By Louis Juricic and Sarina Isaacs
Investing.com -- Here is your weekly Pro Recap on the biggest headlines out of tech this week: Tesla and Netflix drop on Q2, but analysts are bullish; Taiwan Semiconductor slides on a warning; and Wall Street cheers Microsoft's newly unveiled pricing.
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Tesla
Tesla (NASDAQ:TSLA) shares took a dive this past week as investors fretted over the EV maker's recent price cuts to boost volumes and combat intensifying competition in the electric vehicle market. The decision pushed revenues up to a record high of $24.93 billion during the three-month period.
But the move also weighed on its gross profit margin from automotive operations, excluding the impact of regulatory credits, which dropped to 18.2% from 18.8% in the first quarter and 26.2% last year. Although that decline was not as large as many analysts had expected, Tesla's stock still slumped after chief executive Elon Musk later suggested that more price reductions could be coming this year.
As far as the headline numbers go, Tesla reported EPS of $0.91 on revenue of $24.93 billion. Analysts polled by Investing.com anticipated EPS of $0.79 cents on revenue of $24.29B.
The price cuts helped the company boost its installed base and rake in new customers, with deliveries surging 86% to 466,140, marking a record quarter for the company.
Wedbush called the move a "smart strategy," saying after the report that the price cuts "have been in a homerun success in China, Europe, and the US… In a nutshell, we view Tesla where Apple was in the 2008/2009 period as Cupertino was just starting to monetize its services and golden ecosystem with the Street not seeing the broader golden vision at the time."
Needham and Company reiterated its Hold rating due to valuation, and both BofA and Goldman Sachs - which said the report was "solid" but that headwinds remain - reiterating their Neutral ratings on the stock.
Wells Fargo, meanwhile, said Tesla delivered "a low quality" EPS beat "driven mostly by other income."
Netflix
Meanwhile, Netflix's (NASDAQ:NFLX) crackdown on password sharing between users - and its cheaper ad-supported tier - appear to be working, with the company seeing a "low" number of cancellations and adding 5.9 million subscribers in Q2 - well above Wall Street estimates.
However, this trend was overshadowed by softer-than-anticipated revenue of $8.2B, even as EPS came in at a far better-than-expected $3.29 (vs. estimates for $2.84). Netflix's third-quarter projection of $8.5B for the top-line figure missed forecasts as well.
Co-CEO Greg Peters warned investors that returns from all of these initiatives would take "several quarters" to materialize.
Shares in Netflix took a slide, ending the week down 4% to $427.50.
But Evercore ISI lifted the price target to $550 after what it called "a mother of a quarter" and removed its Tactical Underperform rating on the stock. The firm blamed the move lower in shares on expectations correction, and not a fundamental correction, and "would encourage investors to buy NFLX shares on this (small) pullback."
BofA, meanwhile, bumped the price target by $35 to $525 per share on Buy-rated NFLX shares. The analysts said the results were "healthy," adding:
Within the Media ecosystem, we believe NFLX’s depth/breadth of content positions them well to withstand the production reductions.
Taiwan Semiconductor
Taiwan Semiconductor Manufacturing (NYSE:TSM), or TSMC, on Thursday logged a higher-than-expected second-quarter profit on some resilience in chip demand, but warned that a boom in artificial intelligence will not be enough to offset a broader industry downturn.
The New York-traded stock took a quick fall after the results, with American depositary receipts finishing the week down 7.1% to $97.25.
The firm - which is the world’s largest contract chipmaker, and also a key supplier to Apple Inc (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) - said net Q2 earnings per share fell 23% to 7.01 Taiwan dollars (US$1 = T$31.07), or US$1.14 per ADR. The per-ADR figure came in easily above expectations for $1.07, per analysts polled by Investing.com.
While the year-on-year decline in profit was partially due to a strong performance last year, it also reflects a slowdown in semiconductor demand through 2023 amid rising interest rates and worsening global economic conditions.
Profitability is expected to worsen in the coming quarter, with the chipmaker's gross profit margin set to drop to 51.5% to 53.5% in the third quarter from 54.1% in the second quarter, while operating profit margin is also expected to decline to between 38% and 40% from 42%.
The firm said that it faced increased headwinds from a broader economic downturn, which was keeping chip demand subdued after a bumper 2022. TSMC also struck a less optimistic note on an artificial intelligence-driven boost to chip demand than some of its peers.
Following the results, research firm CFRA trimmed the company's rating to Buy from the prior Strong Buy.
Microsoft
Microsoft (NASDAQ:MSFT) said 365 Copilot users would be charged $30 per month for Microsoft 365 E3, E5, Business Standard, and Business Premium when generally available.
After the announcement Tuesday - with higher-than-expected pricing for a very widely used product - Microsoft shares rocketed to a record high for the session.
Analysts were generally bullish on the news as well.
Barclays, for instance, called the move "a major next step for MSFT’s AI monetization. We think the price uplift (53% over E5) is at the upper end of investors’ expectations and should drive shares.” Wells Fargo (NYSE:WFC) similarly said that the pricing "represents a significant step-up to existing license costs."
BofA, meanwhile, estimated this to represent a $1.52B opportunity based on its estimate of 422 million Office 365 subscribers and anticipation of 1% penetration into that user base. It also believes that "M365 Copilot’s ability to parse through relevant business data" is a "critical differentiator to existing AI products."
Mizuho was also very positive, writing:
We remain confident that MSFT's growth opportunities over the medium term and beyond are greater than many realize, and this includes significant Generative AI monetization. And among June-quarter companies about to report, MSFT remains our top pick. We reiterate our Buy rating and raise our PT to $420 (was $390).
After Tuesday's surge, shares retreated and ultimately ended down fractionally for the week to $343.77.
Senad Karaahmetovic, Ambar Warrick, and Scott Kanowsky contributed to this report.
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