Tesla's Poor earnings, Demand for Solar Wanes, and Netflix's Growing Subscriber Count. Newsletter #28
Tesla's Poor earnings, Demand for Solar Wanes, and Netflix's Growing Subscriber Count. Newsletter #28
Tesla stock fell 9.3% last Wednesday after the company missed on revenue and earnings for Q3, the first time it's missed on both metrics since Q2 2019.
Tesla’s Poor Earnings
Demand for Solar Wanes
Netflix’s Growing Subscriber Count
New US Chip Restrictions on China
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Tesla’s Poor Earnings
Tesla stock fell 9.3% last Wednesday after the company missed on revenue and earnings for Q3, the first time it's missed on both metrics since Q2 2019.
Revenue - $23.4 billion vs $24.06 expected.
Earnings per share - $0.66 vs $0.74 expected.
The drop in profit is largely down to margin pressure after the electric vehicle company began to cut the price of its vehicles late last year.
Margins for the quarter just passed were 17.9%, continuing their downward trend from 18.2% in Q2.
During the earnings call, Elon Musk also voiced his concerns about the global economy, the future of Tesla’s Mexico Gigafactory, and the challenge of ramping Cybertruck production.
The company did say that Cybertruck deliveries should begin on November 30th but that it would take about 18 months for it to become cash flow positive. By 2025 Musk hopes to be producing 250,000 a year.
Demand for Solar Wanes
Solar stocks fell on Friday after solar product manufacturer, SolarEdge, warned that European demand has fallen significantly.
The Israeli-based company’s shares fell 28% on Friday after it said gross-margins and operating-income for the third quarter would be below expectations and that it expects significantly lower revenue in the fourth quarter.
CEO, Zvi Lando, said that the company’s manufacturing however has not been affected by the Israel-Hammas war.
The solar industry was already hurting this year after rising interest rates hurt the demand for solar installation in the US.
The company was downgraded by Goldman Sachs after the earnings call saying that weak demand in Europe is a serious concern going into 2024.
Netflix’s Subscriber Count
Netflix’s crackdown on password sharing seems to be paying off after it added 9 million subscribers in the previous quarter, well above the 6 million analysts had forecast.
During its earnings call on Wednesday, the company also announced that it would raise prices for subscribers in the US, UK and France.
Subscribers to the basic service in the US will see their monthly bill rise by $2 to $11.99, while premium subscriptions will rise by $3 to $22.99. Basic subscribers in the UK will pay an additional £1, or £7.99, with premium memberships rising by £2 to £17.99.
The increase in subscribers was the largest quarterly rise since Q2 of 2020 when the Covid lockdowns were in full swing.
Netflix now has 247 million global subscribers, up 11% from the same time last year.
New US Chip Restrictions on China
The US announced more chip restrictions on China last week aimed at reducing its ability to build AI and military applications.
The new controls will go into effect in mid-November.
The US also aims to stop the indirect transfer of advanced chips to China by limiting the export of tools and equipment used for chip-production in countries such as Russia and Iran.
Analysts suggest that the U.S. seems to be hindering China's semiconductor sector. They believe that if China's technology advancements persist, they might innovate beyond U.S. limitations and produce marginally superior chips.
The post-COVID economic slowdown in China has reduced chip demand, and US restrictions on semiconductors have curtailed South Korean manufacturers' expansion in China.
With shrinking revenues, the ability of China's semiconductor sector to invest in new chip technologies will be constrained, even more so after the latest round of restrictions.