This article was submitted by Giles Coghlan, Chief Market Analyst, consulting for HYCM
Earnings season is upon us again. This time it’s likely to be crucial for the prospects of US equities throughout the rest of the year. With so much uncertainty regarding the path ahead for the US economy, market participants are paying much closer attention to how analyst expectations are updated in the runup to earnings announcements, but also to the tone that’s set during the earnings calls.
The market will be looking for guidance from CEOs regarding their sentiment for the rest of 2023, with attempts to moderate market expectations likely to be perceived as more bearish than usual.
Let’s kick this earnings season off by discussing four prominent companies from two different sectors that have already reported. You can trade CFDs on these names and many more at HYCM broker.
JPMorgan & Citigroup Gap Up
The financial sector has taken a severe hit in the first quarter of 2023. March saw the failure of regional banks that were struggling under the pressure of a higher interest rate environment. While the fear of continued runs on regional banks has somewhat eased in recent weeks, large cap banks appear to be the beneficiaries of all this uncertainty, Both JPMorgan Chase and Citigroup Inc. kicked off earnings season on Friday, April 14 with positive earnings surprises.
JPMorgan announced earnings of $4.10 per share, besting analyst expectations of $3.40 per share by over 20%. It’s also an impressive increase from last year’s earnings of $2.63 per share for the same quarter.
Revenues for the first quarter of the year came in at $38.35 billion to last year’s revenues of $30.72 billion, beating Wall Street estimates by almost 9%. JPMorgan has provided positive revenue surprises three times in the last four quarters and this most recent beat comes at a time when the shares of the company have underperformed the rest of the market.
Meanwhile, Citigroup Inc., which also reported earnings on April 14, announced Q1 earnings of $1.86 per share, beating the broader market’s expectation of $1.66. Citigroup’s revenues also surprised to the upside, coming in at $21.44 billion for Q1 to analyst estimates of $17.91 billion. This represents a 12% improvement over last year’s figures.
Both stocks gapped up on positive earnings news, but still have a way to go if they’re to convince investors that a change of trend is in effect. The story is that regional bank uncertainty is positive for these large caps, which are perceived as much safer places to deposit cash. However, higher rates are weighing on appetites for credit, and uncertainty regarding the broader economy still looming.
JPMorgan’s recent gap higher takes it above its 50% Fibonacci retracement level and back into the range it has been trading in for most of 2023. Meanwhile, Citigroup’s own recent gap up took it right to its 23.6% Fibonacci level, which acted as resistance back in November of last year.
Keep an eye on the $143 level on JPMorgan and the $53 level on Citigroup, as breaks above these levels could suggest that the uptrend following last October’s lows is still intact.
Be sure to stay posted on how this all-important earnings season unfolds by visiting HYCM Lab, your trusted source of market fundamentals, live analysis, opinion, and education.
Netflix & Tesla Gap Down
Netflix pipped Q1 consensus earnings expectations when it repored on Tuesday, April 18. The leading streaming service announced earnings per share of $2.88 to Wall Street’s expectations of $2.86, however it narrowly missed revenue forecasts. The company’s Q1 revenues came in at $8.16 billion to an expected $8.17 billion.
It also disappointed in its new subscriber numbers, with a reported new subscriber count of 1.75 million for the quarter, about half a million fewer than expected.
The company’s stock gapped-down by almost 4%, from $335 to $323 on the following trading day, but has since recovered slightly to $328 and appears to be attempting to close the gap
Tesla reported slightly lower than expected figures on Tuesday, April 18 after markets closed. Earnings per share came in at $0.85, delivering an expected 20% year-over-year decline as expected, on lower than forecast revenues of $23.3 billion.
Tesla shares gapped down following the narrow miss. The price of the leading EV manufacturer’s shares falling by over 9%. Margins were in the spotlight, as the company’s gross margins were shown to have dropped to 19.3% in the previous quarter from 29.1% in Q1 of 2022. This is following a series of price cuts to the company’s EV fleet so far in 2023.
The company also spoke of the likelihood of further cuts in store, as well as for the need to streamline its newest factories and reduce logistics costs. This is precisely the sort of negative forward guidance that investors are primed to react to at the moment, with markets particularly sensitive to any sign that the US economy is slipping into a recession.
The broader economic climate may be a headwind, but a ramp up in production, the introduction of its Semi- and Cybertruck models, as well as solid performance from its energy generation, storage and services segment remain positive for the company’s prospects going forward.
Both stocks were trading between their respective 23.6% and 38.2% Fibonacci retracement levels after having set a number of lower-highs and higher-lows since February. This narrowing of ranges usually means a decisive moment could be approaching. The disappointment market participants have expressed since Tesla’s earnings report is reflected in the fact that its stock has since broken below its own 23.6% retracement level to set a new daily lower-low.
HYCM Stocks Offering
HYCM clients can trade stock CFDs on major names including JPMorgan, Citigroup, Netflix, Tesla and more. In addition to that, as part of its on-going commitment to the equities investors, HYCM will be announcing a major addition to its existing stocks offering in the nearest time.
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
