Yahoo Finance’s Emily McCormick joins The First Trade with Brian Sozzi and Alexis Christoforous to discuss what we can expect from earnings reports this week including Tesla, IBM and Netflix.
Video Transcript
ALEXIS CHRISTOFOROUS: Big week for earnings– we’ve been talking about it today. We’re going to hear from IBM, Netflix, and Tesla, just to name a few. Let’s bring in Emily McCormick now with a preview.
So, Emily, let’s start with IBM. They’re out after the bell today. We recently had on IBM’s CEO talking about their latest big push into cloud, so I’d imagine that’s going to be the star of the report.
EMILY MCCORMICK: Absolutely, Alexis, and that’s especially because IBM did already pre-report its preliminary third-quarter results in that announcement that it would be spinning off part of the business so it would be able to focus more on that cloud and AI work with that legacy company. Now with that report we had IBM saying that it posted earnings of $2.58 a share on revenue of $17.6 billion. That was an about 2% decline over last year on the top line. We have seen IBM actually showing year-over-year revenue declines for about the past two years now.
So a big focus of this earnings call and their earnings report is going to be on the strategy following that spin off, which is expected to be completed in 2021. What the company’s strategy is when it comes to returning to growth and how that spin-off is actually going to help the company be more streamlined and enable it to continue growing– so a couple things here to focus on with IBM, but a lot of it again is going to be around that new strategy, Alexis.
BRIAN SOZZI: And, Emily, Netflix, out with earnings now. Netflix– just a couple months ago they tried to talk down their subscriber growth this quarter. Wall Street can care less. I’ve counted at least three positive mentions by the sell side coming into this report.
EMILY MCCORMICK: That’s right, Brian. If we take a look at analyst ratings, so far overwhelmingly still bullish about Netflix. That company really has been a darling of the stay-at-home trade during the pandemic. But as we’ve seen over the course of 2020, Netflix has been adding a decelerating number of subscribers following a very strong first half.
The company did say it expected to see some pull-forward because of the pandemic and because of those stay-at-home orders during the spring. The company added nearly 16 million subscribers during the first quarter, added about 10 million during the second, but now it’s guided towards just adding about two and 1/2 million. Now Wall Street is taking that guidance to be overly conservative. The street right now is looking for more than three million subscribers, which would still be strong for a typical quarter for Netflix, but of course not nearly as much as we saw during the earlier quarters this year.
As we tend to see, Netflix does tend to trade on those subscriber numbers though and on the guidance. So it is going to be really a key focus here– what they say for the fourth quarter and what they say for 2021, especially since movie production, both for Netflix and for other streaming companies and production companies, had to be put on pause earlier this year due to the pandemic, Brian and Alexis.
ALEXIS CHRISTOFOROUS: And we’ve got to talk Tesla, out on Wednesday. The stock is up something like 437% I think year to date– a lot riding on this earnings report for this electric-vehicle pioneer.
EMILY MCCORMICK: Absolutely, Alexis. Taking a look at this report, I mean, Tesla really coming off the heels of a very strong third-quarter delivery report. Remember that Tesla reported a record 139,300 deliveries for the third quarter. That was a more than 40% gain year-over-year. And that came as we saw other legacy automakers like General Motors, Toyota, Ford each reporting about a 10% decline year-over-year during the third quarter for their sales figures. So Tesla really outperforming here, really setting the bar high heading into this third-quarter report. The company also in the second quarter having reported a fourth straight quarterly profit, so there are expectations that the company will be able to maintain that streak heading into the fall and the fourth quarter.
And finally, of course, we did have Tesla with its inaugural Battery Day at the end of September, the company saying that by 2022 it expected to have mass production on track for that new tabless battery. That’s going to help the company bring down the cost of its electric vehicles. It expects to have a car available at around the $25,000 mark, so a huge value proposition here to potentially bring these costs more in line with those typical combustion engines, something that the street has really been focused heavily on in terms of making Tesla an even more compelling objective here for some of these buyers. And we are seeing shares of Tesla actually adding to that more than 400% gain for the year to date today. It is up about 1% now, Alexis and Brian.
