Nasdaq – Tesla and Netflix tumble after reporting Q2 earnings

  • Tesla beats on earnings and revenues but warns margins may be cut further
  • Netflix massively outpaces subscriber growth forecasts but share price tumbles
  • Nasdaq slips again but record highs not too far away

Stock markets are treading water on Thursday, with earnings from the US failing to stimulate further gains in early trade.

Equities have performed extremely well recently as economic data has been more promising and the banks kicked off earnings season positively. Perhaps that’s just lifted expectations a little too much and we’re seeing some profit-taking going into the end of the week.

Prioritizing sales over margins is working for Tesla

Tesla’s share price appears to be suffering from sky-high expectations going into the earnings report in pre-market trading, with the price off more than 4% despite reporting expectation-beating earnings and revenues.

The company has been squeezing margins recently, initially to the disappointment of investors, in order to shield the company from higher interest rates and cost-of-living pressures. The prioritization of sales over margins is clearly working though and Elon Musk indicated further squeezes are likely if interest rates keep rising, something that should not go down badly given recent results but probably will.

Netflix share price dives despite much stronger subscriber growth

Netflix also failed to live up to market expectations, hitting the share price pre-market by almost 10%, despite recording strong earnings and subscriber growth that smashed analyst expectations. The company is going through an adjustment period as it cracks down on password sharing and previously announced it will eliminate its cheapest tier in order to push subscribers onto more profitable plans.

I don’t think we can read too much into the losses in pre-market trade as the stock has performed exceptionally well this year and bounced back from the poor subscriber growth numbers we were seeing previously. The transition is broadly going well and the company still appears confident that it will pay off later in the year.

Nasdaq not trading too far from all-time highs

These performances have contributed to the Nasdaq trading slightly in the red on Thursday, having pulled slightly off 16,000 resistance a day earlier.

NAS100 Daily

Source – OANDA on Trading View

That said, it remains firmly in an uptrend, trading comfortably within the orange channel, with the first notable test of support potentially coming around 15,500. More significant though may be 15,250, with it having previously been a very significant area of support and resistance and on this occasion, the point at which it interacts with the bottom of the channel. A break of that could be a real blow.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam