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The sell-off in the equity markets intensified in the last week that ended in January 21, 2022. Major indices including the NASDAQ, S&P 500 (AMEX: SPY) and Dow Jones are currently down 14.1%, 8.3% and 6.6% from all-time highs, at the time of writing.
We can see that the tech-heavy NASDAQ Index has entered correction territory and given the threat of multiple interest-rate hikes in 2022, the pullback might continue going forward. Here, we take a look at major market movers in the last week and what you can expect from the earnings of two giants in the upcoming days.
Peloton and Netflix shares tank
Shares of Peloton (NASDAQ: PTON) are down 24% in 2022 and have now fallen by 83% in the last year, valuing the company at a market cap of $8.9 billion. The COVID-19 pandemic acted as a massive tailwind for Peloton as it grew sales from $1.82 million in fiscal 2020 to $4.02 billion in fiscal 2021 that ended in June. However, its top-line growth is expected to decelerate rapidly as Wall Street forecasts sales of $4.51 billion in fiscal 2022.
Last week, a Business Insider reported disclosed Peloton’s plan to lay-off 41% of its sales and marketing staff to cut costs and boost profitability. Further, CNBC reported demand for Peloton’s bikes and treadmills have dwindled significantly which has resulted in a temporary halt in production. Peloton’s bike manufacturing facility is expected to shut-down for two months while treadmill manufacturing might halt for six weeks.
The company is also planning to charge $250 for the delivery and installation of exercise bikes and $350 to install its treadmills which will hurt future consumer demand.
Shares of streaming company Netflix (NASDAQ: NFLX) fell by more than 20% on the back of weaker than expected subscriber growth. Netflix was another company that benefitted from the ongoing pandemic which resulted in a significant uptick of subscribers.
In 2021, Netflix’s subscriber base grew by 18.2 million users, compared to 36.6 million net paid additions in 2020. In the two years prior to 2020, its paid subscribers rose by an average of 28 million per year. In Q4 of 2021, its net subscriber additions were 8.3 million and it expects to add another 2.5 million subscribers in Q1 of 2022, compared to 4 million in Q1 of 2021.
Netflix claimed while customer acquisitions have been less than ideal in a post pandemic world, its subscriber retention has been quite healthy.
NFLX stock touched an all-time high of $700 last year and is currently down 43% from record highs, making it an attractive bet for contrarian investors.
Microsoft and Tesla to report earnings this week
S&P 500 giants including Microsoft (NASDAQ: MSFT) and Tesla (NASDAQ: TSLA) are slated to report their quarterly earnings this week.
Tesla which is the largest electric vehicle manufacturer in the world shipped 308,000 vehicles in Q4 of 2021, taking its total deliveries to 936,000 in 2021. Analysts had earlier forecast Q4 shipments at 270,000 and 2021 shipments at 897,000.
Wall Street estimates Tesla’s revenue at $16.2 billion and earnings of $2.26 per share in the December quarter. In the year-ago quarter, its sales and earnings stood at $10.7 billion and $1.03 per share respectively. Given its shipment numbers in Q4, Tesla is well-poised to crush Wall Street estimates.
Shares of Microsoft are also down 14% from all-time highs, valuing the company at a market cap of $2.22 trillion. Analysts expect sales to rise by 18% to $50.88 billion and earnings per share to rise by 13.8% to $2.31 per share in fiscal Q2 of 2022 that ended in December.
Last week, Microsoft announced its intention to acquire gaming heavyweight Activision Blizzard (NASDAQ: ATVI) for $68.9 billion in an all-cash deal, providing the tech giant to gain a foothold in the rapidly expanding metaverse space.
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