Tesla slumps, Rivian surges, Disney misses subscriber target, Burberry hit by tourist shortfall, and Johnson Matthey pulls out of EV battery tech market

“The FTSE 100 started Thursday on the front foot, shrugging off any hangover from the latest surge in US inflation,” says AJ Bell Investment Director Russ Mould.

“There was plenty to unpick for investors from corporate events on the other side of the Atlantic overnight including divergent fortunes for two electric vehicle plays.

“Tesla continued to slump as founder Elon Musk sold $5 billion worth of shares after responding to a Twitter poll. Maybe running your business according to the whims of social media isn’t such a good idea.

“Heading in the opposite direction was newly listed electric truck and van maker Rivian Automotive which enjoyed a super-charged debut as investors reacted with excitement to its backing from Amazon and its R1T pick-up truck which has earned rave reviews since its recent launch.

“While Americans may have bought into the idea of going electric with their vehicles to save the planet, it appears cutting out meat is proving a step too far as plant-based food firm Beyond Meat revealed a sluggish sales outlook.

“Disney was down in the dumps as its Disney+ platform missed subscriber growth targets as well as falling short on revenue and earnings. Delays to key releases and a mixed reaction to some of its more recent films and shows has set it back in what remains an extremely competitive streaming market.

“The House of Mouse needs to get its house back in order if it is to hit CEO Bob Chapek’s ambitious targets.”

Burberry

“There have been two pressure points for luxury goods firm Burberry during the pandemic – China and travel – and this helps explain why its recovery has been so uneven.

“Historically Burberry has been heavily reliant, particularly in terms of European sales, on Asian tourists buying items as part of their trip, whether that be in airport concessions or stores in popular destinations.

“With travel still restricted and some people reluctant to jet off on holiday in the same way they used to, this part of Burberry’s business is really struggling.

“This explains why sales are down on pre-pandemic levels in the Europe, Middle East, India and Africa region.

“Burberry’s weak performance here is detracting from an otherwise robust contribution from Asia Pacific and the Americas in particular – even if growth on the same period two years ago slowed in the second quarter for the group as a whole.

“Burberry was a canary in the coalmine for the wider market at the start of the pandemic given its significant exposure to China and, while the situation isn’t as bad as in 2020, the company’s business in the country has been affected by the recent resurgence in Covid-19 and weakening economic growth.

“Shareholders will hope these are short-term issues and there were more encouraging signs around the medium-term prospects for Burberry as digital sales’ contribution to the mix continues to build.

“Departing CEO Marco Gobbetti is handing over the business in better shape than he found it as he prepares to give way to his successor, Versace alumni Jonathan Akeroyd, next spring.“

Johnson Matthey

“Electric vehicle battery technology was meant to represent the future of Johnson Matthey. It underpinned the company’s growth plans and showed that the business, whose fortunes have historically been pinned to the combustion engine, was moving with the times.

“The decision to pull out of this market is a shock, and it looks to have cost Robert Macleod his job as chief executive. It takes a lot of guts to say something is not worth pursuing because the economics don’t stack up, but it’s the right thing to do if the business is to avoid spending more money that might not generate a positive return.

“The battery technology story has been the backbone of Johnson Matthey’s sales pitch for quite a few years and there will be a lot of disappointed investors on today’s news.

“The company currently makes most of its money from catalytic converters – it’s estimated one in three cars on the road worldwide has a Johnson Matthey catalytic converter. But this is arguably a part of the market heading towards terminal decline as the world transitions to electric vehicles.

“With battery technology no longer part of its growth plans, its future will now be more dependent on hydrogen where it will be under pressure to scale up existing interests. Fortunately, this is already a profitable part of the business, generating sales from fuel cells and hydrogen production technologies.

“A 12% share price decline is arguably a mild reaction to what initially reads like a drastic change in strategy. Buried at the bottom of the announcement is also a mild profit warning, saying that the trading outlook is towards the lower end of market expectations.

“Combined, these factors could have caused much worse share price declines than we’ve seen. That suggests that the company’s valuation was already cheap ahead of this news for a reason – that a group of sceptics were right to question Johnson Matthey’s ability to commercialise its battery technology. It’s becoming a very competitive place and arguably Johnson Matthey’s progress has been too slow.”

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