Earnings Watch: Expectations, US regional banks, and Tesla earnings

Netflix to set sentiment in technology stocks

This week the Q1 earnings season gets very important with key earnings from Netflix on Tuesday which will set the stage for sentiment in technology stocks ahead of next week’s technology earnings. Analysts expect Netflix to report revenue growth of 4% y/y in Q1 and EPS of $2.87 down 10% from a year ago. Netflix is in the midst of a turnaround case which involves less password sharing for higher revenue monetisation, an advertisement-based model generating revenue of customers that do not want a subscription, and finally less own content production to reduce investment needs. All these actions are positive for shareholder creation.

Charles Schwab sees massive drop in deposits in Q1

This week the market will also focus on US regional banks and among the most important ones to track is US Bancorp reporting on Wednesday. Charles Schwab, which was under pressure during the recent banking crisis, has reported today Q1 net revenue in line with estimates and EPS of $0.93 vs est. $0.90. But the US broker also reported Q1 deposits that declined to $325.7bn down from $366.7bn in Q4 2022 and down from $465.9bn a year ago highlighting that the US broker has been hit hard on the funding side. Charles Schwab notes that Q1 money market fund assets are $358bn vs $143bn a year ago. Charles Schwab shares are up 3% in pre-market trading.

Key earnings next week from Tesla, ASML, CATL

This week the three most important earnings releases are from Tesla and ASML on Wednesday and CATL on Thursday. Tesla has reported its Q1 delivery figures so the market will be obsesses about any guidance on Q2 and generally forward demand. Analysts expect Tesla to report 25% y/y revenue growth in Q1 and EBITDA of $4.4bn vs $4.5bn a year ago as recent price cuts will make it difficult to expand the operating margin.

ASML sits in the middle of the massive investment boom in semiconductor manufacturing in the US due to the US CHIPS Act signed last August and which according to the FT is fueling significant investment commitments already. Due to the nature of ASML being an order driven business quarterly figures can change wildly and analysts expect revenue growth of 79% y/y, but investors will more pay attention to the expected revenue growth for the fiscal year which is currently 25% in FY23.

CATL is the world's largest EV battery maker and is thus riding the tailwind of EV adoption which is happening at a blistering pace. Analysts expect revenue growth of 54% y/y in Q1 and current estimate for Q2 revenue growth if 41% y/y. With lithium carbonate prices coming down batteries are expected to decline in price accelerating EV adoption even more. Investors will also focus on any comments about CATL’s partnerships with Ford and Tesla to build out EV battery manufacturing in the US.

The remaining important earnings releases are highlighted below.

• Monday: Eve Energy, Exor, Charles Schwab
• Tuesday: Ericsson, Johnson & Johnson, Bank of America, Netflix, Lockheed Martin, Goldman Sachs, Intuitive Surgical
• Wednesday: Metro, ASML, Heineken, Tesla, Abbott Laboratories, Morgan Stanley, IBM, Lam Research, US Bancorp
• Thursday: CATL, Tryg, Nokia, Sartorius, Volvo, Philip Morris, AT&T, Union Pacific, American Express, Blackstone, CSX, DR Horton
• Friday: Jinko Solar, SAP, Sandvik, Investor, Procter & Gamble, Schlumberger, Freeport-McMoRan