Stocks jumped out to a strong start to the new week as investors took some solace from measures taken internationally to calm bond markets in Europe and elsewhere. As of 10 a.m. ET Monday, the Nasdaq Composite (^IXIC 0.10%) was leading the way higher, climbing by more than 3%.
Adding to the already considerable volatility that investors have become accustomed to lately, third-quarter earnings season is ramping up, and some much-watched companies are on tap to reveal their latest financial results this week. Reports from Tesla (TSLA 12.06%) always draw attention not just from stock market aficionados but also from the general car-buying public, while tens of millions of Americans watch streaming video on Netflix (NFLX -3.92%) daily. What these two companies say in their reports could help determine whether the Nasdaq hangs onto its early gains or moves downward to new lows for the year.
Netflix starts things off
Netflix will be the first of these two stocks to report, with the streaming video pioneer scheduled to release its Q3 numbers after the end of regular trading on Tuesday. The stock is up more than 5% Monday morning, but shareholders are watching Netflix try to navigate a particularly challenging time in its history.
After a period of spectacular growth that only accelerated during the early years of the COVID-19 pandemic, Netflix has more or less plateaued. The company anticipates that its sequential revenue will actually decrease from where it was three months ago, with year-over-year gains falling to less than 5%. After two straight quarters during which its global paid membership numbers fell, Netflix is hopeful that it will be able to return to growth, but management's forecast for the addition of 1 million new memberships in Q3 is hardly the pace of expansion that Netflix shareholders have come to expect.
One big question will be how the introduction of a new ad-supported tier will affect viewer numbers. That won't show up in the third-quarter results, as the company isn't rolling out the offering to prospective subscribers until early November. Bullish investors are optimistic that the "basic with ads" service at less than half the price of its standard subscription will be appealing, but it could also remove one of the key features that distinguishes Netflix from many of its chief rivals.
Netflix stock is down by two-thirds from its peak, but it has also bounced back by more than 50% from its lowest level of the year. That makes now a critical time for shareholders, and the company will have to build up more confidence among its investor base in order to keep the stock in recovery mode.
Tesla looks to move forward
Tesla is scheduled to report its third-quarter financial results on Wednesday afternoon. The stock was up nearly 6% early Monday amid a broader Nasdaq rally, and shareholders hope that the EV pioneer can keep rebounding from its pullback of more than 30% in the past four weeks.
Investors already know some of the automaker's key Q3 figures because it releases each quarter's production and delivery numbers in the opening days of the next one. Tesla's report on those figures in early October spooked many of its shareholders, as there was a roughly 22,000 gap between the number of electric vehicles it produced and the smaller number it delivered to customers. The automaker put the blame for that big disparity on logistical challenges, and assured investors that those deliveries would get completed early in the fourth quarter, but that wasn't enough to assuage the market's broader concerns.
Tesla hasn't been immune to supply chain disruptions and cost pressures, but the one thing that investors have counted on is strong demand for its EVs. If Tesla's Q3 financials and explanations make it clear that people are still as interested in buying those vehicles as they have been in the past, then the stock could rise further after the report. However, if the report suggests that macroeconomic pressures are leading some prospective Tesla customers to reconsider their planned purchases, that would pose a new problem for the company to overcome.
