Earnings season is always an exciting time for investors and active traders as it provides direct insight into how major companies are doing and where they could be going in the future. While trading a binary event like earnings is extremely difficult, we do often see sharp rallies into the releases that can provide a quick trade. Long-term investors are not as interested in short-term price movements, but rather are more concerned with diving into the details behind major earnings reports to determine whether or not it’s a good idea to make adjustments to their portfolios. Regardless of whether you are a trader or an investor, knowing what earnings reports might move the market can pay off in a big way.
While one earnings report doesn’t make or break a company, they can help to give us clues about market sentiment and future growth prospects for companies. There are 3 companies reporting earnings in the coming weeks that every investor and trader should be watching. Let’s take a deeper look at them below.
All eyes are on Tesla next week as the company will report its Q3 earnings after the bell on October 21st. This has been one of the market-leading stocks throughout 2020 and the stock is up over 400% year-to-date. Any miss on top-line estimates or EPS could cause the stock to pull back sharply. How Tesla performs after the earnings release will give investors more insight into where EV stocks might be heading throughout the rest of the year, as many of the smaller EV names mirror Tesla’s price action. The company provided an update on Q3 deliveries early in October and beat expectations with 139,300 vehicle deliveries. However, it will be interesting to see what Elon Musk and Tesla’s management estimate Q4 deliveries to come in at, as there are demand concerns.
Many will be interested in hearing updates on the construction of new Tesla factories in Austin and Germany as well as any updates related to the Cybertruck. It’s also very important if Tesla reports a fifth-consecutive GAAP and Adjusted EPS profit, as this would increase its chances of joining the S&P 500 index. The company has been heavily reliant on regulatory credit revenue in recent quarters, which might be one of the reasons it still hasn’t been added to the index.
On October 20th, one of the biggest winners of the pandemic will report its Q3 earnings. Netflix is a company that has greatly benefitted from people staying home and streaming more digital entertainment content than ever before. However, there are plenty of new platforms competing with Netflix in the streaming wars that could be affecting the company’s market share. In Q2, Netflix posted very strong EPS growth and a 24.9% year-over-year increase in Revenue but still missed analyst expectations for EPS. Expectations are equally high for Q3.
The big number to watch here is the number of new subscribers the company added during the quarter, as this figure grew substantially during the first half of the year. Netflix added a record 10.1 million paid memberships in Q2 and nearly added the 28 million total paid subscribers from the entirety of 2019 during the first half of 2020. It will also be interesting to hear any updates surrounding new content production, as the pandemic has put a hold on filming. Delays to new content production could be viewed as bearish for the company going forward. Finally, keep an eye out for any news related to price changes for Netflix’s streaming platform, as this could cause existing subscribers to move to cheaper competitors.
Perhaps the most important earnings report to look out for in the coming weeks is Amazon. The mega-cap stock is up over 75% year-to-date and could rally to new all-time highs if it reports blowout numbers on October 29th. Amazon is a good gauge of sentiment for the overall market because when its stock is rallying the market seems to follow suit. This is because of Amazon’s massive $1.6 trillion market capitalization, which makes up a huge portion of the major indices. The company has been in the news lately for the wrong reasons thanks to anti-trust concerns and workers protesting over health and safety concerns.
We know that e-commerce companies have been the biggest beneficiaries of the pandemic, which means that analyst expectations for the company’s Q3 earnings are sky-high. Amazon Prime Day occurred this week, and there’s a good chance it was the most successful one ever. Analysts expect the company to bring in $9.7 billion in revenue from Prime Day this year, an increase of 43% from 2019. It’s a bit concerning to see a “sell the news” event after the stock rallied hard on Monday ahead of Prime Day, which makes the upcoming earnings release even more intriguing.
Before you consider Tesla, you'll want to hear this.
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