Earnings Watch: Netflix and Snap earnings will be different tales of media usage during coronavirus

Earnings Watch

Earnings Watch: Streaming-video and social-advertising companies are both seeing increased usage, but only one is set to profit from it

Snap’s COVID-19 story should be mixed, with a weak ad market but a growing audience.


Daniel Acker/Bloomberg

Snap Inc. and Netflix Inc. have seen increased usage as the COVID-19 pandemic forces people to entertain themselves at home, but only one is expected to see increased earnings when they report financial results Tuesday afternoon.

Snap
SNAP,
-0.46%

depends on advertising revenue through its popular Snapchat platform, which will make it the first internet company this earnings season to detail what is expected to be a frustrating dynamic across media: While audiences are larger, marketers are pulling back on ad spending. Facebook Inc.
FB,
-0.55%

spelled out some of those issues earlier, and analysts believe that advertisers who choose Snap instead of, or in addition to, Facebook could be more vulnerable to a coronavirus-related depletion in ad budgets

Snapchat is “the experimental platform that’s susceptible to budget cuts,” according to Bernstein analyst Mark Shmulik.

Netflix
NFLX,
+3.43%

has a simpler story amid the pandemic: The people love “Tiger King.” With subscribers — and potential subscribers — stuck inside in March, fresh content like the popular documentary series leads analysts to believe Netflix will beat its forecast of 7 million new subscribers by more than 1 million.

Read: Netflix may have edge on competition as coronavirus keeps people looking for new shows

The question for Netflix will be the pipeline of new content that is complete, as production halts in Hollywood threaten to slow the growth of new streaming rivals such as Walt Disney Co.
DIS,
-4.09%

, Apple Inc.
AAPL,
-2.07%

and others.

“Netflix’s [first half of 2020] release slate appears largely unaffected,” Raymond James analyst Justin Patterson wrote in a note. “COVID-19 and production halts may affect the 2H20 slate, but that holds for the entire industry.”

Don’t miss: Earnings are set for their biggest dive since late 2009 — and it gets worse from here

Snap’s stock is off 33% over the past three months, while Netflix shares have reached record highs that have pushed the company near a $200 billion valuation. Their first-quarter results are expected after the trading day is complete Tuesday.

What else to watch for Tuesday

• Chipotle Mexican Grill Inc.
CMG,
-1.40%

has made strides with its delivery business, but it lacks the drive-through presence of some of its peers. That balance, coupled with an “expected sharp decline in weekday lunch occasions,” has Raymond James analyst Brian Vacarro calling for a 40% drop in same-store sales starting in the third week of March that could extend throughout the second quarter.

• Even as consumers stock up on groceries for their homes, Coca-Cola Co.
KO,
-3.18%

is likely to feel the pain from COVID-19 as its on-premise business suffers from store and restaurant closures. Jefferies analyst Kevin Grundy will look for signs of recent momentum in China and any indications that economic challenges are causing U.S. consumers to pull back convenience-store spending.

Read: Grocery delivery sales up 60%, FreshDirect CEO says, calling his employees ‘first responders’

• Viewed as a bellwether for the chip industry, Texas Instruments Inc.
TXN,
-1.77%

will give an early read Tuesday afternoon on whether semiconductor demand has held up, even as end customers experience weakness. Intel Corp.
INTC,
-1.95%

follows Thursday afternoon.

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