Weekly Earnings Outlook

Update 29 January 2024

Tech Titans Set the Tone: Q4 Earnings Deliver Insights and Shakeups

In the week that was, industry giants like Netflix, Microsoft, and Tesla disclosed their Q4 2023 results. These reports have had a significant impact on shaping the overall narrative of this earnings season, providing insights into the performance and outlook of key players in the technology sector.

Netflix Inc. (NASDAQ: NFLX)

Netflix’s Q4 2023 results reveal a narrative of robust growth and strategic positioning within the fiercely competitive streaming landscape. The standout performance comes in the form of subscriber growth, surpassing expectations and adding a staggering 13.1 million subscribers during the quarter, propelling the total to an unprecedented 260.8 million – a record high for the streaming giant. This achievement notably outpaced Wall Street estimates, which had projected a more conservative 8-9 million new subscribers.

From a financial perspective, Netflix demonstrated its resilience and market strength. Revenue surged by 12% year-over-year to an impressive $8.83 billion, slightly exceeding expectations. However, the earnings per share of $2.11 fell short of analyst estimates, landing below the expected $2.22. Despite this discrepancy, the company revised its full-year 2024 operating margin forecast to 24%, attributing it to a robust Q4 performance and the impact of a weakening US dollar.

The company adopts a multifaceted approach, leveraging price hikes, crackdowns on password sharing, and the introduction of ad-supported tiers to boost revenue. The streaming giant remains committed to investing heavily in content, a crucial element to stay ahead in a landscape marked by fierce competition. An interesting facet of Netflix’s strategy is its deliberate decision not to pursue acquisitions of traditional entertainment companies or linear assets. Instead, the company is open to partnerships with content creators from the linear space, exploring avenues for collaboration in a rapidly evolving media landscape.

Tesla Inc. (NASDAQ: TSLA)

Tesla’s Q4 2023 results present a mixed picture, marked by both notable achievements and concerning indicators. While the total revenue saw a 3% year-over-year increase, the company fell short of analyst estimates on both revenue and earnings per share. Automotive revenue, a key metric for Tesla, only grew by 1%, contributing to a decline in the operating margin from 16% a year ago to 8.2%. However, a significant boost in net income was noted, primarily attributed to a one-time non-cash tax benefit.

Looking ahead, Tesla anticipates a “notably lower” growth in vehicle volume for 2024 compared to the previous year, positioning the company between two major growth waves. Elon Musk, the visionary leader of Tesla, reiterated his desire for a 25% voting control stake in the company. However, his criticisms of proxy advisory firms ISS and Glass Lewis, coupled with the absence of a specific timeline for the production of the Optimus humanoid robot, introduced an element of uncertainty.

Despite challenges in the automotive sector, Musk expressed confidence in the Cybertruck, hailing it as Tesla’s “best product ever” and projecting an eventual annual delivery of 250,000 units. On the energy front, the company reported a robust 54% growth in revenue, though operating income declined due to lower average selling prices and increased research and development expenses.

However, the market’s response has been notable, with Tesla stock experiencing a 16% drop in the early part of 2024. This reflects concerns about the company’s outlook for the year, with caution prevailing amid uncertainties about growth and profitability.

Karooooo Ltd (JSE: KRO)

Karooooo’s Q3 2024 results reflect a dynamic performance characterized by both notable achievements and areas of careful consideration. The scale of operations witnessed a commendable 14% growth in the subscriber base, reaching an impressive 1.9 million. However, it’s worth noting that the net additions experienced a marginal 4% dip, indicating a slight deceleration in the pace of acquiring new subscribers.

In terms of financial growth, Karooooo demonstrated robust figures. Total revenue saw a substantial uptick, registering a 16% increase to ZAR1.08 billion, and when measured on a constant currency basis, the growth remained impressive at 14%. The subscription revenue, a key metric for the company, also experienced a healthy surge of 17% to ZAR904 million, maintaining a consistent 14% growth on a constant currency basis. This growth in revenue is further supported by a commendable 55% increase in cash flow from operations, reaching ZAR443 million.

A notable aspect of the Q3 activities is the continued integration of Karooooo Logistics technology with the Cartrack platform. This integration reflects the company’s commitment to enhancing and expanding its suite of services, leveraging synergies between different arms of its operations.

Sources: Sharenet; Moneyweb; CNBC

Piece written by Kealeboga Molefe, Trive Sales Trader

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