Wedbush: 'Bar is High' Ahead of Tesla (TSLA) Earnings
Our preview of the upcoming week's earnings reports includes Tesla (TSLA), Johnson & Johnson (JNJ) and Netflix (NFLX).
Third-quarter earnings season is rolling along, and results from Tesla (TSLA, $832.48) are on deck.
Shares of the electric vehicle (EV) maker charted a path steadily higher from July through September – and this upside is continuing into October. Since its early June lows near $570, TSLA stock is up roughly 46% to trade at levels not seen since mid-February.
Can Tesla's latest earnings report keep the wind at the stock's back?
Jefferies analysts are certainly optimistic ahead of Tesla's third-quarter earnings report, which is due out after the Oct. 20 close. They recently raised their price target on TSLA stock by $100 to $950 – representing implied upside of more than 14% – amid expectations for "higher capacity ramp and sustained demand, following further analysis of third-quarter data and various sources of information on the soon-to-be launched Berlin facility," they wrote in a note.
The team, which has a Buy rating on Tesla stock, referenced the automaker's already-released Q3 deliveries update, which showed a record 241,300 cars delivered and 237,823 vehicles produced over the three-month period. "The final details of Q3 also showed China domestic sales of 73,600 units, putting to rest concerns about domestic demand," they added.
But Credit Suisse analyst Dan Levy is a little more hesitant, and currently has a Neutral rating on Tesla, which is the equivalent of a Hold.
Yes, TSLA is weathering the chip shortage and supply chain disruptions better than other original equipment manufacturers (OEMs), but "the bar is high for the stock into the print."
And for Levy, the "key question will be on the shape of ramp (capacity build-out) of Berlin and Austin, which Tesla indicated on the prior call would likely be slower than we saw in Shanghai." For reference, he adds, "Shanghai produced around 150,000 vehicles in its first year of production." Any upside in capacity build-out from here would likely result in him raising estimates for Tesla.
Overall, analysts, on average, are calling for earnings of $1.50 per share, which is up 97.4% on a year-over-year (YoY) basis. As for revenues, the consensus estimate is for $13.5 billion, or a 53.9% improvement from the year prior.
Johnson & Johnson Stock Struggles Ahead of Earnings
Johnson & Johnson (JNJ, $161.65), like many other stocks, peaked in the third quarter but has since taken a beating alongside a broad-market downturn. To wit, while shares are up a modest 2% for the year-to-date, they're down more than 10% from their late-August record peak just shy of $180.
Analysts are still bullish toward this beaten-down stock. Of the 18 following JNJ that are tracked by S&P Global Market Intelligence, eight call it a Strong Buy, two say Buy and another eight believe it's a Hold. Plus, the pros' average price target of $185.93 implies expected upside of 15.4% over the next 12 months or so.
And as far as Johnson & Johnson's Tuesday morning earnings report goes?
Credit Suisse analyst Matt Miksic, who has an Outperform (Buy) rating on the Dow stock, says recent checks point to a "solid" quarter for JNJ.
Specifically, he believes upside to JNJ's Q3 results will likely be driven by growth in several drugs, including Crohn's disease treatment Stelara and blood thinner Xarelto. This, he writes, will help offset slower-than-expected growth in the company's prostate cancer drug Zytiga and rheumatoid arthritis medication Simponi.
Wall Street will also be looking for updates on the company's COVID-19 vaccine, after a Food and Drug Administration (FDA) advisory committee on Oct. 15 unanimously agreed the agency should authorize boosters of Johnson & Johnson's single-dose shot to the roughly 15 million people in the U.S. who received an initial jab.
The consensus among the pros is for revenues to jump 12.4% year-over-year to $23.7 billion. This will fuel a 7.3% improvement in earnings per share (EPS) to $2.36.
Can Netflix Extend Its Rally Post-Earnings?
Netflix (NFLX, $$629.76) has been red-hot on the charts in recent months, up about 25% since its early August lows near $500 – and fresh off a record high around $647 from earlier this month.
"NFLX stock has emerged from its slump," a team of analysts at Jefferies (Buy) say. They're optimistic about the streaming giant's future, too. Following its recent acquisition of indie game developer Night School Studio, "we are growing more confident in the direction Netflix is taking … and we like it."
And the group believes Netflix's third-quarter earnings report – due out after the Oct. 19 close – is "an important one to watch for longer-term sentiment." In particular, they'll be looking for paid net additions, which they believe will arrive at 3.5 million. This is in line with what NFLX is projecting, but slightly below the 3.75 million the Street is expecting.
Wedbush analysts are forecasting an even bigger 4.0 million paid net adds in Q3. And while the group maintains an Underperform (Sell) rating on NFLX stock, saying its "current valuation reflects faster growth than we expect the company to deliver," they do see Q3 earnings of $2.60 per share on $7.483 billion in revenue.
Both of these figures arrive above analysts' consensus estimates for EPS of $2.56 (+47.1% YoY) and revenue of $7.48 billion – a 17.3% increase from the year-ago period.