in the online real-estate business for nearly 17 years. Rather than a cash issue, Zillow is saying it experienced supply constraints having to do with on-the-ground workers and vendors. Leave it to a technology company to develop an algorithm to predict home values, but mismanage the human aspect of its business.
To add insult to injury, Zillow’s biggest competitor seems to be handling high volumes just fine.
Opendoor Technologies
OPEN 3.20%
said it is “open for business and continues to scale and grow,” noting it has worked hard over the past seven years to ensure it can continue to deliver as it expands. While Zillow long predates Opendoor as a company, it mainly offered an online marketing platform for agents before adding iBuying in 2018.
Zillow said it purchased a record number of homes in the second quarter at 3,805, but that still paled in comparison to the 8,494 homes Opendoor purchased in the same period. It doesn’t seem as though the near-term business has completely flopped: The company says it is continuing to process the purchases of homes from sellers who are already under contract as quickly as possible. That means home purchases could still continue to grow sequentially in the fourth quarter, even with the pause. Zillow hasn’t publicly commented on its fourth-quarter buying forecast, but has said its third-quarter outlook implies a “step up” in purchase activity.
Rather than flip out, iBuying investors may want to look at Zillow’s news as an opportunity for its competitors. Opendoor is now active in 44 markets, including all but two of Zillow’s 25 markets. Zillow’s pause therefore spells a golden opportunity for Opendoor. Zillow hasn’t yet said when it will resume new home purchases, but an email from a Zillow Offers Advisor to an agent seen by the Journal suggests the pause will last through the end of 2021 at the least.
Zillow’s mismanagement also highlights a key strength for smaller competitor
Offerpad Solutions.
OPAD -0.24%
Led by a former real-estate agent, that company has long touted its ground game. Offerpad, which is now a publicly traded company after closing its merger with a special-purpose acquisition company in September, seems to have been ahead of the curve in terms of understanding how many workers to employ and where, which repairs need to get done and how to execute them efficiently. An analysis by BTIG Research shows Offerpad’s contribution profit per home sold was over 4.7 times that of Zillow’s last year.
Opendoor is now active in 44 markets, including all but two of Zillow’s 25 markets.
Photo:
Conor Ralph for The Wall Street Journal
But the news is also a signal that investors may want to start to tread more lightly around what has thus far been a banner year for the sector. The reality is that iBuyers have incredible amounts of market data, can plan acquisitions and inventory months in advance and have a number of levers to pull to slow or accelerate the business, according to Mike DelPrete, a real estate tech strategist and scholar-in-residence at the University of Colorado Boulder. Given that, it is unusual that Zillow’s pause happened so suddenly and across all its markets.
The U.S. real-estate market has finally started to cool a bit. On Friday, Redfin reported the median home sale price rose 14% year-over-year in September—the lowest growth rate since December 2020. Meanwhile, closed home sales and new listings of homes for sale both fell from a year earlier, by 5% and 9% respectively.
Thus far, no other major iBuyer has said it was pausing new acquisitions this year. As Mr. DelPrete notes, it is possible Opendoor and Offerpad began to slow their own buying commitments as the market started to change, while Zillow missed the signs. More likely, Zillow, which has consistently prophesied what it calls the “Great Reshuffling” amid a permanence in remote work, just neglected to do its own reshuffling on the ground.
The U.S. mortgage market involves some key players that play important roles in the process. Here’s what investors should understand and what risks they take when investing in the industry. WSJ’s Telis Demos explains. Photo: Getty Images/Martin Barraud
Canadian Pacific Railway Ltd. is planning to make a new, increased offer for Kansas City Southern , according to people familiar with the matter, reigniting a takeover battle with Canadian National Railway Co. for the coveted U.S. railroad.
Canadian Pacific’s board of directors met Monday to authorize a bid that values Kansas City Southern near $300 a share, the people said, or about $27 billion. There is no guarantee Canadian Pacific will follow through with the plan; if it does, it is expected to do so soon.
Kansas City Southern is the smallest of the nation’s major freight railroads. The company plays a big role in U.S.-Mexico trade, with a network stretching across both countries and contributing to its desirability as an acquisition target. Railroad takeovers are rare as regulators tend to view them warily, but Kansas City Southern is seen as one of the last operators of size that is potentially available for purchase. Its allure has only grown as the U.S. economy recovers from the slowdown triggered by the coronavirus pandemic.
Canadian Pacific had clinched a cash-and-stock deal with Kansas City Southern valued at around $275 a share, or $25 billion. Kansas City Southern later agreed to a sale to Canadian National instead after CN offered about $30 billion (then worth around $320 a share) and Canadian Pacific declined to raise its offer.
Kansas City Southern shares closed Monday at $269.60 apiece and rose 6.5% in after-hours trading after The Wall Street Journal reported on Canadian Pacific’s plans.
’ plans for space go far beyond the short trip he is slated to take there Tuesday.
The
Amazon.com Inc.
AMZN -1.59%
founder has poured billions into his Blue Origin LLC space venture over more than two decades, believing humanity must ultimately establish outposts across the solar system.
More immediately, Mr. Bezos’ company is seeking business in a space market that will triple in size to more than $1 trillion in annual sales by 2040, Morgan Stanley says, assuming rapid technological developments enable routine moon landings, asteroid mining and space tourism.
Blue Origin’s crew capsule interior. The company has spent years developing rockets, engines and vehicles.
Photo:
Blue Origin
His own giant leap comes when Blue Origin is scheduled to launch Mr. Bezos and three other people to the edge of space in an 11-minute flight, the first launch with passengers on the company’s New Shepard rocket.
A successful trip could provide traction in an emerging space-tourism market, which includes
Richard Branson’s
Virgin Galactic Holdings Inc.
Blue Origin’s broader challenge is winning the kind of large government contracts that provide a steady revenue stream and lend credibility to companies that secure them. Space Exploration Technologies Corp., the formal name for
Elon Musk’s
SpaceX, has jumped ahead of Blue Origin in winning those deals.
For years, Blue Origin has been building up operations and developing a portfolio of rockets, engines and vehicles. That push has been animated by what Mr. Bezos has described as his passion for space. He has cited the Apollo 11 moon-landing mission as a foundational moment for him and referenced science-fiction writers like Arthur C. Clarke and the scientist and author Carl Sagan in speeches.
A New Shepard rocket launch.
Photo:
Blue Origin
“If we’re out in the solar system, we can have a trillion humans in the solar system, which means we’d have a thousand Mozarts and a thousand Einsteins. This would be an incredible civilization,” Mr. Bezos said during a speech two years ago. To that end, Blue Origin can lower the cost of space launches, in part by developing reusable rockets, Mr. Bezos has said.
The talk from the Amazon founder has been paired with major financial commitments. Mr. Bezos has disclosed he has sold $1 billion in Amazon stock annually to fund Blue Origin.
After founding Blue Origin in 2000, Mr. Bezos began acquiring hundreds of thousands of acres of land in West Texas for the company in the early part of that decade, telling a newspaper in the area in 2005 he wanted to build a rocket launchpad on the property.
Now, in addition to the launch site in Texas, the company has facilities in Florida, California, Alabama and Washington, D.C., as well as headquarters outside of Seattle. It employs more than 3,500 people, including Chief Executive
Bob Smith,
a former executive at
Honeywell International Inc.’s
aerospace unit. The privately owned Blue Origin doesn’t release financial statements.
Mr. Bezos is “doing what he did with Amazon, which is to roll over every nickel he could get into capital equipment and innovation,” said
Howard McCurdy,
a professor at American University who has written about space and the National Aeronautics and Space Administration.
Richard Branson successfully traveled to the edge of space on Sunday, and Jeff Bezos isn’t far behind. But the two billionaire founders’ spacecrafts, flight logistics and altitudes have some differences. Photo illustration: Laura Kammermann
This year, Blue Origin intends to conduct two additional flights with passengers on the New Shepard following Tuesday’s launch, executives said Sunday at a briefing. Mr. Smith didn’t specify how much the company is selling tickets for.
“Willingness to pay continues to be quite high. Our early flights are going for a very good price,” he said.
Outside of the emerging space-tourism market, SpaceX has gained a deeper footing with space-related agencies in Washington. NASA and the Pentagon have spent $2.8 billion tied to 52 prime contracts won by the company led by Mr. Musk over the past 14 federal fiscal years, according to a federal spending database. They have spent $496.5 million in 33 contracts won by Blue Origin over that period.
Blue Origin didn’t respond to questions about competition with SpaceX or its plans for working with government agencies. Mr. Smith has in the past said the company wants to gain work with such customers.
The two companies are sparring over a deal to build a moon lander for a trip planned for 2024. The Apollo 11 moon lander reached the moon in 1969 on July 20, the same date for Mr. Bezos’ scheduled space trip on Tuesday. NASA awarded SpaceX the lander contract in April, but Blue Origin protested that decision with the U.S. Government Accountability Office, a move that could lead to NASA rebidding the contract.
The accountability agency is expected to issue a decision on Blue Origin’s case by Aug. 4. The Dynetics unit of
Leidos Holdings Inc.
also competed for the lander and filed a protest.
SpaceX is now the most prolific launcher, sending up 23 rockets so far this year, according to Federal Aviation Administration data covering licensed launches. Its reusable rockets help cut the cost of reaching space, a strategy also pursued by Blue Origin, which has completed nine such launches since late 2017.
“They need to have a track record,” said
Marco Cáceres,
a space analyst at aerospace consulting firm Teal Group, referring to Blue Origin.
The New Shepard rocket scheduled to go up Tuesday has been designed for tourist trips into suborbital space, with a six-person gumdrop-shaped capsule and windows stretching 3.5 feet by 2.3 feet along its sides. Along with the Amazon founder, the craft’s passengers are Mark Bezos, Mr. Bezos’ brother; Wally Funk, an 82-year-old pilot who graduated in the 1960s from a program for female astronauts; and Oliver Daemen, an 18-year-old Dutch student, the company’s first paying customer.
The company also has been developing the New Glenn rocket, a vehicle that will stand 321 feet tall and is designed to use seven main engines to lift large payloads to orbit. In February, Blue Origin said it had made progress on several hardware components for the rocket and that it was targeting a maiden flight for New Glenn toward the end of next year.
Blue Origin has struck deals to push its technology into the space market. The company is developing a new rocket engine for United Launch Alliance, which launches satellites for the Pentagon and U.S. spy agencies. The engine, which will replace the Russian-made motors now used, is behind schedule. Last week, NASA said Ultra Safe Nuclear Technologies, a Seattle company, would join with Blue Origin,
General Electric Co.
and other firms to design concepts for nuclear-propulsion systems that could power vehicles into deep space.
Blue Origin’s “aspirations are to become a company like SpaceX, like
Boeing,
like
Lockheed Martin,
” said
John Logsdon,
the former director of the Space Policy Institute at George Washington University.
Write to Micah Maidenberg at micah.maidenberg@wsj.com and Doug Cameron at doug.cameron@wsj.com
Contract drug manufacturer Catalent Inc. is expanding its U.S. production of the Covid-19 vaccine from Moderna Inc., a development that could ensure the U.S. has ample supply as it ramps up vaccinations.
Catalent has reached an agreement with Moderna that will increase the speed of vaccine output at the contract manufacturer’s Bloomington, Ind., plant this month to about 400 vials a minute, according to people familiar with the matter.
Catalent will shift manufacturing of the shot to one faster production line from two slower ones. New doses will be ready for shipping starting next month, the people said, and the upgraded plant will be able fill an additional 80 million vials a year.
The expansion will help Moderna reach its goal of supplying an additional 100 million doses to the U.S. by the end of May and another 100 million doses by the end of July.
Production in the U.S. of several authorized vaccines has picked up speed in recent weeks, as manufacturers have scaled up production lines and taken other steps to increase output.
