by Louis Navellier

December 29, 2020

The biggest corporate news last week was that Apple (AAPL) is moving forward with its self-driving car technology and is targeting 2024 to produce a passenger vehicle that could include its own breakthrough battery technology. This news sent both Apple and solid-state battery company QuantumScape (QS) higher, with QS being the big winner, to a whopping $40+ billion market capitalization, even though it has no sales or earnings yet. Since I have been talking about QuantumScape for a few months now, I thought I should give you some background on Apple’s self-driving car, which is called Project Titan.

First of all, I am predicting right now that the Apple car will be made by VW Group, which invested $300 million in QuantumScape before it went public. There has been a “revolving door” between Apple’s Titan team and VW Group’s Project Artemis, nicknamed “LandJet,” to build the first truly revolutionary vehicle with solid-state batteries, used for Audi, Bentley and Porsche (all owned by VW Group).

The most important person that has gone back and forth from the Titan and LandJet teams is Alexander Hitzinger, who also helped Porsche develop its 919 racecar that won LeMans three times and set the track record at Nürburgring, Spa and other famous racetracks. What made the 919 racing car so amazing is that it was faster at Spa than a Formula 1 racecar with only a 4-cylinder engine.

Hitzinger was lured away from Apple’s Titan Project by VW Group, which announced in January that VW Autonomy would show off autonomous buses at the World Cup in 2022. Regarding Project Artemis, Hitzinger said, “The idea behind Artemis is to have a comprehensive understanding of the vehicle. When something is optimized, this has knock-on effects and these need to be understood.”  He added that, “The human-machine interface, the interior design, the exterior design, aerodynamics and the range are all interconnected. If I modify something on the exterior, it will impact aerodynamics and the efficiency.”

Both Apple and VW Group want to introduce their revolutionary vehicles in 2024, which is when QuantumScape will open its first plant to build solid-state batteries before building a second, bigger plant in 2025. Essentially, the timelines for both Apple and VW Group are identical, so I am expecting the new “people’s car” will be an Apple vehicle built by VW Group, which will also make a “LandJet” for Audi, Bentley and Porsche. By combining two highly respected brand names to make a new autonomous people’s car, Apple and VW are both likely to be big winners.

Interestingly, with all the “buzz” about the new Apple car and QuantumScape being the likely solid-state battery supplier, Tesla’s stock has been consolidating. The ESG money that has been chasing “disruptive change” like Tesla and QuantumScape, do not care about fundamentals – like sales, earnings and price-to-earnings ratios – but now that QuantumScape briefly hit a $47+ billion market capitalization last week, it is definitely overbought, since its first plant is not scheduled to open until 2024 and it is not forecasted to make money until 2027. Do not be surprised if QuantumScape consolidates its price in the upcoming months, since it has already soared over 400% since going public immediately after Thanksgiving!

Navellier & Associates does not own Quantumscape  Kensington Capital Acquisition Corp (QS), or Volkswagen in managed accounts, 1 account only owns Tesla per client request. Navellier & Associates does own Apple Computer (AAPL) in some managed accounts. Louis Navellier and his family do not own Quantumscape  Kensington Capital Acquisition Corp (QS), Volkswagen, or Tesla (TSLA) personally but they do own Apple Computer (AAPL) in a personal account.

The Economic Dashboard Continues to Flash Some “Caution” Lights

The economic news last week was mixed once again. Let’s start with the good news. The Commerce Department announced on Tuesday that third quarter GDP was revised up to a 33.4% annual pace, up from a 33.1% annual pace previously estimated, due to stronger consumer and business spending.

The bad news is that home sales and consumer confidence both dipped. Specifically, the National Association of Realtors announced on Tuesday that existing home sales declined 2.5% in November to an annual pace of 6.69 million. Home sales are likely being impacted by the fact that the inventory of existing homes for sale remains ultra-tight at a 2.3-month supply, which is the lowest level since records began in 1982. On the positive side, existing home sales have risen 25.8% over the last 12 months.

The Commerce Department reported on Wednesday that new home sales declined 11% in November to an annual pace of 841,000. New home sales peaked back in July when annual sales were running at an annual pace of 979,000. In the past 12 months, new home sales rose 20.8%. Median new home prices rose 2.2% in November to $335,300, so affordability issues may be starting to curtail new home sales.

The Conference Board reported on Tuesday that its consumer confidence index declined to 88.6 in December, down from 92.9 in November, the second straight monthly decline, bringing consumer confidence to its lowest level since summer as more Covid-19 restrictions have deflated consumer optimism. The “present situation” component plunged to 90.3 in December, down from 105.9 in November. This signals that consumers are still hurting, but the “expectations” component rose to 87.5 in December, up from 84.3 in November, so consumers are expecting things to get better after the Covid-19 restrictions are lifted.

Next up, the Commerce Department announced on Wednesday that durable goods orders rose 0.9% in November, the seventh straight monthly increase. Core goods orders, excluding defense orders, rose 0.4%, but that was down sharply from a 1.6% increase in October. Economists had expected core goods orders to increase 0.7%, so this report was indicative of how much growth is now decelerating.

The most interesting news was a report from the Commerce Department on Wednesday that consumer spending declined 0.4% in November. Even worse, personal income declined 1.1%, after declining a revised 0.6% in October. Economists were expecting a 0.3% decline. Clearly, Covid-19 restrictions are hurting personal income and overall economic activity. I should add that Economics 101 is all about the “velocity of money,” which is how fast money changes hands. Since Covid-19 restrictions are hindering commerce, and the savings rate is over three times higher, the velocity of money has slowed dramatically.

The Labor Department reported on Wednesday that weekly unemployment claims declined to 803,000 in the latest week, compared to an upwardly revised 892,000 the previous week. Continuing jobless claims also declined to 5.337 million vs. a revised 5.507 million in the previous week. Both figures were better than the economists’ consensus expectation of 880,000 and 5.56 million, respectively.

In the wake of the latest data, the Atlanta Fed finally revised its fourth quarter GDP estimate down to a +10.3% annual pace, down from 11.1% previously estimated. The next update from the Atlanta Fed will be on January 4th – and if holiday sales are lackluster, another downward GDP revision is likely.

Finally, details of the cyber attack on the U.S. government agencies remain murky, but SolarWinds (SWI) was definitely hit with malicious code. Secretary of State Mike Pompeo publicly blamed Russia, but specific details of who implemented the cyber attack are still unclear. As a result, our cloud computing and cyber security stocks continue to perform well due to fears of the possibility of more cyber attacks.

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Apple Moves into Self-Driving Auto Technology

Income Mail by Bryan Perry
Covid-19 Is Shaping Historic Changes

Growth Mail by Gary Alexander
The Pandemic That Saved America

Global Mail by Ivan Martchev
“America!” is Temporarily Closed

Sector Spotlight by Jason Bodner
How to Avoid Spreading “Viral Contagion” in 2021

View Full Archive
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Louis Navellier
CHIEF INVESTMENT OFFICER

Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

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