Two highly anticipated earnings reports are due next week: streaming-TV specialist Netflix (NFLX 0.33%) and electric-car company Tesla (TSLA 1.56%). Netflix will release its fourth-quarter results on Tuesday, April 19, and Tesla will post its earnings for the same period the following day, on Wednesday, April 20.
These are brands that many investors and consumers have become familiar with, so you can bet a lot of eyes will be on the two companies' reports. Can they report strong-enough numbers and provide an optimistic-enough outlook to excite investors?
In many ways, Netflix's fourth quarter was great. Revenue of $7.9 billion for the period came in slightly ahead of management's guidance for revenue of $7.7 billion. Further, earnings per share of $1.33 was far higher than management's forecast for $0.80. Yet Netflix shares have been absolutely clobbered since the last report, falling a total of 32%. What gives?
There's been mounting concerns about the company's ability to continue growing its subscribers at meaningful rates as competition heats up. To this end, the company's net new subscriber additions of 8.28 million during Q4 were notably below management's guidance for 8.5 million. Further, management spooked investors by acknowledging the potential negative impact of competition on its growth trajectory.
Investors should look to see if increasing competition is making things even worse or if the company is managing these challenges well. The best way to find insight into this will likely be to read through the earnings report and listen to the earnings call, noting any remarks from management on the competitive landscape.
Electric-car maker Tesla reported spectacular first-quarter vehicle deliveries, serving up growth that could make one wonder whether the current supply issues facing auto companies really are that bad. Tesla's fourth-quarter deliveries came in at more than 310,000, growing 68% year over year.
But only modest sequential growth could be a sign of troubles ahead, particularly given the company's paused production at its factory in Shanghai at the moment. Many businesses in Shanghai are currently negatively impacted by a government-enforced COVID-19 lockdown. As of this writing, there's no publicly known planned date for a reopening of the factory.
The negative impact on deliveries will likely be significant. With a production capacity of more than 450,000 vehicles annually at the factory, it represents more than 42% of Tesla's reported production capacity at the end of the year.
Fortunately, Tesla recently started production at two new factories -- one in Germany and another in Texas. Investors are likely hoping that production at the two new factories could help offset some of the negative impact of its Shanghai lockdown. But Tesla's new factories could also be negatively impacted by the Shanghai lockdown if they rely on any parts production from any third-party suppliers based in Shanghai.
Investors should watch Tesla's quarterly report closely to get an update on how this lockdown is affecting the company.
Netflix will report its quarterly results after market close on Tuesday, April 19, and Tesla will provide its fourth-quarter update after market close the following day.