3 High-Flying Stocks Setting Up for BIG MOVES This Earnings Season

The skyrocketing stock market has sent many stocks at their all-time highs this year. These stocks are seeing revenues accelerate due to the coronavirus. Earnings season will tell us whether this momentum is continuing. Stocks likeTesla (TSLA) Netflix (NFLX), and Peloton Interactive (PTON), are looking set to make new highs.  

Some of the biggest outperformers of the year are growth stocks. The pandemic has led to an acceleration in their growth. Additionally, the pandemic has led to lower growth expectations and record-low rates. 

This means that growth stocks can get even higher multiples. Earnings season will be an important factor in helping investors determine whether these gains are validated by improvements in operations. Or a particularly impressive performance could lead to even more multiple expansion as investors get more bullish on a company.

Tesla, Inc. (TSLA) Netflix, Inc. (NFLX), Peloton Interactive, Inc. (PTON) are some of the fastest-growing stocks in the market. They are expected to report impressive results this earnings season and this could help their shares soar.

Tesla, Inc. (TSLA)

TSLA designs, develops, manufactures, and sells electric vehicles, electric vehicle powertrain components, and stationary energy storage systems in the United States, China, and internationally.

TSLA split its stock into five earlier this year, reducing its sky-high share price to an affordable range. It is currently planning to expand to Indonesia to ensure a steady supply of nickel, a key component in manufacturing car batteries.

TSLA is also planning to launch three new electric vehicles shortly, including Tesla Cybertruck and 2 electric cars. Its new Model S Plaid is expected to be available by next year and another unnamed electric car to be priced under $25000. It is reportedly planning to launch its product in India as well in 2021. These expansions are expected to increase their earnings in the coming year. On its recent Battery Day, the company outlined a plan to reduce battery costs by 56% and boost vehicle range by 54%.

The company’s electric vehicle (EV) growth is going according to plan, as the company reported that it delivered 139,300 vehicles in the third quarter ending September 2020. This is a 53.6% increase compared to the previous quarter. The company has already exceeded market expectations of 137,000 deliveries of vehicles. 

In the second quarter, TSLA reported net revenue of $6.04 billion declined on a year-over-year basis. Net income of $104 million and EPS of $0.50 for the quarter significantly improvement from the year-ago negative values. Cash and cash equivalents improved 74% year-over-year to $8.62 billion.

Analysts expect their revenue to grow 31% in the third quarter and 22.6% this year. The EPS is expected to grow 51.4% in the third quarter and a whopping 4,275% in the current year. TSLA has gained 436.5% year-to-date.

How does TSLA stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

B for Overall POWR Rating

The stock is also ranked #4 out of 29 stocks in the Auto & Vehicle Manufacturers industry.

Peloton Interactive, Inc. (PTON)

PTON is the largest interactive fitness platform in the world, which engages in the operation of in-studio fitness classes, fitness clubs, at-home fitness equipment & content, and health & wellness apps.  With 3.1 million members, the company operates in three segments: Connected Fitness Products, Subscription, and Others. The Connected Fitness Products segment engages in the sale of bike and tread and related accessories, associated fees for delivery and installation, and extended warranty agreements. The Subscription segment engages in the connected fitness subscription and digital subscription. The Other segment consists of peloton branded apparel.

During the year 2020, PTON expanded its fitness and wellness content offerings in strength, yoga, meditation, and new floor-based categories such as Fit Family and Dance Cardio. The company also launched integrations with the four leading over-the-top TV platforms including Amazon Fire TV, Android, Apple TV, and Roku. On October 15th, PTON was sued for patent infringement by Icon Health & Fitness Inc., the maker of the NordicTrack bike, escalating the legal tussle between the two fitness equipment companies.

In the fourth quarter ending June 2020, the company generated total revenue of $607.1 million, up 172% year-over-year. For the financial year ending 2020, total revenue grew 100% to $1.8 billion. Connected Fitness segment revenue was $485.9 million in the fourth quarter, representing 199% year-over-year growth and 80% of total revenue. Growth of this segment reflects both a significant carryover of undelivered Bikes from the previous quarter as well as continued strong organic demand due to the ongoing COVID-19 pandemic.  The company expects its total revenue to grow in the range of $720 million to $730 million for the first quarter ending September 2020.

PTON introduced a new product suite with Bike+ and tread on September 8th. Priced lower than the average market price, this product offers an effective at-home fitness experience to individuals worldwide.

Analysts expect their revenue to grow 279.7% in the first quarter and 98.2% in the current fiscal year. For the fourth quarter ended June, PTON’s EPS came in at $0.27, exceeding the consensus estimate by 170%. EPS is expected to grow 108.5% in the first quarter and 137.5% in the current year. The stock has gained 670% since hitting its low in mid-March.

It’s no surprise that PTON is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the 34-stock Consumer Goods industry, it’s ranked #5.

Netflix, Inc. (NFLX)  

NFLX needs no introduction. Started as a DVD-rental provider, Netflix is the world's leading streaming entertainment service with 193 million paid memberships in over 190 countries. The company experienced a massive increase in demand because of the lockdown that happened due to the current pandemic outbreak. With limited entertainment means available, more and more people resorted to Netflix for their daily recreation.

Other than creating unique original content, NFLX has become an active player in festival acquisitions. In September, at Toronto International Film Festival, the company acquired three high-profile films. Additionally, the company has invested in providing theatrical exposure to its original movies. 

On October 13th, NFLX removed the option of a 30-day free trial for potential subscribers in the United States. To replace the free trial, Netflix will be introducing new ways to try and attract potential subscribers, including posting some educational content on YouTube for free and other forms of content sampling. Recently, the company launched a portal to watch several episodes from its top series for free. Netflix also made one of its films available to watch without a Netflix subscription. 

The company’s unique and diversified original content particularly in local –foreign languages sets it apart from its competitors. NFLX’s long production lead times, provided it the added benefit, even during the COVID times when the entire world was under lockdown, its lineups for launching original content remained intact.

For the second quarter ended June, NFLX reported a revenue of 6.1 million, up 25% year-over-year.  The company’s paid memberships increased by 10.1 million, up 27.3% year-over-year, beating the company’s estimate. The reported EPS for the period was $1.59 up 165% year-over-year.

Analysts expect EPS to grow 44.9% in the third quarter ending September and 50.4% in the current year. The street expects NFLX’s revenue to grow by 21.6% in the third quarter ending September, and 23.6% in the current year.

The stock has gained 104% since hitting its low in mid-March.

It’s no surprise that NFLX is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade and a “B” in Buy & Hold Grade, Peer Grade, and Industry Rank. In the 58-stock Internet industry, it is ranked #11.

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NFLX shares were trading at $536.43 per share on Friday afternoon, down $5.51 (-1.02%). Year-to-date, NFLX has gained 65.78%, versus a 9.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Madhavi Taneja

Madhavi is a seasoned financial analyst with a focus in valuing early-stage technology companies and evaluating potential mergers and acquisitions. After majoring in economics, she developed a deep understanding of investment strategies while working with EX Service.


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