The three companies retail investors should watch in Q2

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This article is brought to you by Retail Technology Review: The three companies retail investors should watch in Q2.

With countries across the globe experiencing an unpredictable financial future, the past few months have been important for organisations – especially the fourth quarter of 2022 and the first quarter of 2023.

However, among this uncertainty, there have been organisations that have seen to exceed expectations, helping alleviate doubt among investors. With this in mind, Maxim Manturov, Head of Investment Research at Freedom Finance Europe, outlines the three companies that have outperformed expectations and should be watched carefully by retail investors as we begin Q2.

Tesla 

Even in tough times for the electric car industry, the company reported record quarterly revenues of $24.3 billion (£19.8 bn) in the fourth quarter of 2022. That's a 37% increase over last year and above Wall Street expectations. The company remains profitable, which is rare for electric vehicle manufacturers. EPS - earnings per stock, Tesla rose 40% in Q4 to $1.19 (£0.96). On a year-on-year basis, net income is up 85% in 2022 to $14.1 billion (£11.3 bn). 

The company was able to cope relatively well with supply chain issues. Production was up 44% to 439,701 vehicles. Deliveries were up 31% to 405,278 in the fourth quarter and up 40% year-on-year to 1.31 million units. 

Tesla expects demand to be twice as fast as production. The CEO's comment, along with his claims of lower unit production costs, allayed concerns about competition and margins. Musk said Tesla could produce around two million vehicles this year, above the company's conservative forecast of 1.8 million. In the end, his claims trumped negative investor sentiment and, combined with Tesla's undervalued stock price, caused stocks to rise by nearly 25% since the report. This was followed by upgrades from analysts and target price increases. 

Netflix 

The company significantly outperformed investor expectations in the fourth quarter. At the moment, the stock was showing a rise of 15%. The main reason was the addition of 7.66 million paid subscribers. This surprised analysts, who had expected an increase to only 4.57 million, especially in a market environment where many media companies were laying off employees and cancelling TV shows. Netflix spent $17 billion (£13.6 bn) on content creation in 2022, surpassing every company in the sector except Disney. 

Despite the positive trend of subscription growth in the fourth quarter of 2022, revenues increased by only 1.9% year-on-year. This came at a time when earnings per stock fell from $1.33 (£1.07) in the fourth quarter of 2021 to $0.12 (£0.097) for the same period in 2022, with earnings down 91%. Consequently, the company has taken two radical initiatives to revive its results. 

First, it will introduce a paid password-sharing feature. The service plans to charge basic account holders an additional fee for anyone who views the service from outside the home. 

Secondly, the company has been advertising for about two months now. Netflix CFO Spencer Neumann said that the company intends to increase revenue by 10 per cent with this move. 2022 has been a tough year for Netflix, but investors are showing renewed interest in the company as it remains the global leader in streaming media. New revenue initiatives should help boost revenues as early as the second half of 2023. 

AMD 

For the fourth quarter, the US microchip maker achieved earnings per stock of $0.69 (£0.56) on revenues of $5.6 billion (£4.5 bn) - up 16% from a year ago. For the period, the company posted gross margins of 43% - this time down 7%. The depreciation of some assets of Xilinx, acquired a year ago, affected the quarterly results. The Wall Street consensus for earnings per stock was $0.67 (£0.54) per stock on revenue of $5.5 billion (£4.4 bn). AMD expects revenue to be between $5 billion (£4.02 bn) and $5.6 billion (£4.5 bn). That's down 10% from last year, but above Wall Street's consensus of $5.56 billion (£4.47 bn). 

Adjusted gross margins are projected to be around 50 per cent for the period. AMD launched a new generation of data centre chips called Genoa in November and plans to re-release a more powerful version called Genoa-X later this year. Agreements have already been reached with: 

  • Google, Alphabet
  • Azure, Microsoft
  • Oracle​​ 

In the fourth quarter of 2022, data centre sales rose 42 percent to $1.7 billion (£1.36 bn) from the previous year. CEO Lisa Suh said that overall AMD is in a stable position to increase market stock and performance should improve by the second half of 2023. 

While we continue to battle through uncertain times, it is clear that major organisations like Tesla, Netflix and AMD will continue to grow. The end of 2022 and the beginning of 2023 has shown that these three organisations are looking to continuously expand their portfolio, allowing them to have what it takes to grow over the next quarter.

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