Flagship Pod 4/24: How is Earnings Season Going?
Every Friday we host a live 1:1 discussion via discord at 12pm EST.
This gives you the prime opportunity to ask us any questions you have on the markets, the economy, crypto, and more!
If you want to listen to everything we broke down, just click the play button above.
Here are the 4 key things we went over:
How the first full week of earnings season went
Why we're still concerned about bank consolidation
What the new competitive landscape in EVs will be
Where we're moving our focus in our AI investments
And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.
To get all the juicy details, just listen to the entire recording.
And now, onto the summary👇
What we saw last week was an economy struggling to find focus.
Bank earnings were messy across the board and the principal trend we're now concerned about is medium banks faltering enough to cause a wave of consolidation across the board.
Meanwhile, this slate of earnings definitely produced more losers than winners.
Materials stocks took a hit for a variety of reasons, lots of airlines stayed flat-to-down over short-term profitability concerns, and Netflix simply can't consistently raise their subscriber numbers enough to maintain the confidence of the market.
However, rather than look for nothing but pessimism in all that, we're excited to see that some of these earnings figures are revealing a new competitive landscape emerging in the EV space.
It's not all bad news as we gear up for GDP figures and the real meat of Q1 earnings this week. There are a lot of interesting trends to watch so long as you know how to look for the narratives between all the PR.
Let's dive into the details 👇
A Real Hit-or-Miss Earnings Season:
Earnings season started off with a lot of overreactions from bank earnings.
We're still watching for potential consolidation in the financial space, but now that the economy has had a week to process weaker numbers from the likes of Charles Schwab, Morgan Stanley, and Bank of America, things are stabilizing on the more positive side.
Netflix was the big hit mid-week as their numbers came in lower than expected. With the streaming giant geared up to FINALLY crack down on password sharing in the next few months, we're eager to see how that affects their numbers.
They missed badly on subscriber numbers which drove the stock down.
Frankly, our analyst team is still hunting for more concrete narratives in the streaming space, so it's difficult to achieve confidence about how this industry will develop. It's just so expensive and hard to build synergies when you're a pure-play media company.
Meanwhile, while Tesla's earnings drove the stock down thanks to 6 different price cuts this year alone -- the commentary given by management is what we're keying into.
We're very interested to get some clarity about the emerging EV market.
Who Tesla's Biggest Competitor Is:
Because it's not just that Tesla is down on reducing prices.
What's interesting here is their implied reason why. One big margin haul for the EV king has been their luxury-adjacent branding.
Having an EV at all gives their models a luxury premium.
However, Elon Musk's comments during this Q1 call indicated that the company is moving towards a more volume-based strategy.
Tesla doesn't want luxury branding, it wants to sell the most cars.
This is an enormous signal that Tesla is ready to cede the luxury branding in EVs to the likes of Mercedes and Porsche.
Tesla doesn't see them as the real competition, they see Ford as their major competitor moving forward.
Now, to be clear, literally, no car company can really compete with Tesla right now. But as legacy automakers catch up in the next few years, they will become more and more competitive.
What's very interesting is watching Tesla gear up to fight Ford more than they are preparing to fight anyone else. For our analysts, this makes our recent Ford strategy even more interesting.
We're not sure if going for the volume play is the right move for Tesla, but our next step in understanding the EV space is trying to determine if Tesla is pushing these price cuts because they feel like they can't compete in the luxury space or if it's simply more valuable to compete down in the lower-priced, higher-volume car area.
Tesla makes wild margins from value-add services that you can only get from higher-end customers.
It is truly wild that they feel comfortable moving into a more price-sensitive sector of the market.
Wrapping This Up:
So the first full week of earnings season was pretty mixed.
With us hitting the real meat of Q1 earnings this week, we'll get a much broader pulse check for the whole economy.
Not only are we getting the first servings of tech and healthcare reports, but we'll also get last quarter's GDP numbers midweek.
Remember, practically half the market has been barking about an incoming recession for the last year since the Fed started raising rates.
GDP growth is the only real indicator we'll get about whether or not we're in a 'proper' recession.
Maybe the recession actually happened last year and we've been slowly recovering from it. Maybe the recession is right now and we just don't know it.
At the same time, when the entire economy is talking about a recession coming, that's usually when they don't come.
We'll get a lot of clarity this week, but that may end up pushing the apocalypse a few months down the road. We'll keep you posted as we get a better understanding of where this volatile market is taking us.