Tesla and Netflix: Mixed results; shares dropped in after-hours

Spread the love

The much-anticipated earnings result were released. Let’s dive into the main details.

Tesla: Strong results overshadowed by a poor margin

The EV-giant company pretty much beat Wall Street’s estimate on most indicators. The stock price was relatively stable after the earnings release but fell sharply during the earnings call.

The market conditions have not been kind to the EV sector. The auto industry is now flooded with more electric vehicle models, and inventories are rising, given a higher interest rate.

As Elon Musk spoked, ” We’re in turbulent times,”. Gross margin was the culprit, excluding credit sales, came at 18.1%, a drop from 18.8% compared to the first quarter. Analysts were expecting between 18% and 19%, but the lower target shows some uneasiness.

The gross profit margin dropped, as expected, by 11% annually. This is largely attributed due to the enormous price cut by Tesla in early 2023. The average selling price of Tesla cars in the second quarter came in at $45,000, a dramatic decrease from $56,000 during the same quarter in 2022.

Still, there are some positive comments. While profitability is low, Tesla is still navigating well with its advantage.

Elon Musk has shared his strategy that the focus of Tesla is to sell as many cars as possible because he believes that, ultimately, the company can make tons of money from the sale of autonomous driving software. Nonetheless, analysts are “old-school economists” to some extent. They are still laser-focused on profits from the sale of new cars. Hence, Elon Musk’s comments were a constipated comment to the minds of the analysts.

Netflix: Strong subscriber growth underwhelmed by a fall in revenue

The digital streaming program provider had a surprise for investors. The subscriber base rose by 5.89 million for the June quarter. The cheer slowly fades when it provides poor guidance that is lower than anticipated.

During the first quarter, Netflix added around 1.75 million subscribers, so the current number looks much better. This figure is largely attributed to the crackdown on password sharing.

Interestingly, the ad-supported membership tier saw robust growth and doubled compared to the first quarter. The downside is that the ad revenue thus far isn’t material to the finances at this stage, which definitely caused disappointment to traders who are aiming for a swift ramp-up in ads revenue.

Hence, with the expected looming recession and possible softer disposable income, the lower guidance will likely weigh on optimistic sentiment around the stock.

What’s on the menu today?

We have quite a number of items today. First, we will receive the Initial Jobless Claims, which will need to show a continuous rise in the number to reflect better a softening labour market, a positive sign the Fed aims to achieve. Any better than forecast reading will likely trigger inflation fear again.

Existing home sales are next and are likely to see a further drop from the prior period, given that fewer homeowners are willing to sell their houses, and a high mortgage rate is still deterring first-time homeowners from the market.

More earnings are coming in, so stay safe, friends!