TOP 3 stocks October 2023

Tesla under pressure of falling margins. Are we expecting more declines?

Despite the correction of recent weeks, 2023 is a great success for Tesla. The stock is up 85% since the start of the year and some believe it may still be attractive as a long-term investment. So let's take a look at Tesla.

We've been warning about Tesla's earnings results for a long time. The most watched indicator, besides the number of cars delivered and produced, is the margin. And that has been severely compromised by Tesla's pricing policies. Indeed, Tesla has logically fought lower demand by getting cheaper, several times. So for Q3, we expected a significant margin reduction, which was finally confirmed.

Operating margin fell to 7.6%, compared to 17.2% a year ago. Moreover, for the first time since Q2 2019, Tesla missed market expectations for both profit and revenue. The stock reacted to the results with a big sell-off. In addition, Elon Musk expressed concern about the overall state of the global economy due to high-interest rates and expressed his intention to produce cheaper cars.

_{Tesla shares on D1 chart, MT4}

Tesla, however, has two aces up its sleeve. The first is a new planned factory in Mexico, where construction was already due to begin. That should help Tesla produce even more cars at lower costs.

The second is the long-announced Cybertruck. The first cars should be delivered to customers at the end of November. But the question mark hangs over the price tag. It should be around $70,000 for the two-motor version, well below the market average for electric pickups in the US. This would confirm Elon Musk's words about a more affordable pricing policy. Moreover, the Cybertruck should be a literal hit, with almost 2 million people having confirmed their interest and a waiting period of up to 5 years.

Just for comparison, Tesla is expected to produce around 1.8 million new cars in the full year 2023. However, given the falling prices, Tesla's margins are likely to continue to suffer. The stock may thus be vulnerable to further sell-offs. However, the stock's fall below $200 may be used as a buying opportunity by some investors, and given the new production capacity and Cybertruck, Tesla may be interesting as a long-term investment.
 

_{Tesla's quarterly sales by segment. Source: CNBC}

Why isn't Pfizer doing well? Is it time to buy?

Investors love growth and unfortunately, Pfizer is not offering it now. The gold mine for Pfizer was coronavirus and its vaccines. But the world is gradually forgetting about coronavirus and Pfizer stock is falling into oblivion. Since the beginning of the year, they have written down over 40% in value and are currently at their lowest point in over 3 years. The development of these shares seems a little unfair, they are at the same value as before the coronavirus, but Pfizer is a different company.

Revenues for 2022 were practically double compared to 2019. The same is true for earnings. So the company has a lot of resources to develop new drugs, so Pfizer is not a "one trick pony". The stock may also be attractive for long-term investors thanks to its interesting dividend, the yield is currently over 5.5% per year. Moreover, the coronavirus is not over yet, Pfizer has recently agreed with the US government to supply additional vaccines.
 

_{Pfizer shares on D1 chart, MT4}

To get investors excited again, however, Pfizer will need something new. So far, it hasn't been very successful. Pfizer is also in the race for an obesity drug, and its testing has been relatively successful - people lost weight faster than Novo Nordisk's rival drug, but interim results from the development phase have pointed to potential liver damage, putting Pfizer at a big disadvantage here against Eli Lilly and Novo Nordisk. The company does have several other promising projects up its sleeve - but the drugs must first pass the US FDA.

The stock has also been knocked by the expectations of the company itself, which revised earnings and revenue significantly lower. For this year, profits are expected to fall by as much as 75% year-on-year and sales by as much as 40%. The company even fell into a loss for the past quarter due to large write-downs. Sales numbers were not too good either - they fell 42% year-on-year and fell short of market expectations. Given this, we cannot now label Pfizer as a buy despite its attractive capitalization and dividend.

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