Summary

• Stocks of leading American companies Microsoft Corporation (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) have performed relatively well through the pandemic.
• Investors had their eyes on Tesla stocks in the anticipation of its ‘Battery Day’ event, which was held on Tuesday.
• Microsoft stocks have been gaining attention ahead of its upcoming Xbox launch in November.
• Both the stocks are popular among Canadian investors.

American companies Tesla Inc (NASDAQ: TSLA or TSLA:US) and Microsoft Corporation (NASDAQ: MSFT or MSFT:US) generated quite a fervor around their newest events. On Tuesday (September 22), Tesla held its much-awaited ‘Battery Day’ presentation, while Microsoft opened preorders for its upcoming Xbox Series S and Series X game consoles due for release in November. 

Having weathered the pandemic-triggered market crash in March and rebounded, stocks of Tesla and Microsoft are popular among Canadian investors. They are also currently in the limelight for their new product launches, which have a tendency of impacting their stock movement. Let us see how these companies have performed recently.

Tesla Inc (TSLA: US)
Current Stock Price: C$ 424.23

Tesla Inc has seen over 400 per cent year-to-date (YTD) surge in its stock price. After dropping to C$ 72.2 during the March lows, its scrips climbed 487 per cent in value in the last six months. Its rallying shares hit the highest note on September 1, touching C$ 498.32 a pop. It soon dropped in the second week of the month following a worldwide sell-off in tech stocks. However, since falling to C$ 330 on September 9, its stock price has gone up by 28 per cent.

(Tesla Stock YTD performance / Source: EODHD/Others, Thomson Reuters)

Originally set to be held in April, but postponed due to the pandemic, the highly anticipated ‘Battery Day’ had car enthusiasts and investors on the edge of the seat.

When the big day finally arrived, Tesla CEO Elon Musk unveiled a new range of electric vehicle batteries that are to be stronger, cheaper and longer-lasting than Tesla’s current batteries. He also dropped hints about a future Tesla car that would be as good as or even “slightly better” than its contemporaries and available for US$ 25,000.

Musk, however, added that this ‘cheaper’ Tesla car is at least three years away. He earlier tweeted that some of the innovations revealed at the ‘Battery Day’ event won’t see full production till 2022.

Since the ‘Battery Day’ event on Tuesday, Tesla stock prices saw a decline of about five per cent.

The COVID-19 outbreak in March led to a temporary shutdown of the main Tesla factory in Fremont, California. The factory remained closed for nearly half the second quarter in 2020, disrupting its production and, in turn, income. The electric car company saw a five per cent year-over-year decline in total revenues and total production. Its total gross profit, however, increased 38 per cent YoY in Q2 2020, amounting to US$ 1.26 billion. It generated a free cash flow of US$ 418 million in the second quarter and has resumed production to pre-pandemic levels.

Tesla Inc has a market cap of C$ 396 billion market cap company. It currently has a price-to-book (P/B) ratio of 40.17 and a price-to-cash flow (P/CF) ration of 158.70, as per TSX data.

Microsoft Corporations (TSX- MSFT:US) 
Current Share Price: C$ 207.42

The first wave of preorders for Microsoft’s Xbox Series X and S was sold out soon after it went live on Tuesday. Thanking people for the “record-breaking demand”, Xbox’s Twitter handle later announced that those who could not place a preorder would have to essentially wait for the new gaming consoles’ official launch on November 10.

The announcement of a launch date for the new Xbox consoles had created much noise among gamers as well as investors. Microsoft stocks made an impressive 51 per cent rebound in the last six months after the March lows amid a market crash. After hitting a record high of C$ 231.6 on September 3, its scrips slumped again during the tech stock sell-off in the second week of September. But the news of the upcoming Xbox release was followed by a rise in Microsoft’s share price. In the last 10 days, it recorded an average trading volume of 35.6 million. Since the preorders went live on Tuesday, its stocks have gained about 2.4 per cent.

(Microsoft Stock YTD performance / Source: EODHD/Others, Thomson Reuters)

Microsoft, which recently lost the bidding war for TikTok in the United States, has been faring well in its gaming business segment in the pandemic times.

Xbox has played a major role in influencing Microsoft’s overall performance. The tech giant saw a 65 per cent YoY increase in its Xbox content and services revenue in fourth fiscal quarter ending 30 June 2020. The growth in its Xbox division contributed to the company’s gaming revenue 64 per cent YoY rise in Q4 2020. The Xbox hardware division posted a 49 per cent YoY increase, mainly due to increased console sales. Microsoft’s total revenue stood at US$ 38 billion in the fourth quarter, a 13 per cent YoY increase. Its operating income was US $13.4 billion, an eight per cent YoY increase. Its new cloud computing service, Azure, also recorded a substantial growth of 47 per cent in the latest quarter.

The Xbox maker is also acquiring popular video game developer ZeniMax Media for $7.5 billion. ZeniMax is the parent firm of American video game publisher Bethesda Softworks, which is the creator of cult classics such as The Elder Scrolls, DOOM, Fallout, Wolfenstein, Starfield, Quake and Dishonored. Microsoft will also launch the latest installment of its flagship multi-billion-dollar Halo series in the upcoming Xbox.

Apart from the gaming segment, its applications such Microsoft 365, Dynamics 365, Teams, etc have also seen a rise in demand amid the coronavirus pandemic, as work-from-home became the new normal. The US$ 1.5 trillion company has a price-to-book (P/B) ratio of 13.27 and a price-to-cash flow (P/CF) ration of 25.6. It currently pays a quarterly dividend of US$ 0.56. The dividend yield is 1.08 per cent at the moment.

We won’t know until November 10 whether the Xbox Series S and Series X gaming consoles have managed to win hearts. The launch, however, has a likely potential of impacting the stock market.