- Subscriber outlook is more important than ever at Netflix.
- Difficult times for Royal Mail but increased automation should help.
- Tesla is hoping to rebound after missing production expectations.
- Ocado reports off the back of raising fresh capital from investors.
Netflix, Q2 Results, Tuesday 19 July
Sophie Lund-Yates, Equity Analyst:
“There’s a lot riding on Netflix’s results. The market has not taken kindly to its downgrading of subscriber targets, and a further disappointing show is likely to result in another severe revaluation of the group’s value. As a reminder, last quarter, Netflix new subscribers declined by 200,000 and said it expects a further 2.0m drop in the current quarter.
Attracting and keeping subscribers isn’t just difficult because of heightened competition in the streaming space, but because of the ongoing surge of inflation. Household budgets are under real strain across the world, meaning TV subscriptions could be rubbed off monthly outgoings.
Away from the core metric of subscriber numbers and predictions, there will be a watch on Netflix’s content spend. It takes big bucks to stay ahead in this sector, and it will be interesting to see how Netflix is handling the balancing act of being financially responsible and spending enough to create content that keeps customers.”
Royal Mail, Q1 Trading Statement, Wednesday 20 July
Susannah Streeter, Senior investment and markets analyst:
“Royal Mail made a rapid recovery in 2021 but its share price has been under significant pressure to the extent that it exited the FTSE 100 at the last reshuffle. Strike action is the latest problem to rear its head, with managers walking out in a row over pay. This is set to exacerbate the worries about inflation, which are weighing on the stock, with the company warning that stamp prices may have to rise again as it faces a raft of higher prices from energy to labour costs. However, again, increased automation should help it weather the storm.
Royal Mail’s strong pandemic performance appears to have become unstuck with parcel numbers on the decline. But although volumes have fallen from last year’s highs, they crucially appear to be rebasing at a much higher level than pre-pandemic.
Royal Mail’s accelerated modernisation drive has also been boosting profitability and the move to greater automation should make the company more flexible to deal with peaks and troughs of demand going forward.”
Tesla, Q2 Results, Wednesday 20 July
Matt Britzman, Equity Analyst:
“There has already been a glimpse of what’s to come in next week’s second quarter earnings, with an update on production and delivery volumes earlier in July. Despite June being the highest production month in Tesla’s history, volumes missed analyst expectations and marked the first time in 10 quarters that quarter to quarter deliveries fell.
Ongoing supply chain issues and factory shutdowns have continued to hinder the group’s ability to ramp up scale. In China, operations at the Shanghai factory were impacted by fresh bouts of Covid restrictions. Also new factories in Texas and Berlin battle with soaring costs as they struggle to ramp up production.
The outlook for the second half of the year will be watched closely. Bringing new factories up to production levels that support profits is key, and it’ll be interesting to hear whether the group’s target of making 1.5m cars this year remains intact.”
Ocado Group, Half Year Results, Thursday 21 July
Matt Britzman, Equity Analyst:
“Having tapped investors for just shy of £600m last month, there’s pressure to deliver some positive news on new partner sign-ups for Ocado Solutions. It’s all well and good having the most advanced robots flying around fulfilment centres, but further progress is needed on sign-ups sooner rather than later.
Close attention will be paid to guidance on capital expenditure. Building out new customer fulfilment centres isn’t cheap and keeping costs in check is key. Management guided to around £800m at the start of the year – it will be interesting to see if that’s intact.
The Retail arm, jointly owned with M&S, expects to see further impact on sales from the ongoing cost-of-living crisis. Last we heard, new customers were coming onboard but average basket size was declining as shoppers ordered one or two less items. That, coupled with growing cost pressures put the Retail arm under pressure. The group’s expecting low single digit cash profit (EBITDA) margin.“
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