This week, the earnings season is set to increase, providing new data on the strength of corporate profits in the face of high inflationary pressures for investors.
The two main names announced this week include Netflix (NFLX) and Tesla (TSLA), which provide an early overview of how some mega-cap technology companies performed earlier this year.
Other names to be announced this week will expand on the various businesses, extending from last week’s bank-dominated results. Companies including United Airlines (UAL), American Express (AXP), Johnson & Johnson (JNJ) and Kimberly-Clark (KMB) are ready to report in the coming days.
In the earnings season so far, the results have been mixed, although there has been a sharp shift towards the number of financial names announced last week, including JPMorgan Chase (JPM) and Goldman Sachs (GS). 7% of the S&P 500’s index components have so far recorded real Q1 results, and 77% of these are topping Wall Street’s earnings (EPS) ratings, according to data from FactSet. The index’s estimated revenue growth rate is currently 5.1%, which, if carried across the season, represents the index’s lowest revenue growth rate since the fourth quarter of 2020.
Netflix is set to announce the results on Tuesday, with investors paying close attention to further signs of a slowdown in streaming giant growth after an epidemic-period surge in subscriber numbers.
Analysts estimate that Netflix added 2.51 million subscribers in the first quarter, the lowest since the second quarter of 2021. This brings the total number of Netflix subscribers to less than 225 million. During the same quarter last year, subscribers increased by nearly 4 million.
Although Netflix has already seen a slowdown in subscriber growth from the height of an epidemic, the exit from the streaming giant Russia in early March will further contribute to this decline. The Los Kados-based California-based company suspended its operations in Russia on March 6 in connection with the invasion of Ukraine, after which analysts further downgraded their subscribers’ ratings.
“We now expect tariff net additions of 1.45MM below the 2.5MM guideline given by Russia’s suspension (~ 1MM subs),” Cowen analyst John Blackledge wrote in a note last week. Due to low subscriber growth forecast, the company lowered its price target on Netflix from $ 600 to $ 590.
After the company announced price hikes for subscribers in the US and Canada in January, other analysts suggested that Netflix’s confusion or subscriber losses could increase quarterly. But others point out that the revenue from these price hikes will help Netflix create larger content slots and boost growth in less saturated markets internationally.
“Netflix seems to be approaching the UCAN (US and Canada) subscriber ceiling, and is pulling new levers to lower,” Wedbush analyst Michael Pachter wrote in a note. “Rising subscription prices in the West should stimulate growth in additional content production and other regions, and we expect cash flow to become positive in 2022 and beyond as directed by management. However, subscribers’ growth will occur primarily in underdeveloped areas. Are paying. “
“All episodes of a new season will have more content dumps being delivered at the same time because expensive consumers can switch from Netflix and switch to competitor service after seeing the content they want,” he added. “Sustained profit growth should continue as long as Netflix continues to raise subscription prices, but competition can control future price increases.”
Overall, Netflix is expected to report $ 2.91 GAAP revenue per share of $ 7.95 billion, an increase of only 11% over last year. In the same quarter of 2021, revenue grew 24%.
Shares of Netflix fell 43% in 2022, while the S&P 500 did not perform well against the 7.8% fall over the same period.
Meanwhile, another big company announcing the results this week is Tesla.
The electric vehicle maker is scheduled to release its quarterly report on Wednesday after the market closes. Prior to these results, Tesla announced more than 310,000 deliveries in the first three months of this year. This is 68% more than last year’s distribution. Tesla sought to achieve an average of 50% growth in annual vehicle supply.
However, production fell slightly over the quarter, reaching 305,407 in the first quarter compared to 305,840 in the final three months of 2021. Tesla, like many automakers, continues to struggle with sustainable delivery. With chain challenges and rising input costs, lead CEO Elon Musk suggested that the company could launch its own lithium mine for batteries when metal prices rise.
“Now Tesla has a high-quality problem of oversupply, and in this issue Model Ys, some Model 3s have been translated பல்வேறு 5-6 months late in various parts of the world,” wrote Wetbush analyst Dan Yves in a note. “The key to mitigating these issues is focusing on key Giga openings in Austin and Berlin, which will ease production barriers for Tesla worldwide.”
Earlier this month, Tesla officially launched the first vehicles made in Texas from its new Austin Gigafactory. At the launch of Tesla’s Cyber Rodeo on April 7, Musk said he aims to build the Tesla CyberTruck starting in 2023 and aims to produce 500,000 Model Y units a year.
The newly built US Gigafactory plays a key role in furthering Tesla’s production and meeting domestic demand, particularly in Tesla’s Shanghai Gigafactory region.
“We hope that by the end of 2022, Tesla will have a run rate capacity of about 1 million units per year, “Eves added. At the same time as flexibility, many automakers are struggling to get ground products. “
Shares of Tesla came under pressure on Thursday after Musk revealed that it had offered to buy social media company Twitter (TWTR) for $ 54.20 or about $ 43 billion a share, although it has outperformed the S&P 500 since the beginning of the year. . Many have indicated that Musk will have to sell Tesla shares if the deal is to go through.
In Tesla’s first quarter results, Wall Street expects to record revised revenue of $ 17.85 billion per share to $ 2.27, indicating 65% sales growth.
Monday: NAHB Housing Market Index, April (expected 77, March 79)
Tuesday: Housing starts, March (1.745 million expected, 1.769 million in February); Building permits, March (1.830 million expected, 1.859 million in February)
Wednesday: MBA mortgage applications, week ending April 15 (previous week -1.3%); Current home sales, March (5.78 million expected, 6.02 million in February); The Federal Reserve publishes the book Peugeot
Thursday: Philadelphia Fed Business Outlook Index, April (20.5 expected, 27.4 in March); Initial unemployment claims, the week ending April 16 (185,000 in the previous week); Continued claims, the week ending April 9 (1.475 million in the previous week); Leading index, March (0.3% expected, 0.3% in February)
Friday: S&P Global US Manufacturing PMI, April first (57.8 expected, 58.8 in March); S&P Global US Services BMI, first in April (58.1 expected, 58.0 in March); S&P Global US Composite BMI, first in April (57.7 in March)
Before Market Opening: Synchrony Financial (SYF), Bank of New York Mellon Corp. (BK), Bank of America (BAC), Charles Swap (SCHW)
After Market: JB Hunt Transport Services (JBHT)
Before the Market Opens: Fifth Third Bancorp. (FITP), Johnson & Johnson (JNJ), Citizens Financial Group (CFG), Halliburton (HAL), Trust Financial Corp. (DFC), Hasbro (HAS), Lockheed Martin (LMT)
After the market closes: Netflix (NFLX), IBM (IBM), First Horizon Corp. (FHN)
Before the Market Opens: Anthem (ANTM), Nasdaq (NDAQ), Baker Hughes (BKR), Procter & Gamble (PG), Abbott Laboratories (ABT)
After Market: CSX Corp. (CSX), United Airlines (UAL), Crown Castle International (CCI), Alcoa Corp. (AA), Equifax (EFX), Steel Dynamics (STLD), Tesla (TSLA), Denet Healthcare (THC), Kinder Morgan (KMI)
Before the market opens: Xerox (XRX), AT&T (T), Dow Inc. (DOW), Las Vegas Sands (LVS), Spirit Airlines (SAVE), Blackstone (BX), Danaher (DHR), American Airlines (AAL), Pool Corp. (POOL), Autonation (AN), Alaska Air Group (ALK), Tractor Supply Co. (TSCO), Philip Morris International (PM), Union Pacific (UNP),
After Market: Boston Beer Co. (SAM), Snap (SNAP)
Before the market opens: Verizon (VZ), Schlumberger (SLB), American Express (AXP), Kimberly-Clark (KMB)
After the market closes: Significant reports are not planned
Emily McCormick is a Yahoo Finance correspondent. Follow her on Twitter: emily_mcck
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