Earnings: What Wall Street is looking for in Microsoft, Tesla results

Yahoo Finance’s Ines Ferre joins the Live show to discuss Wall Street’s take on Microsoft and Tesla earnings.

Video Transcript

JULIE HYMAN: We were just looking at tech, and Microsoft and Tesla, in particular, are in focus ahead of their earnings reports this week after a year of poor performance. How does Wall Street feel about the tech titans? What are investors looking for from those upcoming announcements? Yahoo Finance’s Ines Ferre has the details on this. Ines, let’s start with Microsoft. Tell us what people are looking for.

INES FERRE: Yeah, and it’s important to start with Microsoft because it is a barometer for Cloud, for Enterprise Service, and enterprise spending. And so let’s take a look at what Wall Street is expecting for Microsoft. We have a graph for you. Microsoft is expected to report a fiscal second quarter sales increase of 2%. That would be the smallest increase in six years. Adjusted earnings per share are expected to come in at $2.30. That would put it ahead of almost every other S&P 500 company.

But still, what this is showing you is that growth is taking a breather because earnings per share are expected to be down 7% year over year. Now, last week, Microsoft had also announced that it’s cutting jobs, like other tech companies. Jefferies analyst Brent Thill expecting constant currency revenue growth. That will likely remain under pressure. Lower than expected PC shipments, so don’t expect anything great when it comes to PCs. We know that because the consumer is really pulling back. And there was a lot of pull forward going on.

And also, an investor focus, though, on Azure. Now that is the one big focus that investors, analysts are taking a look at. Microsoft just announced it’s investing another $10 billion in Open AI– that’s the maker of ChatGPT– and will be integrating that with their Azure cloud service. Timothy Horn from Oppenheimer dubbing that integration of ChatGPT with Azure an iPhone moment for artificial intelligence technology.

And also Wedbush’s Dan Ives basically saying that Microsoft is Wedbush’s favorite when it comes to a cloud theme in 2023. Dan Ives has an outperform rating on Wedbush with a price target of $290. Look, the Street is really bullish on Microsoft. Even though we have seen a big slowdown in tech, still, you’ve got 52 buys, four holds, one sell.

BRIAN SOZZI: And Ines, speaking of Dan Ives, he notes this morning in a note that Tesla, their earnings call this week is probably the most important in its recent history.

INES FERRE: Yeah, most definitely. Now the Street’s still relatively bullish also on Tesla, even though the stock has really, last quarter, took a big beating. You’ve got Tesla analysts recommending 27 buys on Tesla. You also have 13 analysts with a hold and six with a sell. Piper Sandler putting an overweight recently on Tesla and lowering its price target from 340 to 300, saying that, look, Tesla took longer than expected to cut prices, but now that the valuations have been reset, investors should be buying Tesla.

Also saying that Tesla can easily put forth a delivery growth in 2023 of more than 50%, predicting delivery growth of anywhere between 300,000, 600,000 units, just in the US. And gross margin forecasts, even though that’s been lowered by many analysts, Piper Sandler saying that they wouldn’t be surprised if, in 2023, they surprised to the upside. Also Canaccord, I know that you interviewed Canaccord’s George Gianarikas recently, and Canaccord also bullish on the stock.

Because, look, even though the stock pulled back last year, a lot of it had to do with also many saying Elon Musk and Twitter and also based on demand, the demand situation in China. You still– they’re highlighting the full service driving software. That’s expected to increase gross margins and also was very important that Canaccord highlighted was commodities came down in price. And that’s something that Elon Musk has talked about that that they have been seeing a reduction, a deflation when it comes to commodities as well. So that is expected to help.

JULIE HYMAN: I mean, and definitely in contrast to Microsoft, the sentiment around Tesla is not as bullish, right? You talk about 52 buys for Microsoft. It’s 27 in the case of Tesla and then 13 holds and 6 sells. So there are a number who are still underperform on Tesla, going into the results.

INES FERRE: Yeah, that’s right. It’s not as bullish as you mentioned when it comes to Microsoft. But still, out of the EV makers, you still have quite a bit of bullishness.

BRAD SMITH: Yahoo Finance’s own Ines Ferre.