3 Earnings Reports to Watch Next Week

Featured Q2 earnings reports next week include two internet juggernauts and Elon Musk's TSLA

Source: Shutterstock

Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest earnings picks.

Earnings season has arrived – and so far, it hasn’t been great news. Bank earnings reports looked mixed. Netflix (NASDAQ:NFLX) fell hard after earnings, hitting tech indices. The market isn’t quite set to crash, but a modest pullback this week at the beginning of the earnings calendar might suggest some caution.

Further downside wouldn’t be necessarily surprising, but it would be ironic. As I’ve noted in this space before, the worry about the market in recent months was that a relative lack of earnings reports would be a problem. Corporate earnings mostly provided good news for the market in recent years. External factors, most notably the trade war with China, were seen as the big risk.

U.S. equities instead confounded expectations by moving higher despite seemingly negative news on the macro and political fronts. The risk now, with the earnings calendar again full, is that investors might be asking more of U.S. companies than they can provide in this environment.

The earnings calendar this week should provide some clarity on that front. Several key companies will report and give a picture of demand in important markets: Caterpillar (NYSE:CAT), industrial distributor W.W. Grainger (NYSE:GWW), Visa (NYSE:V), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), AT&T (NYSE:T), United Parcel Service (NYSE:UPS), Intel (NASDAQ:INTC), and others.

But the focus here will be on two of the largest companies – the kind that can move indices and markets – and perhaps the market’s most controversial stock. In all three cases, the reaction to earnings reports will be as interesting as the numbers themselves. This is a big week, and the biggest names will have the biggest impact.

Facebook (FB)

facebook stock fb stock
Source: Shutterstock

Earnings Report Date: Wednesday, July 24, after market close

There’s one positive for Facebook (NASDAQ:FB) ahead of its Q2 earnings report. Wednesday afternoon’s release almost certainly won’t be worse than the second quarter release last year.

A year ago Facebook guided for significantly higher spending, which spooked investors. FB stock fell 20% the next day, the largest one-day loss of market value in history.

That said, Facebook earnings could be a little dicey. FB stock still hasn’t recovered all of last year’s losses (which continued to a December low at which point the stock was down over 40%), but it has come close. Expectations clearly have been normalized. Worries about user defections amid the company’s scandals have faded.

Investors seem to believe that all is back to normal for Facebook. I’m inclined to agree. But if that’s not the case – particularly if Facebook shows any weakness on the user front – there’s not nearly as much downside priced in. A difficult quarter for Facebook could read across to other social media plays like Twitter (NYSE:TWTR) and Snap (NYSE:SNAP).

Facebook has convinced a lot of investors so far that it’s back on track. It will need to convince a few more to rally further next week.

Tesla (TSLA)

Investors Mull Tesla Stock Buy as Production, Hiring and Sales Rev Up
Source: Shutterstock

Earnings Report Date: Wednesday, July 24, after market close

A big quarter looms for the market’s most divisive stock, Tesla (NASDAQ:TSLA). Shares bounced 44% since TSLA stock hit a 30-month low in late May – but still sit 34% off highs reached after the company’s supposed sale nearly a year ago.

Tesla already has reported deliveries for the quarter, which were a record. But the question bears (myself included) are asking is: were those deliveries profitable? With mix shifting to the lower-priced Model 3 and away from the S and the X, Tesla profits could disappoint.

That’s just one reason why this is a big quarter for TSLA. After the hugely disappointing Q1, a strong quarter would re-engage the growth narrative here – and put TSLA stock on track to head back to the $300-range. It would establish that Tesla can be profitable with the 3 – which significantly improves the long-term case for the stock.

There’s no shortage of Tesla skeptics out there: CEO Elon Musk and Tesla can quiet those doubters with a big quarter. Anything less, and margin and profit worries stay front and center for at least the rest of the year.

Amazon (AMZN)

Amazon stock
Source: Shutterstock

Earnings Report Date: Thursday, July 25, after market close

At this point, Amazon’s (NASDAQ:AMZN) earnings report matters simply because Amazon matters. Its revenue is deep enough and broad enough that it acts as a proxy for the broader U.S. economy. Its valuation – still 52x 2020 EPS estimates – is high enough that investor reaction to its earnings can signal potential reactions elsewhere. For instance, AMZN sold off sharply despite a decent Q3 report in late October, and tech stocks as a whole plunged for the next seven weeks.

And so Amazon’s earnings report on Thursday evening will be important for the market as a whole. The stock again has suffered from the “trillion dollar curse” in recent sessions. Valuation concerns remain.

If investors are willing to bid up AMZN after the Q2 earnings report, there’s room for other growth stocks to keep rising. If AMZN stock gets pounded after a strong quarter, however, investors need to stay on guard. We saw exactly that happen nine months ago – and it signaled on the largest sell-offs of the decade.

As of this writing, Vince Martin has a bearish options position in Tesla. He has no positions in any other securities mentioned.


Article printed from InvestorPlace Media, https://investorplace.com/2019/07/earnings-reports-to-watch-next-week-earnings-calendar/.

©2019 InvestorPlace Media, LLC