Weekly StockWatch: Tesla Record Revenues, Netflix Subscriber Growth, Deliveroo Lower GTV Guidance & More

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Tesla Solid Q3

The EV king posted solid financial results for the third quarter, on Wednesday after markets closed, with record Revenues of $21.454 billion. Operating Income surged 84% compared to Q3 2021, to $3.688, despite a $250 million negative FX impact. [1]

Operating Margin strengthened to 17.2%, which mr Musk characterizing it as "industry leading" in the subsequent earnings call [2], although Automotive Gross Margin stayed at an underwhelming 27.9%.

Tesla Motors Inc had already announced record Deliveries of 343,830 vehicles and production of 365,923 units, with the wider than usual gap between the two, having caused some concern about demand.

Mr Musk addressed this during the earnings call, speaking of "excellent demand for Q4", adding that they expect to sell every car they produce "for as far in the future as we can see". In spite of this, CFO Zachary Kirkhorn said that the gap would persist in Q4, while expecting 2022 delivery growth to come "just under" the 50% target.

Tesla has not launched any new models this year and there was no meaningful update around the long-awaited and delayed Cybertruck. However, deliveries of the Semi truck to Pepsi are expected to start on December 1. [3]

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Markets did not like the mixed messaging over the delivery/output gap and TSLA.us shed nearly 7% on Thursday, setting fresh 2022 lows.

Netflix Subscriber Growth

The streaming giant had an abysmal first half of the year, during which it relinquished more than a million subscribers, but staged an impressive turnaround in Q3, with the addition of 2.41 million new users. More to it, Netflix now expects its user base to grow by 4.5 million memberships in the fourth quarter. [4]

Similar to other US companies, its Revenues were adversely affected by the strong US Dollar, coming in lower than the previous quarter. However, the $7.926 billion still constitute a strong performance and a 5.9% year-over-year increase.

After the loss of subscribers during the first quarters of the year, Netflix decided to move expeditiously towards a new less expensive subscription plan, with the inclusion of advertisements. The new offering will launch in early November in 12 countries, with a cost of $6.99 in the United States, undercutting rival Disney+, in both timing and pricing.

The impressive results helped NFLX.us to a surge in excess of 10% on Wednesday and six months highs.

Zip Co Quarterly Results

Zip Co Ltd (Z1P.au) is an Australian fintech company, which provides Buy Now Pay Later (BNPL) services in various countries, including the United States. It announced its latest results for Q1 FY2023 (period ending September 30), before market open on Thursday. [5]

Zip generated Revenues of A$ 158.4 million, representing a 19% yearly increase and 2% quarterly. Transaction volume also grew by similar percentages to around A$ 1 billion. Its active customer base grew to 7.4 million with most of them coming from USA, while merchants increased by 70% compared to the same period a year ago.

CEO Lary Diamond spoke of "another solid set of numbers" and of "great progress" towards sustainable growth.

US-based rival Affirm Holdings Inc is expected to release its Q1 FY2023 results in early November, after having Total Net Revenue of $1.349 billion and Gross Merchandise Value (GMV) of $15.5 billion for Fiscal Year 2022. [6]

The BNPL sector has been expanding rapidly, while Apple recently entered the arena with its iOS 16 Pay Later service. The current high inflation and rising interest rates environment however, poses challenges.

Z1P.au benefited on Thursday after the results, but ended the week mixed.

Deliveroo Lowers 2022 Guidance

After an underwhelming, albeit somewhat resilient first half to the year, the British food delivery firm released today its trading update for the third quarter, before markets opened. Orders dropped slightly to 72.8 million from 73.6 million during the same period a year ago and around 79 million in Q2 2022. [7]

On the bright side, Gross Transaction Value (GTV) rose 8% year-over-year, but posted another decline on a quarterly basis. GTV/order strengthened for third consecutive quarter, driven by higher inflation.

Founder & CEO Will Shu talked of "ongoing economic uncertainty", but also noted "further progress on our path to profitability".

Most importantly though, Deliveroo downgraded its GTV sales for the full year to the lower end of its prior range, now expecting Gross Transaction Value growth of 4-8%, from 4-12% previously. Adjusted EBITDA Margin however is expected to improve to the range of minus 1.2%- minus 1.5%, from minus 1.5%- minus 1.8% previously projected.

Furthermore, the company confirmed this week the end of its operation in the Netherland at the end of November, a market that represented 1% of the GTV in the first nine months of 2022.

Dutch-based rival Just Eat Takeaway (TKWY.nl) saw its Order shrink by 11% year-over-year in Q3, to 235.3 million. However, it returned to profitability sooner than expected, while GTV grew 2% to nearly €7 billion [8]. Just Eat now forecasts positive Adjusted EBITDA in the second half, but projects slower low-single-digit GTV growth for 2022, from mid-single-digit previously.

ROO.uk is having a food day today, despite the lower forward guidance, heading towards a profitable week.

Snap Disappointing Growth

The popular social media company announced its latest earning on Thursday, after US markets closed, posting strong Revenues of $1.128 billion [9]. However, the 6% yearly increase marked the first single-digit growth in the company history as a publicly traded entity.

Snap attributed this slowing growth to various factors, which include "platform policy changes, macroeconomic headwinds, and increased competition" and expects Revenue to continue to decelerate in Q4, although it did not offer forward guidance, in another sign of uncertainty.

The company is harmed by lower brand-oriented advertising spending, as its advertising partners decrease their budgets "in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital".

In spite of the challenging environment, DailyActive users (DAU's) increased by 19% year-over-year, to 363 million.

Markets reacted negatively to the results, as Snap's stocks was losing around 25% in Friday's pre-market, dragging lower other advertising-dependent firms such as Meta Platforms.

Next Week (October 24-28)

Netflix was, as usual, the first of the FAANGs to release its results and focus now shifts to the rest of them and other big tech names. Alphabet (Google), Apple, Meta Platforms (Facebook), Amazon.com, as well as Microsoft report their results during the upcoming week.

Big US and German automakers will also be in the spotlight. The Ford Motor Company is due on Wednesday having already achieved strong sales in the to-be-reported third quarter, including 6,464 units of the F-150 Lightning electric pick-up truck [10]. Rival General Motors, which reports a day earlier saw achieved a 24% year-over-year sales growth during the same period. [11]

On the European front, the Mercedes-Benz Group (MBG.de) and Volkswagen AG stand out, with the latter having delivered more than 2 million vehicles in Q3, including 149,300 electric ones. [12]
After strong results on increased demand from US airliners, markets now turn to Germany's Lufthansa Group, while plane manufacturers Boeing and Airbus are also expected to release their results in the same were.

The banking sector stays front and center, as UK's Barclays and Lloyds Banking release their quarterly results and Australia's ANZ Group (ANZ.au) posts the results for the full FY 2022.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 21 Oct 2022 https://tesla-cdn.thron.com/static/WTULXQ_TSLA_Q3_2022_Update_KPK2Y7.pdf

2

Retrieved 21 Oct 2022 https://www.youtube.com/watch

3

Retrieved 21 Oct 2022 https://twitter.com/elonmusk/status/1578170980283076608

4

Retrieved 21 Oct 2022 https://s22.q4cdn.com/959853165/files/doc_financials/2022/q3/FINAL-Q3-22-Shareholder-Letter.pdf

5

Retrieved 21 Oct 2022 https://www.asx.com.au/asxpdf/20221020/pdf/45ghy09yclt2vl.pdf

6

Retrieved 21 Oct 2022 https://www.businesswire.com/news/home/20220825005613/en/Affirm-Reports-Fourth-Quarter-and-Fiscal-Year-2022-Results

7

Retrieved 21 Oct 2022 https://dpd-12774-s3.s3.eu-west-2.amazonaws.com/assets/6116/6630/2968/Deliveroo_2022_Q3_Trading_Update_RNS.pdf

8

Retrieved 21 Oct 2022 https://s3.eu-central-1.amazonaws.com/takeaway-corporatewebsite-dev/19-10-2022-Press-release-Just-Eat-Takeaway.com-Q3-2022-Trading-Update.pdf

9

Retrieved 21 Oct 2022 https://s25.q4cdn.com/442043304/files/doc_financials/2022/q3/Snap-Inc.-Q3-2022-Investor-Letter-(10.20.2022).pdf

10

Retrieved 21 Oct 2022 https://s201.q4cdn.com/693218008/files/doc_downloads/2022/10/September-Sales-Release-FINAL.pdf

11

Retrieved 21 Oct 2022 https://investor.gm.com/static-files/557a4748-4bff-44df-b514-2ae06afddd96

12

Retrieved 01 Dec 2022 https://www.volkswagenag.com/presence/investorrelation/publications/deliveries/2022/20221013_Deliveries_September.pdf

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