Tesla Set to Report Earnings as Market Continues Winning Streak

July 19, 2023
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Stephanie Bedard-Chateauneuf
The stock market's winning streak persists as major indexes eagerly await Tesla's earnings report later today.

The stock market's winning streak persists as major indexes eagerly await Tesla's earnings report later today. The recent positive data, fueling hopes for an economic "soft landing," has propelled stocks to new 15-month highs.

Investors anticipate positive news from Tesla, as the company's stock has climbed for the past eight trading sessions and has gained over 160% year-to-date. After facing economic and management challenges in 2022, which resulted in a nearly 70% decline in stock value, Tesla stock has experienced a remarkable rebound.

Besides Tesla, other major companies, including Netflix, Haliburton, and U.S. Bancorp, are set to report today. Goldman Sachs' earnings release concludes the reporting from the nation's largest banks, while smaller banks like First Horizon and Regions Financial, reporting later this week, may shed light on the credit market and deposits following the failures of several small banks earlier this year. Despite facing deposit slippage and higher funding costs, regional bank shares have risen in pre-market trading, building upon yesterday's gains.

It's worth noting the impact of Treasury yields on the recent upswing in the stock market. A significant 20-basis-point drop in yields since early July has provided some breathing room. Reports such as yesterday's June Retail Sales, which indicated a moderation in consumer spending, may have contributed to the belief that the Federal Reserve is nearing the end of its rate-increase cycle. While the bond market factors in one more rate hike this year and subsequent cuts in the following year, quantitative tightening is expected to continue.

In the latest economic data, June's Housing Starts and Building Permits figures failed to meet analysts' lofty expectations. Housing starts of 1.434 million fell short of the consensus estimate of 1.475 million, and permits of 1.44 million missed the forecast of 1.472 million. Additionally, May's strong starts figure was downwardly revised, although it still remains above the steady long-term trend.

Tesla takes center stage as investors anticipate its earnings report this afternoon. The company's recent announcement of blockbuster deliveries for Q2 has heightened expectations. Despite facing stiff competition, Tesla delivered 466,000 vehicles in the last quarter, surpassing market expectations. The call will likely address inventory, pricing strategies, and plans to maintain strong delivery figures. China's demand and Tesla's performance in the market could also be discussed, as well as any updates on new product releases following the Cybertruck's production commencement.

Wall Street analysts have a consensus estimate of $0.82 earnings per share on revenue of $24.48 billion for Tesla. The results are expected shortly after today's closing bell.

Meanwhile, Goldman Sachs experienced a slight stumble, with its shares losing ground early Thursday as the bank fell short of Wall Street's earnings per share expectations. However, the company's revenues exceeded analysts' estimates, and it raised its dividend, mitigating some initial losses. Goldman Sachs faced challenges in its Investment Banking business due to reduced merger and acquisition activity, impacting revenue in that segment. Trading activity and the company's commercial real estate holdings also posed challenges.

Netflix is another company reporting earnings after the market close today. The stock rallied earlier this week, possibly in anticipation of stronger revenue and subscriber growth. Last quarter, Netflix projected June quarterly revenue of $8.2 billion and earnings per share of $2.84, with subscriber growth expected to reach approximately 1.75 million from Q1.

Attention remains on the Federal Reserve, with futures trading indicating a 99.8% probability of a 25-basis-point interest rate hike at the upcoming Federal Open Market Committee (FOMC) meeting. There is a growing belief that this expected rate hike could mark the end of the current cycle, given that inflation is trending downward.

In terms of upcoming data, tomorrow's focus will be on June's Existing Home Sales report, expected to show sales at a seasonally adjusted annual rate of 4.25 million. Existing home sales have declined significantly compared to the previous year, partly due to homeowners' reluctance to sell properties acquired during the period of affordable mortgage rates. Additionally, the government's weekly initial jobless claims report will be released, with consensus estimates of 240,000 claims, remaining within the recent range.