Just Chill

NFLX had an aggressive International build in 2016. It also increased investment in its original content after so many of its shows (House of Cards, Orange is the New Black, Narcos, Stranger Things, etc) performed so well. The investments were complimented by a price increase that was 75% complete at the end of Q3. 

Subs will remain topic of focus but investors want to see the company deliver. Especially with Forward P/E at a 145x 2017 earnings. The cash burn in Q3 was $506 mln and NFLX said it expected Q4 to come in at a similar level. 

Q4 Guidance:

• Total Streaming- $2.34 bln
  • Contribution Margin 18.8%
  • Total Membership 91.94 mln
  • Net Adds 5.20 mln

Domestic Streaming

• Revenue $1.39 bln
• Contribution Margins 36.9%
• Total memberships 48.95 mln
• Net Additions 1.45 mln (Street expectations closer to 1.39 mln)

International Streaming

• Revenue $947 mln
• Contribution Margins -7.9%
• Total Memberships 43.0 mln
• Net Additions 3.75 mln (Street expectations are for a slight beat)
• Total
  • Net Income $125 mln

Q3 Recap

• NFLX reported Q3 (Sep) earnings of $0.12 per share, excluding non-recurring items, $0.07 better than the Capital IQ Consensus of $0.05. Revenues rose 31.7% year/year to $2.29 bln vs the $2.28 bln Capital IQ Consensus.
• Netflix Q3 Domestic Net Additions 0.370 mln vs 0.30 mln guidance; Q4 guidance is for 1.45 mln, expectations were for ~1.00 mln; Q2 adds was 0.16 mln 
• Netflix Q3 International Net Additions 3.20 mln vs 2.00 mln guidance; For Q4 NFLX expects addition of 3.75 mln, expectations were for ~3.00 mln; Q2 Adds was 1.52 mln 
• NFLX issued upside guidance for Q4, seeing EPS of $0.13, excluding non-recurring items, vs. $0.08 Capital IQ Consensus Estimate.

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NFLX SET TO TAKE OFF

The Take:

Einhorn really put a damper on this stock yesterday as it confirmed an all time high breakout. It seems everyone from Carl Icahn to Einhorn want to take a shot at calling a top in this stock. "Valuation" is the obvious key concern for these guys, but it's all relative to how you value the stock. Take Amazon for example, it has been shot against on valuation for years now. That short selling and top calling has done nothing more than fuel Bezos' land buying spree. 

NFLX has started to break out of a two year range and has cleared enough room for further upside. I want to play to capture that upside. 

NFLX SET TO EXPLODE WE WILL TAKE FEB 145 155 CALLS INTO THE PRINT

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Results

Netflix beats by $0.02, reports revs in-line; guides Q1 EPS above consensus

• Reports Q4 (Dec) earnings of $0.15 per share, $0.02 better than the Capital IQ Consensus of $0.13; revenues rose 35.9% year/year to $2.48 bln vs the $2.47 bln Capital IQ Consensus.
• Co issues upside guidance for Q1, sees EPS of $0.37, excluding non-recurring items, vs. $0.17 Capital IQ Consensus Estimate.
• See 16:10 comment for additional metrics.

Excerpts from Shareholders Letter:

• This was the largest quarter of net additions in our history and was driven by strong acquisition trends in both our US and International segments.
• 15% ASP growth; ASP for the international segment rose 13% year over year; US contribution margin expanded 395 basis points year-over-year to 38.2%. Margin improvement was greater than expected due primarily to higher-than-forecast revenue and the timing of content deals.
• Our anticipation for a year-over-year decline in domestic net adds reflects a difficult comparison in the year ago quarter where we exceeded our net adds forecast by 27%. Similarly, in our international segment, we will lap our Rest of World launch in January of last year. We also expect a greater membership impact from our content slate in the second half of 2017. On a sequential basis, we believe our strong Q4 results likely pulled forward some net adds from Q1'17 to Q4'16.
• Targeting global operating income of 7% (Was 4% in Q4).
• We anticipate the international segment will be slightly contribution profit positive in Q1. We plan on investing over the remaining quarters of 2017 internationally and, as a result, anticipate an international contribution loss in Q2. On a full year basis, we expect international contribution loss to improve substantially year on year.
• Net Neutrality- Weakening of US net neutrality laws, should that occur, is unlikely to materially affect our domestic margins or service quality because we are now popular enough with consumers to keep our relationships with ISPs stable. On a public policy basis, however, strong net neutrality is important to support innovation and smaller firms. No one wants ISPs to decide what new and potentially disruptive services can operate over their networks, or to favor one service over another. We hope the new US administration and Congress will recognize that keeping the network neutral drives job growth and innovation.
• We expect our FCF to be around -$2 billion in 2017 vs. -$1.7 billion in 2016, with FCF loss improving sequentially in Q1'17.
• We are funding our working capital needs through the debt market. In October, we raised $1 billion of senior notes with a coupon of 4.375%, which will reduce our weighted average cost of capital. We will continue to be a regular issuer of debt to finance our investment in original content as we balance our cash needs with the carrying cost of interest expense

METRICS FROM THE QUARTER

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NFLX Key Metrics Courtesy of Briefing

FLX CURRENTLY TRADING AT $144 AFTER HOURS WHICH IS ABOVE $1000 PRE-SPLIT

Tanning Bed ($FSLR Earnings)

First Solar (FSLR) is set to report Q3 earnings after the close with a conference call to follow at 4:30pm ET. FSLR reports right after the bell and provides additional details in a presentation shortly ahead of its call.

Current Capital IQ consensus stands at EPS of $0.66 on Revenue of $985 mln.

Shares of FSLR are holding steady at the $40 level ahead of the report. Shares hit a 52-week low of $33.74 on September 20 and are up over 20% but buyers have been unwilling to move in above the $40 level. The company needs to show it is meeting the worries about 2017 head on and that the concerns in the markets are overdone before it can press back toward the $50 level. This stands as a key quarter for the company.

FY16 Guidance

• Net Sales $3.8-4.0 bln (Was reaffirmed in Q2);
• Gross Margin (GAAP)- 18.5-19.0% (Prior 18-19%);
• Operating Expense $380-400 mln (Reaffirmed);
• Operating Income $310-370 mln (Prior 300-370 mln);
• EPS $4.20-4.50 (Prior $4.10-4.50);
• Operating Cash Flow $500-600 mln (Prior $500-700 mln);
• CapEX $275-325 mln (Prior $300-400 mln);
• Shipments- 2.9-3.0 GW (Unchanged)

Get Your Fat On ($FIT Earnings)

Fitbit (FIT) is set to report Q3 results after the bell (released results last quarter at 4:05pm ET). The co has a conference call scheduled to follow at 5:00pm ET.

 Cap IQ Consensus estimates Q3 EPS of $0.19 (vs. $0.24 in 3Q15) w/revs of $506.6 mln (+23.6% y/y). 

Guidance

• On the Q2 call, co issued guidance for Q3, sees EPS of $0.17-0.19 vs. the $0.17 Capital IQ Consensus Estimate (at the time); sees Q3 revs of $490-510 mln vs. the $497.82 mln Capital IQ Consensus Estimate (at the time).
• On the Q2 call, co reaffirms guidance for FY16, sees EPS of $1.12-1.24 vs. the $1.17 Capital IQ Consensus Estimate (at the time); sees FY16 revs of $2.5-2.6 bln vs. the $2.58 bln Capital IQ Consensus Estimate (at the time).

Based on FIT options, the current implied volatility stands at ~ 75%, which is 64% higher than historical volatility (over the past 30 days). Based on the FIT Weekly Nov04 $12.5 straddle, the options market is currently pricing in a move of ~12% in either direction by weekly expiration (Friday).

Technical Take

Technically, FIT has been in a range for the better portion of this year. It found support in Feb and June with each probe of the $12-level, but also struggled to maintain strength above the $16-area. 

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Swipin ($MTCH Earnings)

Match Group (MTCH) will report Q3 results after the bell. The company will release a slide presentation with guidance soon after the press release and host a call tomorrow morning at 8:30.

• The Street is looking for adj. EPS of $0.20 with revenue +16% to $318 mln and Adj. EBITDA +29% to $108.5 mln.
  • Match guided for Dating revenue up 2-3% Q/Q (to $280.8-283.6 mln) with a Dating adj. EBITDA margin of 35-37%.
• Match already guided for Q4 Dating revenue +4-6% Q/Q with Dating adj. EBITDA margins in the mid 40% range.
• Match also guided for FY16 adj. EBITDA of $400-415 mln with Dating revenue of $1.10-1.14 bln. Last quarter, strength in Dating revenue, led by Tinder, was offset by lower than expected indirect (adverting) revenue.
• Last quarter, Match pushed out expectations for the advertising model as Tinder chose to focus on driving user growth and engagement. Less advertising was more than offset by higher direct rev but the company also increased its investment in Tinder (mostly headcount), which resulted in lower EBITDA guidance for 2016.
• Tinder's Q2 paid member count (PMC) was up 20% Q/Q to 1.23 mln. Match reaffirmed guidance for PMC doubling this year to 1.6 mln. Match is focused on adding features to drive Tinder user growth and engagement as there is competition in this low barrier to entry business. That said, network effects are on its side. Still, Tinder is focused on growing the business before really ramping up the advertising business model on top of it.
• Q2 total dating rev was up 23% with avg. PMC +30% to 5.3 mln. Indirect (advertising) revenue was up 25% at just $11.9 mln. Non-dating revenue consists of just the Princeton Review, which averages ~$25 mln in revenue per quarter.
• Tinder essentially changed the game of dating with its simple swipe left/right app based on location and a quick profile with pictures.
  • Bears see competition in a low barriers to entry business and Tinder cannibalizing the company's legacy dating brands as serious risks.
  • Bulls point to secular tailwinds like the shift to online dating and the fact that millennials are staying single longer.
• Match's legacy dating brands like Match and OkCupid have struggled with the shift to mobile. As Tinder reduces the stigma of online dating, it could be a benefit to the legacy dating brands longer term.
• IAC (IAC) still owns 83.8% of the shares outstanding after spinning off MTCH one year ago.
• Meanwhile, 23% of the float is sold short.
• MTCH broke out to a new all time high two weeks ago but the stock has since pulled back to retest the level that offered resistance for most of October. 

$GILD Earnings

Gilead Sciences is expected to report Q3 earnings today after the close with a conference call to follow at 4:30 pm ET the same day.

Capital IQ Consensus calls for EPS of $2.84 & a revenue decline of 12.5% to $7.44 bln, compared to EPS of $3.22 on revenue of $8.51 bln in the same quarter last year.

FY16 guidance

• Co updated guidance for FY16 in their Q2 earnings release.
  • Lowered net product sales to between $29.5-30.5 bln from $30-31 bln; reaffirmed adj gross margin between 88-90%.

Techs:

GILD has been in a slump throughout 2016 as it sits down -26% YTD near the $73-area. The path of least resistance remains to the downside as price flirts with 2-1/2 year lows & its down-trending 50-day simple moving avg near $77.

Options Activity

Based on GILD options, the current implied volatility stands at ~ 33%, which is 67% higher than historical volatility (over the past 30 days). Based on the GILD Weekly Nov04 $74 straddle, the options market is currently pricing in a move of ~5% in either direction by weekly expiration (Friday).

Peers include: AMGN, RHHBY, NVS, CELG, SHPG, REGN, BMRN, ALXN, BIIB

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RESULTS:

Gilead Sciences misses by $0.09, reports revs in-line; reaffirms FY16 (Dec) revs in-line

• Reports Q3 (Sep) earnings of $2.75 per share, $0.09 worse than the Capital IQ Consensus of $2.84.
  • Antiviral product sales, which include primarily products in Gilead's HIV and liver disease areas, were $6.8 billion for the third quarter of 2016 compared to $7.7 billion for the same period in 2015.
    • HIV and other antiviral product sales were $3.5 billion compared to $2.9 billion for the same period in 2015.
    • HCV product sales, which consist of Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi (sofosbuvir 400 mg) and Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg), were $3.3 billion compared to $4.8 billion for the same period in 2015.
  • Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $564 million for the third quarter of 2016 compared to $509 million for the same period in 2015.
• Co reaffirms guidance for FY16 (Dec), sees FY16 (Dec) revs of 29.5-30.5 vs. $30.38 bln Capital IQ Consensus Estimate.

GILD notes they have seen 'strong adoption' of TAF-based regimens where they received reimbursement

• In the US, of the nearly 840k people on antiretroviral therapy, 80% receive a Gilead regiment

Anticipated Milestones:

• Achieve 48-week endpoint in Phase 3 studies in treatment-naïve and switch patients
• Complete Phase 1 study in HIV cure.
• Complete enrollment of Phase 2 study in HCM
• Complete Phase 3 study in LQT-3 syndrome
• Complete Phase 2 study in HCM
• Complete Phase 2 study in ebola virus disease

It's in the Game ($EA Earnings)

Electronic Arts (EA) is set to report Q2 results after the bell (released results last quarter at 4:00pm ET). The co has a conference call scheduled to follow at 5:00pm ET. Cap IQ Consensus estimates Q2 EPS of $0.43 (vs. $0.65 in 2Q15) w/revs of $1.09 bln (-4.8% y/y). 

Guidance

Q2

• GAAP net revenue is expected to be approximately $915 million.
• GAAP net loss is expected to be approximately ($51) million.
• GAAP loss per share is expected to be approximately ($0.17).

FY17

• Ending March 31, 2017 GAAP net revenue is expected to be approximately $4.750 billion (Reaffirm).
• GAAP net income is expected to be approximately $809 million.
• GAAP diluted earnings per share is expected to be approximately $2.56 (Prior guidance was $2.53)

Options Activity

• Based on EA options, the current implied volatility stands at ~ 39%, which is 95% higher than historical volatility (over the past 30 days). Based on the EA Weekly Nov04 $77 straddle, the options market is currently pricing in a move of ~7% in either direction by weekly expiration (Friday).

TECHS:

Last week's downgrade took the wind out of the stock. Sellers responded with an aggressive drop below its rising 50-day moving average which has price in "no-man's land" ahead of earnings. Next key support is the 200-day simple ma near 73.

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Alphabetical ($GOOGL Earnings)

Alphabet (GOOGL, GOOG) is set to report Q3 earnings tonight after the close with a conference call to follow at 4:30pm ET. GOOGL reported Q2 results at 4:01pm, the company does not guide. 

Current Capital IQ consensus stands at EPS of $8.60 on Revenue of $22.03 bln.

Shares of GOOGL hit an all time high of $838.50 on Monday but we have seen some profit taking ahead of tonight's report as the stock has pulled back to $820. The company is coming of an impressive Q2 in which it was able to accelerate revenue growth to over 20% for the first time in three years.

The growth was driven by Google website revenues as strength in the mobile and YouTube segments provided a boost. The rise in mobile has also boosted the growth in partners and website TAC which will be an area to watch.

The all time high will certainly be in play, especially when one views the Forward P/E of 20.5x being reasonable for a co that is posting 20%+ revenue increases despite being a $20+ bln a quarter company, no easy feat. A miss by GOOGL should prove interesting with the $783.50 Post-Q2 results being a key level of support. A break of this will send the shares to the $760 with the 200-sm ($757.29) in play.

Key Metrics

• Revenue Growth
• Operating Margins
• Aggregate Paid Clicks-  Q3 expected to increase approx 26% y/y; Q2 +29%;-Q1 +29%;Q4 +31%; Q3 +23%.
  • Paid Clicks on Google websites- Q2 +37%;Q1 +38%; Q4 +40%; Q3 +35%.
  • Paid clicks on member sites- Q2 0%;Q1 +2%; Q4 +2%; Q3 -5%.
• Aggregate cost per click- Q3 is expected to decline approx 5% y/y; Q2 -7%; Q1 -9%; Q4 -13%; Q3 -11%
  • CPC on Google sites- Q2 -9%; Q1 -12%; Q4 -16%; Q3 -16%.
  • CPC on member sites- Q1 -8%; -8%; Q4 -8%; Q3 -4%.
  • If curious: Cost-per-click is defined as click-driven revenue divided by our total number of paid clicks and represents the average cost we charge advertisers for each engagement by users.

Q2 Recap

GOOGL reported Q2 (Jun) earnings of $8.42 per share, $0.38 better than the Capital IQ Consensus of $8.04. Revenues rose 21.3% year/year to $21.5 bln vs the $20.77 bln Capital IQ Consensus.

RESULTS

GOOGL/GOOG beats by $0.46, beats on revs  

• Reports Q3 (Sep) earnings of $9.06 per share, $0.46 better than the Capital IQ Consensus of $8.60; revenues rose 20.2% year/year to $22.45 bln vs the $22.04 bln Capital IQ Consensus.
• Non-GAAP Operating Margin 34% compared to 33% prior year
• Other Bets revenue $197 mln compared to $141 mln in prior year
  • Other Bets operating loss ($865) mln compared ot ($980)mln in prior year
• Cost of revenues as %- 39% compared to 38% in prior year
• Google Website Revenue Growth 23%
• Google Network Members Websites 1%
• Google Other Revenues 39%
• Google segment Revenues 20%
• TAC as a % of revenue 21% compared to 21% in the prior year
• Aggregate Paid Clicks-
  • Q3 +33%, expected to increase approx 26% y/y; Q2 +29%;-Q1 +29%;Q4 +31%; Q3 +23%.
  • Paid Clicks on Google websites- Q3 +42%; Q2 +37%;Q1 +38%; Q4 +40%; Q3 +35%.
  • Paid clicks on member sites- Q3 +1%; Q2 0%;Q1 +2%; Q4 +2%; Q3 -5%.
• Aggregate cost per click-
  • Q3 -11%, expected to decline approx 5% y/y; Q2 -7%; Q1 -9%; Q4 -13%; Q3 -11%
  • CPC on Google sites- Q3 -13%; Q2 -9%; Q1 -12%; Q4 -16%; Q3 -16%.
  • CPC on member sites- Q3 -14%; Q1 -8%; -8%; Q4 -8%; Q3 -4%.

Rigged ($XOM Earnings)

Oil and gas major-giant giant Exxon Mobil (XOM) is scheduled to release its Q3 earnings results tomorrow on Oct 28 before the opens with a conference call to follow at 9:30 am ET the same day.

Capital IQ Consensus calls for EPS of $0.60 and a revenue decline of 10.0% to $60.6 bln, compared to EPS of $1.01 on revenue of $67.3 bln in 3Q15

The company announced an oil discovery in offshore Nigeria; potential recoverable resource of between 500 mln & 1 bln barrels of oil. Some color about this find was in the press release. Color on this tomorrow will be good.

In other news that just came out a couple of hours ago, Exxon Mobil is mulling setting up a full-scale trading division, according to the FT.

XOM Chart: https://www.tradingview.com/x/ceKwvDIR/

Peers include: PTR, EC, TOT, SNP, STO, E, OXY, SSL, MITSY, ECA, YPF, PZE, RDS.A, BP, CVX

Dirty Burrito; $CMG Earnings

CMG is expected to report Q3 earnings tonight after the close. There is a conference call scheduled for 16:30 (the company typically does not provide any EPS or revenue guidance).

Capital IQ consensus calls for Q3 EPS of $1.62 (versus $4.59 last year) on revenue of $1.048 bln (-13% YoY).

• For Q3, the Street is expecting Q3 comps to decline by 18%

• The company is still seeing the impacts of the E Coli crisis which negatively impacted comps and earnings.

• FY16 Guidance: For 2016, co expects 220 - 235 new restaurant openings & an effective full year tax rate of ~ 38.4%

Pershing Square 9.9% Stake

•  On September 6, shares spiked as much as 8% after Pershing Square disclosed a 9.9% active stake, intends to engage in discussions w/ mgmt. and the Board.
• On October 21, Pershing Square affirmed the 9.9% active stake, disclosed the purchase of 2,328,250 shares of Common Stock for an aggregate purchase price of $947,367,983 pursuant to forward purchase contracts described in the Original 13D

PEERS TO WATCH: JACK, PNRA, BWLD, DPZ

$BA Earnings

Boeing will report Q3 results before the bell tomorrow (released results last quarter at 7:30am ET). The co has a conference call scheduled to follow at 11:30am ET. 

Cap IQ Consensus estimates Q3 EPS of $2.62 (vs. $2.52 in 3Q15) w/revs of $23.60 bln ( -8.7% y/y).

In the Q2 earnings release, co lowers FY16 EPS to $6.10-6.30 from $8.15-8.35 vs. the $8.50 consensus; reaffirms FY16 revs of $93-95 bln vs. the $93.84 bln Consensus; reaffirms 740-745 commercial airplane deliveries but lowers operating margin to 4.5-5% from 9%.

BA was initiated with an Outperform at Robert W. Baird; tgt $161. Firm believes the FCF dynamic at BA continues to be underappreciated especially with $25 billion in FCF being generated during 2017-19 with ~$17 billion available for buybacks after dividends. Ramping build rates, seven-year backlog visibility with record low deferral rates, stable R&D costs, and productivity improvements lend to returning significant cash to shareholders. Their price target is $161 based on 11x their 2018 FCF estimate. Buying the pullback in BA shares as bear points priced in at current levels (October 6th).

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Boeing reports Q3 (Sep) results, beats on revs; reaffirms FY16 EP ex-tax benefit; raises rev on higher commercial deliveries  

• Reports Q3 (Sep) earnings of $3.51 per share, including $.98 in favorable tax items, may not be comparable to the Capital IQ Consensus of $2.62; revenues fell 7.5% year/year to $23.9 bln vs the $23.6 bln Capital IQ Consensus.
• Co issues reaffirms guidance for FY16, sees EPS of $6.10-6.30 ex-$0.70 favorable tax adjustment vs. $6.29 Capital IQ Consensus Estimate; raises FY16 revs $500 mln to $93.5-95.5 bln vs. $94.04 bln Capital IQ Consensus on higher commercial deliveries: to 745-750 from 740-745. 

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Call Notes

• Co anticipates modest U.S. Federal defense spending growth in the next five years.
• Regarding the 747 program, the co is encouraged by modest recovery in the air cargo market.
• Co delivered 188 commercial airplanes in the quarter. 
• Defense, space and security orders valued at $6 billion with a backlog of $53 billion
• 38% of business comes from customers outside of the United States.
• Co paid $700 mln in dividends, repurchased 51 million shares during the quarter for a total of $6.5 billion.
• So far in 2016 co has added 17 net new 777 orders, on track to transition to 7 per month.
• Encouraged by recent Qatar airways decision for 10 777s. 
• Co will provide FY17 guidance during the Q4 earnings call.

Slicing the Competition ($AAPL Earnings Preview)

Apple, will report Earnings after Tuesday's close.

• Investors are anxious to see what type of sell-through Apple has achieved with its new iPhone 7 and what the company says about demand expectations for the fiscal first quarter, which will encompass the holiday selling period
• Shares of AAPL have surged 21% since the company's better-than-feared fiscal third quarter report in July.  Investors will have higher expectations from AAPL's earnings which provides guidance. Failure on either front could lead to some material downside for the stock, which would act as a major drag on the broader market.

Expectations have ratcheted up in recent weeks on the back of Samsung's disclosure that it has stopped production, and sales, of its Galaxy Note 7

• International sales accounted for approximately 60% of revenues in fiscal 2015, so investors will be looking for remarks on global demand trends and the impact of foreign exchange
• Apple is the most heavily-weighted stock in the market-cap weighted S&P 500, the most heavily-weighted stock in the market-cap weighted Nasdaq 100, and the seventh highest-priced stock in the price-weighted Dow Jones Industrial Average, so it clearly has market-moving capability
• With a huge installed base of Apple products around the globe (iPhone, iPad, Mac, iTunes, iPod, and Apple Watch), the company's performance is watched closely as a gauge of consumer spending activity
   

Key Earnings Items

• Any color on the iPhone 7 release as a demand driver
• Average selling price and gross margin trends
• Apple's ability to monetize its installed base (viewed through revenue growth in the services businesses)
• The performance of its "Other Products" (Apple Watch, iPod, and Apple Pay)
• The performance, and outlook, for its three largest geographic regions
  • Americas segment accounted for 40.2% of net revenue last year
  • Greater China accounted for 25.1% of net revenue last year (China is seen as company's most important growth market)
  • Europe accounted for 21.5% of net revenue last year
     

Stocks Affected
 

Smartphones

• Samsung (SSNLF)
• Blackberry (BBRY)
   

Component suppliers

• Broadcom (AVGO; Apple more than 20% of fiscal 2015 net sales)
• Cirrus Logic (CRUS; Apple was 72% of fiscal 2015 sales)
• InvenSense (INVN; Apple 30% of fiscal 2015 net sales) 
• Qualcomm (QCOM) 
• NXP Semiconductors (NXPI)
• Micron Technology (MU)
• Analog Devices (ADI)
• Skyworks Solutions (SWKS)
• On Semiconductor (ON)
• Western Digital (WDC)
• Seagate Technology (STX)
   

Wearables 

• Fitbit (FIT)
• Garmin (GRMN)

Wireless carriers 

• AT&T (T)
• Verizon (VZ)
• T-Mobile (TMUS)
• Sprint (S)
• China Mobile (CHL)
   

Related ETFs

• PowerShares QQQ ETF (QQQ)
  • AAPL is top-weighted holding at 10.77% of assets
• SPDR S&P 500 ETF (SPY)
  • AAPL is top-weighted holding at 3.24% of assets
• SPDR Dow Jones Industrial Average ETF (DIA)
  • AAPL is tenth-weighted holding at 4.22% of assets
• Technology Select Sector SPDR ETF (XLK)
  • AAPL is top-weighted holding at 13.56% of assets

 

Electric Overdrive ($TSLA Earnings)

Tesla (TSLA) will report Q2 results in shareholder letter on its website after the bell and host a call at 17:30.

Tesla is expected to report Q2 non-GAP EPS of ($0.65) vs. ($0.48) last year with non-GAAP rev up 38% to $1.65 bln.

• Tesla delivered 14,370 vehicles during Q2 vs. 17,000 guidance. Production came in 18,345 vehicles vs. 20,000 guidance.
• Tesla said it will produce and deliver 50,000 vehicles in the second half of the year, which effectively lowered 2016 delivery guidance to just under 80K (79.2K) from 80-90K previously.
  • Prior FY16 guidance also called for 30% non-GAAP Model S gross margin and 25% Model X non-GAAP gross margin by year end, cap-ex $2.25 bln and non-GAAP op-ex +20-25%.         

Tesla has consistently missed production and delivery targets.

• Still, Tesla investors look at the big picture as demand for its electric vehicles remains strong.
• There is a great deal of skepticism that Tesla will hit its increased (and seemingly impossible) production plan: 500K Model S, X & 3 vehicles by 2018.
• July 26: Mobileye (MBLY) announces its relationship with Tesla won't go beyond its current EyeQ3 chip. 

The stock has been very resilient despite added risks as investors give Elon Musk the benefit of the doubt.

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Nice Tan ($FSLR Earnings)

First Solar (FSLR) is set to report earnings tonight after the close with a conference call to follow at 4:30pm ET. FSLR reports at 4:05pm.

Current Capital IQ consensus stands at EPS of $0.55 on Revenues of $862 mln.

The FSLR revenue recognition model makes it extremely difficult for analysts to provide accurate quarterly estimates.  The company has been able to handily beat EPS expectations by an average of $1.03. Revenue has been a little less friendly with two big misses and three big beats over the past five quarters.

The annual projections remain the primary focus for the underlying health of the company and that is where we will be looking to judge the overall performance and outlook. Shares of FSLR have had a difficult 2016. The stock got out of the gates strong hitting a two year high of $74.29 on March 18. But the shares have tumbled 33% since that high water mark.

2016 Guidance

• Net Sales $3.8-4.0 bln was reaffirmed in Q1
• Gross Margin 18-19% (Prior 17-18%)
• Operating Expenses $380-400 mln (Reaffirmed)
• Operating Income $300-370 mln (Prior $260-330 mln)
• EPS $4.10-4.50 (Prior $4.00-4.50)
• Net Cash Balance $1.9-2.2 bln (Reaffirmed)
• Operating Cash Flow $500-700 mln (Prior $400-600 mln)
• CapEx $300-400 mln (Reaffirmed)
• Shipments 2.9-3.0 GW (Reaffirmed)

TECHS:

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CAR Accident ($CAR Earnings)

Avis Budget (CAR) is set to report Q2 earnings tonight after the close with a conference call to follow tomorrow morning at 8:30am ET. CAR reported Q1 results at 4:15pm. Current Capital IQ consensus stands at EPS of

Shares of CAR have had a solid run since reporting Q1 results in early May. The co missed its EPS by 22 cents but revenues were in line and, most importantly, it guided FY16 revenue above the consensus. The primary driver, and what attracted investors, was commentary from the company that it was starting to see a turn around in the pricing environment for the troubled car rental business.

This stock fell from the $50 area in October of 2015 all the way to $22. So the recent upward trend allowed the stock to recapture approx 55% of its losses. But we are seeing the stock under pressure today as it has given up nearly 5% ahead of today's report. Shares are down approx 12% over the past week. This suggests that investors remain cautious on the name and are taking profits after buying low.

CAR will need to show a continued improvement in pricing to entice more investors into the name. It does have some solid support below at the 200-sma ($31.90) and the $33-34 area which both linger just below. Also we would keep an eye on Hertz (HTZ) which will trade closely with CAR on the news.

Key Metrics

• Pricing- CAR expects it to decline 1% in FY16. Pricing in Q1 declined by 5% so investors are looking for a deceleration in the price decline.
• Rental Days- FY16 guidance is for this to increase 2-4%. Rental Days increased by a healthy 8% in Q1.
• Per Unit Fleet Costs- Expected to be $280-290 per month in 2016. This figure ran hot in Q1 as it came in at $312 per month, up 6% y/y.

Guidance

• Co expects FY16 EPS in the range of $2.70-3.30, excluding non-recurring items, vs. then-$2.97 Capital IQ Consensus Estimate. Revenue is expected to come in the range of $8.75-8.90 bln which was an upgrade from the prior outlook of $8.70-8.85 bln vs. then-$8.7 bln Capital IQ Consensus.
• Car reaffirmed its FY16 EBITDA expectations of $820-900 mln.
• The Company also expects that it will generate $450 to $500 million of free cash flow in 2016, and that it will repurchase $300 to $400 million of common stock in 2016.

Q1 Recap

• CAR reported Q1 (Mar) loss of $0.28 per share, excluding non-recurring items, $0.22 worse than the Capital IQ Consensus of ($0.06). Revenues rose 1.7% year/year to $1.88 bln vs the $1.88 bln Capital IQ Consensus, +3% in constant currency, primarily due to an 8% increase in rental days (5% excluding the acquisition of Maggiore).
• First quarter Adjusted EBITDA was $44 million.
• Results benefited from increased rental volumes, offset by reduced pricing, higher per-unit fleet costs and a $33 million negative impact from currency movements, including losses on currency hedges.

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