Earnings season is well and truly kicking off this week with over 400 public companies reporting. Here are the two you need to tune into and what to look out for.
Earnings season has descended on us once more after three months that simultaneously felt like three weeks but also felt like three years. It will be one of the more interesting and probably least enlightening earnings seasons to date as many companies have pulled guidance. However, due to the historic run-up we have seen from so many stocks, particularly in the tech sector, a lot of walking will need to be done to back up all this talking. We’ve already seen a mixed bag from last week as Goldman Sachs (NYSE: GS) blew everyone out of the water, while Netflix’s (NASDAQ: NFLX) historic run-up hit a speed-bump.
Here are the two most important earnings reports happening this week:
Tesla
I mentioned walking the walk previously. Well no company has been more talked, lamented, preached, and screamed about in the past three months than Tesla (NASDAQ: TSLA) and, perhaps worryingly, its CEO Elon Musk. The electric car manufacturer has a lot of walking to do to justify the 87% run-up it has had since we last saw its books, especially with increased interest in the electric vehicle industry. Traders have pumped up stocks like NIO (NYSE: NIO), Nikola (NASDAQ: NKLA), and Workhorse (NASDAQ: WKHS) to insane valuations, and as the leader of the pack, Tesla’s positive or negative results will reverberate around the EV industry.
We’ve seen all the comparisons and hyperbole surrounding the stock and its outrageous valuation, and how volatile it’s proved to be — from up 16% in the morning to closing the day down 3% is not normal guys — so a big move in either direction is likely. Will the army of short-sellers finally have something to cheer about?
What to look out for
Having announced earlier this month it had delivered over 90,000 vehicles in the quarter, outstripping analysts’ expectations by some way, the scrutiny will instead fall on Tesla’s books and whether it can post a GAAP profit. This is important not only because the point of a business is to actually make money, but it will be the 4th quarter in a row Tesla will have posted a profit, meaning it can qualify for entry into the S&P 500 (NYSEARCA: VOO) index, which would prove to be a big boon for the business and investors alike.
For a while there Twitter (NYSE: TWTR) was actually looking pretty good, at least in comparison to Facebook (NASDAQ: FB). It banned political ads, it seemed to be taking a bit more responsibility for the hate that is so frequently spewed on its platform, it even went so far as to censor POTUS. There are also rumblings of a potential paid-for subscription service that had investors send the stock soaring two weeks ago. All while it’s bigger, more profitable brother was dealing with public outrage, employee mutinies, and an advertising boycott. Everything was roses until a highly-coordinated hack managed to gain access to some of the social media giant’s most influential accounts, including Amazon (NASDAQ: AMZN) CEO Jeff Bezos, Microsoft (NASDAQ: MSFT) founder Bill Gates, Barack Obama, and even Kanye West. The wounds will be fresh on Thursday’s call.
What to look out for
The hack brought into question the security of Twitter’s platform and the potential impact it could have. It seemed that the bitcoin scam was at the lighter end of the scale when it comes to the potentially devastating geopolitical and economic effects such a coordinated infiltration could have. Thursday’s report will be an opportunity for Jack Dorsey and Twitter’s executives to assuage investors’ concerns over the company’s security frameworks. As investors eye up the election and the increased scrutiny the platform will be under as a result, will questions re-emerge of how Dorsey manages his time between Twitter and Square (NYSE: SQ)?
In terms of the numbers, there are two contrasting forces pulling at Twitter’s and the social media industry’s bottom line. People have more time to spend on its apps, however, advertisers are pulling spend across the board. So while we may see a boost in monetizable daily active users (this is Twitter’s new-fangled metric, not mine), ad revenue might take a hit, even in the face of increased usage.
If the board’s response to the hack isn’t sufficient or we see an anomaly in the figures of users and ad revenue, the stock could see some volatility Thursday, as has been the case with the past few quarterly reports for Twitter.
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