Tesla, Netflix earnings due: Cheaper cars, cheaper content, more workout videos, as 'earnings recession' seems likely

Netflix Inc. NFLX, -2.18%, which reports first-quarter results on Tuesday, is trying to crack down on shared accounts, and analysts polled by FactSet see subscriptions coming in well below the average. However, BofA analyst Jessica Reif Ehrlich said that first-quarter results would likely “mark the low point” of the year, “reflecting the initial impact of password sharing efforts in select markets.”

Netflix will report as shareholders’ growing influence over the streaming universe raises questions over what shows and films get streamed, and for how long, as Wall Street tries to wring more bottom-line gains from an industry that boomed before and during the pandemic but burned cash and got crowded in the process. Netflix, along with Walt Disney Co. DIS, -0.93%, have laid off employees, while Warner Brothers Discovery Inc. WBD, -1.85% fuses its streaming holdings together.

“We expect Netflix to continue reining in spending, particularly by seeking alternatives to its past practices,” Wedbush analysts Alicia Reese and Michael Pachter wrote in a research note on Thursday. “The company appears to us to be producing fewer feature length films, which we have always viewed as a poor investment, and appears focused on lower cost television content.”

“We are equally encouraged that Netflix is looking at low-cost content like workout videos, which we believe will present a lot of value to subscribers at very low cost,” they added later.

The analysts said that they felt Netflix was well positioned, as other streamers rethink their approach to expansion and financials. And they said Netflix “should be valued as an immensely profitable, slow-growth company.” They also said that Netflix’s decision to launch a cheaper ad-supported option was a “great decision” after growth stalled in the U.S. and Canada and the company’s business in Europe, the Middle East and Africa reaches the saturation point.

For Tesla Inc. TSLA, -0.48%, which reports results on Wednesday, the focus for investors will be on price-cutting and its impact on margins. Still, Potter, an analyst at Piper Sandler, has said Tesla is on a “warpath” and “maintaining its aggressive approach to pricing,” and said investors “should expect relentless price cuts to continue.”

Base prices for Tesla’s Model S and Model X have fallen by around $5,000, MarketWatch has noted, as the electric-vehicle maker tries to stimulate demand. The company is also selling a more affordable Model Y SUV.

“Tesla concerns on pricing and a race to the bottom persisted as general sentiment on the stock is souring given recent price cuts after a brief period of stabilization,” TD Cowen analyst Jeffrey Osborne said in a note.

Tesla will report as the Biden administration tries to take a harder stance on auto pollution. The EPA recently proposed new emissions restrictions intended to hasten electric-vehicle usage, by incrementally curtailing tailpipe emissions each year for vehicle model years 2027 through 2032. However, some analysts said the measures would push prices higher for regular and electric vehicles.

This week in earnings

The first-quarter earnings reporting season will pick up steam in the week ahead, with 60 S&P 500 companies, including six from the Dow Jones Industrial Average DJIA, -0.42%, reporting quarterly results, according to FactSet. Those companies will report as Wall Street analysts remain pessimistic about results for the quarter, and the prospect of another so-called “earnings recession” in which profits contract for at least two straight quarters.

“As of today, the S&P 500 is reporting a year-over-year decline in earnings of -6.5% for the first quarter, which would mark the largest earnings decline reported by the index since Q2 2020 (-31.6%) and the second straight quarter the index has reported a decline in earnings,” FactSet Senior Earnings Analyst John Butters said in a report on Friday.

After investors cheered JPMorgan Chase & Co.’s JPM, +7.55% quarterly results on Friday — despite Silicon Valley Bank’s collapse and broader recession anxieties — other banking giants, like Bank of America Corp. BAC, +3.36%, Goldman Sachs Group Inc. GS, +1.44% and Morgan Stanley MS, +1.19% report during the week ahead. So does Johnson & Johnson JNJ, -0.16%, after it agreed to pay as much as $8.9 billion to settle scores of lawsuits alleging that its talc baby powder was linked to cancer. Charles Schwab Corp. SCHW, -1.40%, United Airlines Holdings Inc. UAL, -0.71% and AT&T Inc. T, -0.15% also report during the week.

The calls to put on your calendar

Supply-chain update, anyone? Shipping rates have fallen. Labor tensions have risen. Railroad safety is under scrutiny. Elsewhere in that industry, hedge funders are applying pressure. Memories of 2021’s supply-chain meltdown are still fresh after it led to shipping delays and put the low-work labor that fuels much of that distribution network under a spotlight.

At any rate, trucking and logistics company J.B. Hunt Transportation Services Inc. JBHT, +1.23% reports on Monday, while railroad giant CSX Corp. CSX, +0.13% reports on Thursday. Both companies report after a drop-off in demand for goods last year, as inflation remolded consumers’ buying habits. They also report after rail workers threatened to strike over what they said were inadequate sick-time policies. More recently, a group representing the terminal operators at the ports of Los Angeles and Long Beach alleged that dockworkers were disrupting daily operations at the two massive import gateways, as the workers’ union and the terminal operators try to work out a contract. The quarterly financial reports and earnings calls will offer a look at what the year ahead has in store.

The number to watch

Credit-card transactions, charge-offs: Credit-card providers Discover Financial Services DFS, +0.68% and American Express Co. AXP, +0.57% report Wednesday and Thursday, respectively. The companies will report after Discover took a hit in January after it forecast credit-card net charge-offs — a measure of debt a company doesn’t think it’ll get back — that were worse than what Wall Street expected. Similar to the results from the big banks, the results from American Express and Discover will tells us how much consumers are still spending, and whether more are falling behind on their bills, as recession anxieties prevail.