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 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.
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The COVID-19 pandemic hasn’t been quite as kind to Tesla Inc. TSLA, 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.
Netflix and Tesla highlight the busiest earnings reporting slate so far this quarter, with 84 members of the S&P 500 SPX and eight Dow Jones Industrial Average DJIA components due to report this week. Here are some other major themes.
I hope you have a successful week!
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