Preview of the week starting 18 July 2022 - Tesla's earnings

Public Holidays (USA, Hong Kong, China & Singapore)

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Earnings Calendar

This is a big week of earnings.  Personally, I am looking with great interest in Tesla, Netflix, Dow Chemicals and the banking sector.

<Note that most of the charts and company profiles are extracted from investing dot com website>

Banking sector

The banking had the first part of earnings last week.  This week, the earnings for some of the other players will be released.  It will be an interesting industry to watch as they will stand to benefit as we expect the Fed to raise the interest rates.  More than their earnings, their outlook for the coming months will paint an outlook of inflation and recession.

Some of the notable earnings that we can look into include Bank of America, Goldman Sachs, American Express and the Blackstone Group.

Dow Chemicals

Dow Inc. provides various materials science solutions for packaging, infrastructure, mobility, and consumer applications in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. It operates through Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings segments. The Packaging & Specialty Plastics segment provides ethylene, and propylene and aromatics products; and polyethylene, polyolefin elastomers, ethylene vinyl acetate, and ethylene propylene diene monomer rubbers.

Dow has a forecast of $2.14 and $15.54B for their EPS and revenue respectively for their coming earning report.  Dow has hit a recent 52-week low of 48.27 and has dropped 17.43% since a year ago.  Will this chemical giant yield a good report?  This is an indication of the market outlook as these are the raw materials used to make many of the finished goods used.

Netflix

Netflix, Inc. is an entertainment services company. The Company has paid streaming memberships in over 190 countries, and it allows members to watch a variety of television (TV) series, documentaries, feature films and mobile games across a variety of genres and languages. 

Tesla has a forecast of $2.96 and $8.03B for their EPS and revenue respectively for their coming earning report.  Netflix suffered a big drop in April following their last earnings and they have dropped 64.34% since a year ago.  This coming quarter can be crucial if we see a rebound or a further drop.  Since the drop in April 2022, the price has ranged sideways in the region of about $190.  Will we see a turnaround?  For me, Netflix depends on user subscription.  Netflix has been producing their own series. Though there were a few award winners, there is no guarantee of new user subscription or for that matter, retention of existing users.  With a range of competition from Disney to Comcast, the consumers have a luxury of options to choose from.  The recent tie-up with Microsoft has been hailed to be a strategic move.  This success needs to be seen in their finances.

Tesla

With Elon Musk as their Maverick CEO, this is one of the most noticeable businesses in the world.  While most of us will relate to Tesla as an Electric Vehicle (EV) manufacturer, Tesla is m way more than an automaker.  We should view Tesla as a leading innovator of sustainable solutions that range from solar energy, EV, energy storage, Artificial Intelligence (seen in their FSD autonomous driving solution and their humanoid venture in Optimus) and other service offerings like Tesla insurance.

Tesla has a forecast of $1.86 and $16.52B for their EPS and revenue respectively for their coming earning report.  Since the recent peak in November 2022, Tesla has been in a decline though they saw a rise of 11.79% from a year ago.  Tesla remains a volatile stock with a beta of 2.13 (where a beta value of more than 1 is considered volatile).  For the last few weeks, the price has been moving sideways.  With a wedge forming in the 1D chart, we can expect a strong break from the current range.  With the recent departure of their AI executive and the recent Covid19 lockdown in China, the market seems to have factored in a "less than adequate" quarter of earnings.  Though Elon's pursuit of Twitter does not affect Tesla's operations, the market seems to respond to Twitter's news.

Economic Calendar

In the coming week, we have a few economic data that we should monitor.  For the red hot property market, the lack of properties available is one of the reasons for the high price.  Thus, the number of building permits will provide an indication of how many more properties would be made available soon in the market.  The more we have, the more relief we can get from the high prices.

For existing home sales (June), this reflects the number of home sales.  With an expectation of more interest rate hikes, people could be more urgent to secure their homes.  In a similar vein, people could be put off by the interest rate hike - choosing not to purchase for now.  Some of the market players are recommending to choose fixed interest rate for mortgage repayment as a means to protect oneself against interest rate hikes.

Crude oil inventories are an important prelude to how producers see the demand for consumption for the coming months.  If the consumption is lesser than expected, this is treated as bearish generally.

Initial jobless claims will be an important factor.  As per the screenshot above (taken from a WSJ video), this clearly explains how retrenchment leads to recession.  Thus, the jobless claims will be an important consideration for the Fed to consider as they decide how the rate of the looming interest rate hike.  Since the last 75 basis points hike, the inflation rate has continued to soar to a recent record high of 9.1%.  This implies that the 75 basis point was unable to adequately contain the inflation.  While the market has factored in a 75 basis points increase for the next interest rate adjustment, we should not be surprised if the Fed decides to increase by 100 basis points.

News and my muse

Both initial jobless claims and PPI are higher than forecast.  Will the Fed get even more aggressive with the coming interest rate hike?  Should we be surprised if the rate hike is 100 basis points?

“But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the  quantitative tightening and their effects on global liquidity ... are very likely to have negative consequences on the global economy" - JP Morgan

Celsius files for bankruptcy. will more follow?

BYD's monthly production is expected to reach about 300,000 units in August, the report says.  As of early July, BYD's cumulative order backlog has exceeded 700,000 units, according to local media.

Inflation hit over 50% in Sri Lanka and citizens stormed the President's palace. 

Market Outlook

From the 1D chart above, the stochastics indicator looks at a potential reversal to an uptrend.  For the MACD indicator, an uptrend looks to continue.  With the important earnings season starting, the coming earnings report will paint an important forecast for the economy.  There are more concerns about a recession.  Personally, the recession could have already landed.  The coming Q2/2022 GDP data (if it shows a negative growth) will simply confirm that the economy has been in decline since the first 6 months of 2022.

Thus, the price decline could be due to macro factors too.  It remains crucial that we research to find great companies available at good discounts.  It is a good time to start building a list of great companies to invest in.