What to know in the markets this week

This week, earnings season is set to ramp up, giving investors a new set of data on the strength of corporate earnings in the face of elevated inflation pressure.

Two of the biggest names reporting this week will include Netflix (NFLX) and Tesla (TSLA), offering a preliminary look at how some of the big-cap tech companies fared earlier in the year.

The other names to be reported this week will span a variety of industries, expanding from last week’s bank-dominated results. Carriers such as United Airlines (UAL), American Express (AXP), Johnson & Johnson (JNJ), and Kimberly-Clark (KMB) are set to report in the coming days.

For the earnings season so far, results have been mixed, though heavily skewed towards the host of financial names reporting last week, including JPMorgan Chase (JPM) and Goldman Sachs (GS). About 7% of the S&P 500 Index constituents have reported actual first-quarter results so far, and 77% of these have beaten Wall Street’s earnings-per-share (EPS) estimates, matching the five-year average percentage. , according to FactSet data. The estimated earnings growth rate for the index is currently 5.1%, which, if sustained through the rest of the season, would mark the lowest earnings growth rate for the index since the fourth quarter of 2020.

netflix earnings

Netflix is ​​set to report results on Tuesday, with investors closely watching for more signs of a slowdown in growth for the streaming giant after a surge in subscriber numbers during the pandemic era.

Analyst consensus estimates look for Netflix to have added around 2.51 million subscribers for the first quarter, which would mark the fewest since the second quarter of 2021. This would bring Netflix’s total subscribers to just under 225 million. In the same quarter last year, subscribers grew by almost 4 million.

While Netflix has already seen subscriber growth slow dramatically from a pandemic-era peak, the streaming giant’s departure from Russia in early March will also further contribute to the slowdown. The Los Gatos, California-based company suspended operations in Russia on March 6 due to the country’s invasion of Ukraine, and analysts have since lowered their subscriber estimates further.

“We now expect paid net adds of 1.45m, below guidance of 2.5m given Russia suspension (~1m subscribers),” Cowen analyst John Blackledge wrote in a note last week. pass. The firm also lowered its price target on Netflix to $590 a share from $600 previously, due to lower subscriber growth forecasts.

BRAZIL – 02/2022/03: In this photo illustration the Netflix logo is seen on a smartphone screen and in the background. (Photo illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Other analysts also suggested that Netflix’s subscriber loss could increase in the quarter after the company announced a price increase for subscribers in the US and Canada in January. But the revenue earned from these price increases could also be used to help Netflix build larger content slates and drive growth in less saturated markets internationally, others noted.

“Netflix appears to be hitting a ceiling in UCAN subscribers (US & Canada), and is pushing new levers to reduce churn,” Wedbush analyst Michael Pachter wrote in a note. “Subscription price increases in the West should drive additional content production and growth in other regions, and our bias is that cash flow will turn positive in 2022 and beyond, as management has indicated. However, subscriber growth is likely to occur primarily in less developed regions at lower subscription prices, with Western subscribers paying higher fees to fund new content.”

“Content dumps, where all episodes of a new season are delivered at the same instant, will likely maintain a high churn rate, as price-conscious consumers may switch from Netflix and switch to a competing service afterward. to see the content they want,” he added. “Sustainable earnings growth should continue as long as Netflix can continue to raise subscription prices, but competition may limit future price increases.”

Overall, Netflix is ​​expected to report GAAP earnings of $2.91 per share on revenue of $7.95 billion, which on the top line would represent just an 11% increase from last year. In the same quarter of 2021, revenue grew 24%.

Netflix shares are down 43% year-to-date in 2022, underperforming the S&P 500’s 7.8% drop over that same period.

tesla gains

Meanwhile, another major company to release results this week will be Tesla.

The electric vehicle maker is scheduled to release its quarterly report on Wednesday after the market close. Before these results, Tesla announced record deliveries of more than 310,000 during the first three months of this year. That represented a 68% jump from last year’s deliveries. Tesla has sought an average growth of 50% in annual vehicle deliveries.

However, production declined slightly quarter-over-quarter, with 305,407 produced in the first quarter compared to 305,840 during the last three months of 2021. Tesla, like many other automakers, has continued to grapple with persistent supply . chain challenges and rising input costs, prompting CEO Elon Musk to suggest the company could start mining its own lithium for batteries as metal prices soar.

“Right now Tesla has a high class issue of demand outstripping supply and this issue is now translating into ~5-6 month delays for Model Y’s, some Model 3’s in different parts of the world,” the analyst wrote. of Wedbush, Dan Ives, in a note. “The key to alleviating these issues centers on key Giga openings in Austin and Berlin, which will alleviate Tesla’s production bottlenecks globally.”

Just earlier this month, Tesla officially began delivering its first Texas-made vehicles from its new Austin Gigafactory. At Tesla’s “Cyber ​​Rodeo” launch party on April 7, Musk said the facility aimed to start building the Tesla Cybertruck as early as 2023 and aimed to make 500,000 Model Y units per year.

The newly created US Gigafactory will be instrumental in helping Tesla further ramp up production and help meet domestic demand, especially given international groans as Tesla’s Shanghai Gigafactory closed for weeks due to a COVID outbreak in the region.

We believe that by the end of 2022, Tesla will have run-rate capacity for a total of ~2 million units annually from approximately 1 million today,” Ives added. “While China’s zero COVID policy is causing closures in Shanghai for Tesla (and remains a worrying trend if it continues, seeing the forest through the trees with Austin and Berlin now live and on ramp, Musk & Co. will continue to flex its distribution muscles in the EV landscape while many other automakers struggle to get things off the ground.”

While Tesla shares have outperformed the S&P 500 so far this year, shares came under pressure on Thursday after Musk revealed he had made an offer to buy social media company Twitter (TWTR) for $54.20. per share, or about $43 billion in cash. . Many have noted that Musk would likely have to sell shares of Tesla to fund the deal if it went through.

In Tesla’s first quarter results, Wall Street expects the company to post adjusted earnings of $2.27 per share on revenue of $17.85 billion, representing 65% sales growth.

economic calendar

  • Monday: NAHB Housing Market Index, April (77 expected, 79 in March)

  • Tuesday: Housing starts, March (1,745 million expected, 1,769 million in February); Construction permits, March (1,830 million expected, 1,859 million in February)

  • Wednesday: MBA mortgage applications, week ending April 15 (-1.3% from the previous week); Used home sales, March (5.78 million expected, 6.02 million in February); The Federal Reserve publishes the Beige Book

  • Thursday: Philadelphia Fed Business Outlook Index, April (20.5 expected, 27.4 in March); Initial jobless claims, week ending April 16 (185,000 during the previous week); Continuing Claims, Week Ended April 9 (1.475 million during the previous week); Leading Index, March (0.3% expected, 0.3% in February)

  • Friday: S&P Global US Manufacturing PMI, preliminary for April (57.8 expected, 58.8 in March); S&P Global US Services PMI, preliminary for April (58.1 expected, 58.0 in March); S&P Global US Composite PMI, preliminary for April (57.7 in March)

earnings calendar

Monday

Before the market open: Synchrony Financial (SYF), Bank of New York Mellon Corp. (BK), Bank of America (BAC), Charles Schwab (SCHW)

After Market Close: JB Hunt Transport Services (JBHT)

Tuesday

Before market opening: Fifth Third Bancorp. (FITB), Johnson & Johnson (JNJ), Citizens Financial Group (CFG), Halliburton (HAL), Truist Financial Corp. (TFC), Hasbro (HAS), Lockheed Martin (LMT)

After Market Close: Netflix (NFLX), IBM (IBM), First Horizon Corp. (FHN)

Wednesday

Before the market open: Anthem (ANTM), Nasdaq (NDAQ), Baker Hughes (BKR), Procter & Gamble (PG), Abbott Laboratories (ABT)

After Market Close: CSX Corp. (CSX), United Airlines (UAL), Crown Castle International (CCI), Alcoa Corp. (AA), Equifax (EFX), Steel Dynamics (STLD), Tesla (TSLA), Tenet Healthcare (THC), Kinder Morgan (KMI)

Thursday

Before market opening: 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 Close: Boston Beer Co. (SAM), Snap (SNAP)

Friday

Before market open: Verizon (VZ), Schlumberger (SLB), American Express (AXP), Kimberly-Clark (KMB)

After market close: There are no notable reports scheduled for publication

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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