Top 3 S&P 500 headlines this week: TSLA, NFLX, and BA

Netflix earnings come in strong as streamer posts record subscriber growth in Q4

Netflix’s share price surged this week after the company reported fourth-quarter results that exceeded revenue expectations and showcased record subscriber growth.

The Netflix earnings call on Tuesday revealed that the streaming giant added 13.1 million net new subscribers in Q4 2023, surpassing its own forecast of 8.7 million net additions and marking its best-ever fourth quarter for subscriber growth.

Not everyone was upbeat after the Netflix earnings report — Deutsche Bank, while lifting its price target on Netflix to $525 from $460, downgraded its rating on the streaming leader to Hold from Buy.

“Netflix’s leadership position is fully priced into the stock at these levels with Netflix trading at 32x 2024E / 27x 2025E EPS, which we see as leaving little room for multiple expansion given what we think will be peak EPS growth in 2024 (at 38%); decelerating to 21% and 16% in 2025 and 2026, respectively,” wrote Deutsche Bank analyst Bryan Craft.

Netflix shares, which trade on the Nasdaq under the ticker NFLX, were poised to gain close to 16% this week. The company’s 12-month stock performance has seen NFLX shares gain over 54%.

Tesla share price tanks after “train wreck” earnings report on Wednesday

A number of analysts were highly skeptical of Tesla stock this week, revising their share price targets and issuing negative guidance. On Monday, Morgan Stanley analyst Adam Jonas revised down his Tesla share price target from $380 to $345 while maintaining a Buy rating, citing an oversupplied EV market.

“Global EV momentum is stalling,” wrote Jonas. “We anticipate Tesla’s 2024 outlook to be cautious on volume and profitability.”

Equity research firm Redburn Atlantic also downgraded TSLA stock, setting a Sell rating and $170 Tesla share price target. The firm’s analysts shared Jonas’ concerns about an oversupplied EV market:

“We identify a widening gap between expectations and the margin and free cash flow (FCF) challenges faced by slowing near-term growth. Pricing – amid increasingly oversupplied EVs – will dominate any margin benefit from lower commodity prices in the coming quarters, in our estimation. We expect Tesla to prioritise volumes over price, but with the monetisation of its growing fleet only beginning from 2025.

Meanwhile, to support its leadership position, Tesla will invest significantly in AI and in building EV capacity ahead of new vehicle launches. This higher investment intensity may further pressure FCF, where our estimates sit materially below consensus. We launch with a Sell recommendation, flagging that our call is most at risk if Tesla introduces a compelling next-generation model with a viable start of production within 18 months of announcement. However, we find such an outcome challenged by new production technology (including battery cells) and a difficult Cybertruck ramp-up.”

The Tesla earnings report on Wednesday saw the EV maker warn of slower growth this year and miss key financial targets in what one analyst said was a “train wreck” of a call. Wall Street didn’t hide its disappointment, as the Tesla share price tanked on Thursday in response to the news. TSLA stock ended Thursday at $182.63 (down 12.13%), marking its worst trading day in over a year.

Boeing woes continue as Alaska, United Airlines CEOs take turns blasting the manufacturer

On Tuesday, the heads of United Airlines and Alaska Airlines took turns criticizing Boeing for manufacturing issues that resulted in the grounding of over 140 of their planes.

“I am more than frustrated and disappointed. I am angry,” Alaska Airlines CEO Ben Minicucci told “NBC Nightly News” in an interview that aired Tuesday night. “My demand on Boeing is, what are they going to do to improve their quality programs in-house?”

Kirby said that Boeing needs “real action” to restore its previous reputation for quality. United said on Monday that it no longer wants any 737 Max 10s — an extended version of the troubled Boeing 737 Max 9. Southwest Airlines has also cut the Boeing 737 Max 7 — the shortest version of the Max family — from its 2024 fleet plan.

Boeing has also seen several of its planes break down in the weeks that followed the Alaska Airlines door plug incident.

U.S. Secretary of State Anthony Blinken was unable to leave Davos for Washington on January 17 due to a critical failure in his modified 737, forcing the official to switch planes. Several days later, a Boeing 747 cargo plane made an emergency landing on January 19 after it was seen spewing flames in the night sky over Miami. Finally, a Delta Airlines Boeing 757’s tire fell off a wheel at Atlanta airport on January 24, marking the latest incident to affect the Virginia-based aerospace firm.

While the details of these failures are pending, the barrage of negative press is ramping up pressure on Boeing — and the company’s stock. Boeing stock was last off 22.5% year-to-date, wiping out over $30 billion in market value. The stock, which trades on the NYSE under the ticker BA, closed at $201.88 on Thursday (down 5.72%).

BofA Securities recently downgraded Boeing stock to Neutral from Buy and cut their price target to $225 from $255.

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