Tesla and Netflix Report Mixed Earnings, Nasdaq 100 Futures Weaker After Hours

TESLA AND NETFLIX RESULTS:

• Tesla’s second-quarter results beat top and bottom-line estimates, but profitability worsens
• Netflix’s results were mixed, with revenue slightly below expectations but EPS above market forecasts
• Shares of both companies traded lower after hours, weighing on Nasdaq 100 futures

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Shares of Tesla (TSLA) and Netflix (NFLX) headed lower in extended trading after both companies reported somewhat mixed earnings for the April-June period, with the former sliding roughly 1% and the latter down about 5% at the time of writing. Meanwhile, Nasdaq 100 futures were a touch softer after hours following an already subdued performance during regular hours.

Focusing first on Tesla, the electric vehicle maker announced earnings per share of 91 cents versus 79 cents expected, on sales of $24.9 billion, slightly ahead of the consensus estimate of $24.29 billion and 47% above the reported Q2 2022 top line figure, indicating that management continues to generate growth despite several macroeconomic challenges.

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The operating margin, meanwhile, shrank to 9.6% from 11.4% previously, raising concerns that profitability is becoming impaired, although this development could be linked to the company’s recent decision to offer large incentives and discounts as part of a strategy to boost sales in an environment where rates are at their highest level in more than 20 years.

Turning to Netflix, the largest video streamer in the world posted EPS of $3.29 on revenue of $8.19 billion, with second metric rising 2.8% compared to the same three-month period last year. For context, Wall Street analysts expected the tech firm to earn $2.84 per share on takings of $8.27 billion.

Netflix also managed to increase its subscriber base significantly after it introduced ad-supported more affordable subscription plans following its decision to start cracking down on password sharing in the spring. Against this backdrop, paid users soared by an impressive 5.9 million, exceeding the projected addition of 2.07 million members. While this was a great achievement, the operating profit margin outlook of 18% to 20% failed to impress investors.

Here is how both companies performed relative to Wall Street’s expectations:

TESLA (TSLA):

Earnings per share: $0.91 versus $0.79 expected

Revenue: $24.93 billion versus $24.29 billion expected

NETFLIX (NFLX):

Earnings per share: $3.29 versus $2.84 expected

Revenue: $8.19 billion versus $8.27 billion expected

Source: DailyFX Earnings Calendar

MARKET OUTLOOK

Technology stocks have been on a tear and re-rated sharply this year despite rising interest rates. The mixed performance from Tesla and Netflix suggest that the premium valuation commanded by the sector may be called into question. This could prevent the Nasdaq 100 from pushing higher, though traders will need to assess earnings from other mega-caps including Apple, Microsoft, Alphabet, Amazon, Nvidia and Meta before reaching broad conclusions.

TESLA AND NETFLIX 5-MINUTE CHART

Source: TradingView