Technology stocks have a bad start to earnings, can Tesla survive? Which companies can still be expected?

The financial report of large technology stocks that investors have been waiting for has finally officially opened under the leadership of Netflix. However, Netflix's big overturn came a little unexpectedly, making Wall Street shout "dumbfounded".

Although the market has expected a slowdown in the growth rate of Netflix users, the company lost 200,000 users in the first quarter, which caught investors off guard.

Dragged down by the poor performance of Q1, Netflix plunged more than 25% after hours, dragging streaming stocks such as Roku, Spotify and Disney to fall sharply after hours, and technology stocks such as Amazon, Microsoft and Meta also fell.

Market participants pointed out that

In the context of the poor performance of the stock price in the first quarter of the science and technology network, investors need more beautiful performance and guidance to strengthen the confidence of holdings. Especially at a time when future growth and the path of interest rates are so uncertain, investors will become more dependent on data on their day-to-day work than usual.

Netflix is the first large technology stock to report earnings. Its earnings report, the "avalanche," could prompt analysts to reconsider their forecasts for the industry as a whole.

Technology stocks have a bad start to earnings, what are the unfavorable factors in the "trouble"?

Some strategists said that given the many risks facing companies (cost pressures, consumer demand, The Russian-Ukrainian conflict, the pandemic), the downward trend in performance revision should be repeated in the current earnings season.

Affected by the above risks, the agency lowered its first-quarter performance forecast. Earnings from S&P 500 constituents are expected to grow 4.7 percent year-over-year, the slowest increase since the fourth quarter of 2020, according to FactSet.

Goldman Sachs pointed out that weak profit growth will be mainly concentrated in industries such as consumer discretionary and consumer discretionary. Earnings expectations for both industries fell in the first quarter of the year as inflation has intensified.

In addition, due to the impact of the Russian-Ukrainian conflict, companies with significant revenue exposure in Europe will be at risk in the fiscal quarter compared to companies that focus mainly on sales in the United States.

According to previously disclosed public statements and securities filings, Western companies' operations in Russia have accumulated tens of billions of dollars in huge losses in response to the impact of asset sales, closures and sanctions. According to researchers at Yale University, more than 600 Western companies have said they will withdraw or cut back on operations in Russia.

As Netflix revealed in its earnings report, the company has "paid" for the withdrawal from the Russian business. Exiting the Russian market cost it 700,000 subscribers, and if the business continues in Russia, the number of subscribers will grow by 500,000 in the first quarter.

And, almost certainly, the write-downs of Russia-related assets by Western companies will continue beyond the current earnings season, and the extent of future losses will depend in part on whether the Russian economy recovers later this year.

Tesla's earnings report is about to be announced, can it survive?

After the US stock market on April 20, local time, Tesla will announce the 2022 Q1 financial report.

Since the automotive industry has previously released the delivery data for the first quarter, there will not be much doubt about the current performance. However, considering that Tesla's stock price itself contains the expectation of high-speed growth, the market will pay close attention to whether it can continue to maintain a high growth rate.

Analysts are now unanimously expecting Tesla to achieve revenue of $17.8 billion (+71.2% year-over-year) and profit of $2.27 (+144%) per share in the first quarter of this year.

In addition, in the context of global inflation, Tesla's operating margin will receive additional attention from investors. With strong pricing power, the company was able to pass on supply chain costs to consumers. This is better than many car manufacturers, and their performance in the first quarter will also be in the spotlight.

Analysts noted that Tesla's average selling price has been rising over the past two fiscal quarters to offset rising costs and supply chain issues. No problems with Tesla's electric car demand are expected to break out on Wednesday.

Matt Weller, head of global research at GAIN Capital Group, said Tesla has dealt better with chip shortages than competitors in recent years, and delivery vehicles are expected to maintain a rate of about 50% per year.

Recently, Tesla's stock price has shown a signal of stabilization around $1,000. If the first quarter earnings report is better than expected, the bulls may take advantage of the current support level to take advantage of the momentum to attack the early April highs in the $1100 area. And if the earnings report is disappointing, the stock price may break through the $900 first-line upper-line support, clearing the obstacle to expanding the downside.

Which companies are still expected to report earnings?

In general, profit growth is one of the most important factors driving stock prices up. Therefore, in the search for earnings season opportunities, finding companies that have obtained profits that exceed expectations has become the starting point for the market to grasp the market.

By sector, analysts expect energy sector revenues to grow sharply in the first quarter from the same period last year due to higher oil prices, while raw material industry profits are expected to benefit from soaring prices.

Looking back at the first quarter, energy stocks emerged as big winners in the U.S. stock market thanks to the dividends from rising global oil prices. Bank of America said that although energy has outperformed the broader market so far this year, its valuation remains attractive against the backdrop of high inflation and rising cash yields.

At the same time, analysts expect profits from large U.S. companies to continue to grow this year, even as costs rise. At a time when investors are anxious about the Fed's plans to raise interest rates to combat inflation, companies have been showing that they can achieve profitable growth, which has supported the bull market in the stock market.

Next week, the remaining members of "FAANMG" Apple, Microsoft, Meta, Google, and Amazon will disclose their results. As a reference, if investors can see them delivering good results, this will be a very positive driver for the stock market.

Edit/phoebe

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