There are still a number of companies in the private market that are potential IPOs — but underwriters will likely take a cautious approach this year.
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Tesla Inc. is about to offer investors some hints of what’s to come, and one analyst thinks Wall Street should brace for “growing pains.”
Wells Fargo analyst Colin Langan expects about 13% growth in Tesla
TSLA,
deliveries next year, below the company’s 50% long-term target. The year already hasn’t gotten off to a great start for the electric-vehicle company, which has cut prices in China and paused production in Germany.
“There are also macroeconomic headwinds around elevated interest rates
& flattening EV adoption,” Langan wrote in a Tuesday note to clients. “Additionally, there are signs of moderating growth in all three key regions.”
Tesla is expected to share more about the landscape, and its outlook for the year, when it reports earnings next Wednesday afternoon. While Langan expressed caution about automotive earnings in general for the latest quarter, Tesla “screens the most at risk,” in his view.
Read: Nio’s stock tanks toward a record-tying loss streak as Tesla price cuts weigh
Wall Street will be focused on Tesla’s profit picture as well, and Langan predicts that the effect of price cuts outweighed the impact of higher volumes in that latest quarter. He models a 15.4% gross margin for the period, which he said is below the 17% consensus view on VisibleAlpha. FactSet lists a 16.7% consensus estimate.
Langan is interested to see how higher leasing rates in the U.S. will affect profits, “as leases would qualify for IRA 45W credits,” or those related to the Inflation Reduction Act.
“Profits on leased vehicles are realized over the lease life, rather than up front like a normal sale,” he added.
Don’t miss: Fisker loses its biggest bull as EV maker’s stock breaks the buck
Langan cut his price target on Tesla’s stock to $223 from $250, with the new target reflecting his expectations for lower long-term growth.
Tesla shares are off 2.5% in afternoon trading Wednesday.
Popular crypto analyst JD, known for predicting XRP’s bottom at the $0.28 price level, has warned of a batch of ‘dumb money’ traders missing on the next XRP price surge. According to JD, this set of traders may overlook the opportunity to get on before the next price surge, drawing parallels to past XRP price action.
Analyst JD Draws Parallels To Past XRP Trends
Despite the volatile nature of the crypto market, most cryptocurrencies are known to repeat or mirror past phenomena in their price action. As a result, it is very common for crypto analysts to look at the past and assess current trends when trying to predict the future movement of cryptocurrencies.
The expert compared the present price pattern to 2017, which was the year that XRP finally broke its boring price action that lasted from 2013 to 2017. A look through this cycle shows XRP underperforming when compared to other cryptocurrencies. As a result, the ‘dumb money’ traders complained and bolted, causing them to miss the astounding gain that came after.
However, XRP would then go on a 600x price gain after breaking out of the 4-year consolidation trendline. As a result, the crypto reached as high as $3.84 in January 2018, its current all-time high.
XRP has had its ups and downs this year stemming from different updates within the Ripple ecosystem. The crypto went on a price surge in the middle of the year, reaching a yearly high of $0.82 in July. XRP has traded below this price point since then, despite most cryptocurrencies registering new yearly highs in the last quarter of the year.
JD noted that XRP’s price action is currently mimicking the point at which it broke out of the consolidation in 2017, warning of ‘dumb money’ traders who might miss out on the next potential price surge.
#XRP – I remember 2017 when “Dumb money” capitulated after 4years of “boring emotional” action while other coins 🚀📈
“Dumb money” complained & capitulated missing the 600x gain LOL!
Present pattern looks exactly like 2017. Need more dumb money to complain before 🚀📈 LOL! $XRP… pic.twitter.com/tbyckfYA8V
— JD 🇵🇭 (@jaydee_757) December 26, 2023
Token price sitting at $0.64 Source: XRPUSD On Tradingview.com
XRP Price Target
XRP has grown massively since its 2017 days and now has a market cap of over $34 billion. When asked about a potential price target, JD noted that the repeat of a 600x in the case of a breakout would be unrealistic at this point. An 8-10x surge is more likely according to the current technicals. With XRP currently trading at $0.639, a 10x price surge would make a price target just over $6.
In another chart shared by the analyst, he noted that XRP’s price is currently forming a cup and handle formation in the 2-day timeframe. If this formation holds, a bullish breakout would see XRP reaching a $0.95 price target.
#XRP – As long as handle does not break down 50% of the size of cup, then C&H is in play!
This may be what we need for Symmetric triangle to breakout on Log Scale! Loaded up at 0.28, 0.33, 0.45, 0.52, and 0.59 during FEAR! Be ready both ways!
Retweet/like for updates!… pic.twitter.com/T67EhrHKO2
— JD 🇵🇭 (@jaydee_757) December 28, 2023
Featured image from The Bitcoin News, chart from Tradingview.com
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Delphi Labs general counsel Gabriel Shapiro warned that most crypto firms will struggle to comply with the new financial promotions regulations by the U.K. Financial Conduct Authority (FCA).
In a Sept. 11 post on X (formerly Twitter), Shapiro noted that strict compliance with the regulations may be feasible only for centralized exchanges and a select few established DeFi projects. However, he emphasized that even these entities could face challenges meeting the compliance requirements due to time constraints.
Shapiro further highlighted the financial challenges that might come with compliance. According to him, each project could require a minimum of $500,000 for legal counsel and development. He pointed out that covering these costs could necessitate reallocating funds from other areas.
While the crypto attorney conceded that the regulations would help to protect people “investing in coins,” he pointed out that the laws were incompatible with the industry because “most of the tech is peer to peer” and “many participants in the industry are not intermediaries or custodians.”
The new regulation
The U.K.’s FCA implemented a revised financial promotions regime set to take effect in October, impacting the marketing of cryptocurrency assets. These updated regulations impose stringent guidelines on how crypto firms can promote their services to residents of the United Kingdom. Notably, one consequence of these regulations is prohibiting crypto referral programs, among other restrictions.
Meanwhile, the law established various legitimate avenues for companies to market crypto assets to consumers in the United Kingdom. These pathways encompass communication by an authorized individual, communication by an unauthorized individual with approval from an authorized person, or contact by a company registered under the FCA Money Laundering Regulations (MLRs).
These new regulations have forced several crypto firms, including Luno and PayPal, to have a changed approach towards their services in the country. Due to the upcoming legislation, the two firms would restrict some of their services within the jurisdiction starting in October.
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The U.S. Securities and Exchange Commission (SEC) issued a stern warning to accounting firms on July 27, outlining the potential risks and liabilities of serving clients in the rapidly evolving crypto industry.
Paul Munter, Chief Accountant to the SEC, said that many crypto companies have wrongly stated that certain non-audit work is equivalent to an audit.
Munter wrote in his statement:
“… Clients’ marketing and terminology risks misleadingly suggesting that these alternative, non-audit arrangements are at parity with, or even more “precise” than, a financial statement audit. Such suggestions are false.”
He explained that accounting firms could be held responsible for their own statements and any incorrect statements made by their clients.
Munter said there are a “variety of facts and circumstances” under which auditing firms could be liable for violating antifraud provisions of securities regulation. He warned that such violations could cause the accounting firm and its members to be censured, reprimanded, or even suspended from appearing or practicing before the SEC.
Munter added that Office of the Chief Accountant (OCA) staff believe that accounting firms should make a “noisy withdrawal,” meaning breaking ties with dishonest crypto clients by making a public statement or informing the SEC.
He also suggested that auditing firms consider risks before taking on crypto clients, take precautions with existing clients that move into cryptocurrency, and set rules for how clients can describe their relationship with the auditor.
Crypto firms have trouble finding auditors
The warning is notable as certain accounting firms broke ties with the crypto sector in late 2022. Armanino and Mazars reportedly dropped crypto companies as clients in December. The Guardian also reported that Binance was unable to secure audits from the “Big Four” accounting firms, though some of those firms provide such services.
Those service denials were seemingly motivated by the then-recent failure of FTX. It is unclear what developments, if any, prompted the SEC’s latest warning.
More recent reports suggest that the problem remains. A Bloomberg survey from May suggested many crypto firms are unable to find major audit firms willing to serve them.
The post SEC cautions accounting firms against accommodating non-compliant crypto clients appeared first on CryptoSlate.