Wall Street has been on edge lately. Investors aren't quite sure whether inflation is now under control, and even though the rate of price increases has slowed, the amount consumers have to pay for the things they want is still a lot higher than it was just a couple of years ago. Moreover, inflation rates haven't yet fallen toward the 2% target that the Federal Reserve has set. Uncertainty about the future has made stock price movements more volatile.
In that context, it becomes crucial to look at individual companies and their financial performance to get a read on how the broader economy is doing. This week, both electric automaker pioneer Tesla (TSLA 15.31%) and streaming video leader Netflix (NFLX -0.31%) are set to announce their latest results, and investors will be watching to see how the two behemoths do. Here's a look at what to expect.
Tesla deals with short-term pressures
Tesla is set to report its third-quarter financial results after the close of regular trading on Wednesday afternoon. The automaker has had to deal with some challenges recently, but investors still have high hopes that the long-term prospects for Tesla remain favorable.
Investors already have had to deal with some disappointment from Tesla during the summer months. In early October, Tesla released its third-quarter production and delivery figures, and both numbers were below what most of those following the stock had expected. The EV giant delivered about 435,000 vehicles from July to September, far less than the 462,000 that many investors had expected. Also, Tesla produced about 430,500 EVs during the period. Although both numbers were well above year-ago levels, they were below the production and delivery figures from the second quarter of 2023.
That news arguably shouldn't have come as a surprise to investors, as Tesla CEO Elon Musk had warned that planned factory shutdowns in some of its facilities would weigh on capacity. The fact that Tesla still expects to deliver 1.8 million vehicles for 2023 as a whole suggests that it's confident it can get throughput back up to finish the year.
Netflix looks to advertising for a boost
Also reporting Wednesday afternoon will be Netflix. The streaming video provider's stock came under pressure last month, but investors are looking forward to getting a good reading on how recent changes in its business model will affect its financial performance.
Overall, investors have reasonably high expectations for Netflix's third-quarter results. Most of those following the stock expect earnings growth above 10% year over year and revenue gains of around 9%, reaccelerating from a recent slowdown.
The big question that Netflix's results will help answer is the extent to which new subscription tiers supported by advertising revenue can help bolster the company's overall sales. If ads are performing better than expected, then it could prove to be the catalyst that prompts Netflix to move forward with new price increases on premium ad-free tiers.
In addition, investors will need to watch churn rates among Netflix subscribers. With so much competition, it's easier for viewers to switch among subscription services at will. Given that competing video streaming services are all fighting for the same audience, Netflix will have to take care and keep executing the strategy it has used so well to keep subscribers thus far. If it's successful, then its stock could start to rebound from the move lower it has had in recent months.
