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Investors will get a peek at Tesla’s third-quarter performance Wednesday afternoon.
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Two of 2020’s hottest companies will try to keep their momentum alive as earnings reporting season kicks into high gear this coming week.
Netflix Inc. NFLX, -2.05% has been one of the biggest beneficiaries of the COVID-19 crisis, as more people flocked to streaming services amid quarantine measures and a dearth of traditional new TV programming in the first half of the year. Now the question is whether that easy growth is in the past.
After adding nearly 27 million new paying subscribers in the first six months of 2020, Netflix warned investors to brace for a slowdown. Analysts expect only 3.8 million new paid subscribers for the third quarter when Netflix reports results Tuesday afternoon. That would mark its lowest quarterly pickup in more than a year.
There’s more to Netflix than subscriber growth, however, and some analysts are upbeat about other parts of the company’s story. The streaming giant seemed less impacted than other media companies by pandemic-induced production halts, according to Morgan Stanley’s Benjamin Swinburne. Both he and Jefferies analyst Alex Giaimo are also encouraged by a recent price hike in Canada, which suggests strong engagement with the Netflix platform and could signal a future price hike in the U.S. as well.
Full preview: Is Netflix about to raise prices in U.S.? Recent actions suggest it could happen
The COVID-19 pandemic hasn’t been quite as kind to Tesla Inc. TSLA, -2.05%, forcing factory shutdowns earlier this year, but you wouldn’t know that by looking at its stock, which has rocketed more than 400% higher so far in 2020. Even if Tesla is unable to meet its previously stated sales target of 500,000 vehicles over the course of 2020, investors may blame the shortfall on the pandemic and give the company a pass, per CFRA’s Nelson Garrett.
A key issue for Tesla’s Wednesday afternoon earnings call is how the company’s demand is holding up. Tesla delivered 124,100 Model 3 and Y vehicles combined in the third quarter, despite having the capacity to make at least 150,000, according to Bernstein analyst Toni Sacconaghi. That utilization rate was less “than what we have seen in prior quarters, begging the question of whether demand or production was the constraint,” he wrote.
Full preview: Investors are asking if Tesla’s sales guidance is intact
Netflix and Tesla highlight the busiest earnings reporting slate so far this quarter, with 84 members of the S&P 500 SPX, +0.01% and eight Dow Jones Industrial Average DJIA, +0.39% components due to report this week. Here are some other major themes.
Chip shots
Intel Corp.’s INTC, +0.57% Thursday afternoon report follows a disappointing showing three months back, when the company disclosed a delay for its next generation of chips and said that it might look for a third party to manufacture them.
In-depth: How did Intel lose its Silicon Valley crown?
Intel executives will be looking to restore confidence this time around, and Wedbush analyst Matt Bryson argued that the company “should handily exceed expectations” after issuing a forecast that he deemed conservative. The company could also benefit from improved PC and automotive demand, but it remains to be seen how much reassurance the company will be able to give on its long-term roadmap.
Fellow chipmaker Xilinx Inc. XLNX, -0.17% reports Wednesday. Its results will be in the spotlight more now that Advanced Micro Devices Inc. AMD, +0.04% is reportedly interested in purchasing the company.
For more: An AMD-Xilinx deal would be fraught with risk
iPhone signals
Telecommunications rivals Verizon Communications Inc. VZ, -0.18% and AT&T Inc. T, -0.43% may give some early indication about iPhone demand when they report Wednesday morning and Thursday morning, respectively. Preorders for Apple Inc.’s AAPL, -1.40% iPhone 12 and iPhone 12 Pro began Friday.
For more: The 5G iPhone is reigniting the subsidy wars
The two companies could also shed light on their promotional strategies for this year’s launch. AT&T in particular took an aggressive approach in offering $800 in bill credits to both new and existing customers who trade in an iPhone 8 or newer model. Verizon’s most attractive deal also comes out to an $800 subsidy, an analyst said, but it was limited to new subscribers.
AT&T’s existing-subscriber promotion could help the company retain subscribers at a time when rival T-Mobile US Inc. TMUS, -0.29% is improving the quality of its network, but history has shown that generous subsidies don’t necessarily pay off for carriers when the whole industry is offering the same sorts of deals.
Travel tales
After United Airlines Holdings Inc. UAL, -0.26% and Delta Air Lines Inc. DAL, +0.41% reported big losses and warned of prolonged recovery timelines due to the pandemic, Southwest Airlines Co. LUV, +2.26% and American Airlines Group Inc. AAL, +1.88% will offer their own views of the situation Thursday morning. “Southwest’s main goal is to avoid furloughs, but it seems increasing unlikely,” Cowen & Co. analyst Helane Becker wrote.
An even more dire view of the travel landscape could come from Royal Caribbean Group RCL, -0.92%, which has sailings on hold in nearly every market. The company is optimistic that it could see sailings resume later this year, but William Blair analyst Sharon Zackfia sees uncertainty to the timing and expects Royal Caribbean to see fourth-quarter capacity of 5% with occupancy levels of 50%.
Technically speaking
International Business Machine Corp. IBM, +0.83% already announced in-line preliminary results for the September quarter, but Morgan Stanley’s Katy Huberty said that stands in contrast with “improving IT spending data points.” She expects that the company will continue to lag peers as tech spending rebounds, and she’s especially focused on trends in the company’s cloud and cognitive software businesses when IBM reports Monday afternoon.
IBM earnings: Chief executive’s first big move will be more scrutinized than the numbers
Snap Inc. SNAP, -0.82% follows with its report Tuesday and its report will serve as the first signal on social-media advertising trends. Stifel analyst John Egbert expects that the company’s revenue growth “accelerated materially” from second-quarter levels as ad demand recently snapped back. “Despite a thin feature film slate in recent months, data / anecdotes from large agencies and advertisers regarding directional trends in the ad market have been largely positive since August,” he wrote.
Here comes the Dow
IBM’s Monday report kicks off a packed week of earnings reports for stocks in the Dow Jones Industrial Average. Procter & Gamble Co. PG, +0.38% and Travelers Cos. Inc. TRV, +0.60% both report Tuesday, followed by Verizon Wednesday morning. Coca-Cola Co. KO, +0.08% and Dow Inc. DOW, +0.59% are on the schedule for Thursday morning, with Intel that afternoon. American Express Co. AXP, +0.46% rounds out the week Friday morning.
