Finimize - ⚔️ GM vs Tesla

What’s going on here?

General Motors (GM), the biggest US car company, announced third-quarter results that beat investors’ expectations and revved up its share price on Tuesday.

What does this mean?

Both GM’s revenue and profit came in ahead of expectations, leading it to hike its profit and cash flow forecast for the year. And while GM was characteristically quiet on giving too much away about next year’s expectations, it did offer a few clues. Overall, despite bracing for a tougher year, the car giant’s planning for profitability in 2025 to be about the same as in 2024. That’ll be down to GM being more efficient in producing SUVs and EVs (GM makes on loss on each electric vehicle it sells right now), being more disciplined on its spending in general, and turning around its China business which has lost almost $350 million this year.

Why should I care?

For markets: Driving investor confidence.

GM has exceeded analysts’ revenue forecasts for the last eight quarters, and beaten their revenue predictions for the last nine. It’s little wonder, then, that the carmaker’s stock has risen almost 40% this year, while shares of rivals Ford, Tesla, and Stellantis are down 11%, 12%, and 45% respectively. GM’s seemingly been able to do what others can’t: guzzling profit from its gas-guzzlers while still betting on an electric future, keeping investors optimistic about its adaptability and growth.

The bigger picture: GM’s doing what Tesla can’t.

Last quarter, GM’s average price per vehicle sold was over $49,000. That compares to Tesla’s roughly $45,000 average selling price, which has been coming down pretty rapidly as the EV wunderkind battles against tough competition. GM, meanwhile, has actually been able to increase prices, reduce discounts and incentives, and gain market share in the last few months – and that car buyers, as far as it’s concerned, have held up “remarkably well”. An enviable combination if ever carmakers saw one…

What’s going on here?

Shares of European software giant SAP jumped 4% and hit an all-time high on Tuesday after the company lifted its earnings forecast for the year.

What does this mean?

SAP’s not just Europe’s biggest software company: its rally helped it overtake semiconductor machinery maker ASML and become the region’s biggest tech player outright. That was thanks to its third-quarter earnings, which were pumped up by a 27% increase in cloud computing revenue and a 36% rise in sales from its Cloud ERP Suite. And AI has taken to the, uh, cloud: it featured in 30% of SAP’s new cloud contracts last quarter. That, along with “strategic cost management” – like curbing new hires – boosted SAP's operating profit by 28%. Even with an expected $3 billion expense for restructuring coming down the line, which could affect up to 10% of its workforce, SAP is optimistic. The company raised its revenue, profit, and free cash flow forecasts for the year.

Why should I care?

For markets: AI and cloud computing go together.

Some analysts have warned investors that they haven’t seen enough companies take full advantage of AI to be confident it’s not a flash in the pan. Folk keen on AI’s prospects can point to SAP, then. The company’s cloud growth and profit margins show how efficient AI can be. As the cloud sector thrives, investors are warming to companies like SAP that marry technological innovation with strong financial performance. And the numbers speak for themselves: SAP’s stock is up some 60% this year, outperforming the key German index’s 16% rise and the key European index’s 8% ascent.