Johnson & Johnson, Tesla, Netflix: Earnings movers

Pharma company Johnson & Johnson's shares jump following its earnings beat. Tesla shares slide following an earnings miss and a disappointing earnings call with CEO Elon Musk. Netflix's stock falls on a revenue miss despite huge gains in subscriber growth figures. Yahoo Finance Live anchors Seana Smith and Alexandra Canal break down the earnings data on several top stocks.

Video Transcript

SEANA SMITH: All right. Let's talk about some of the individual names. First up. We got to take a look at Johnson & Johnson, closing the day in the green, up just about 6%. The company reporting earnings here that beat the Street's expectations. They also raised their guidance. Johnson & Johnson saying that it now expects adjusted earnings for the full 2023 fiscal year, $10.75 per share. That was up from its previous estimate of $10.65 a share.

Certainly, something, Alie, the Street was very excited about when you talk about a beat on both the top and bottom line, raising the forecast. Kanter was out with a note saying that there's a lot of strength in their business segments that remains. And they believe it's underappreciated when it comes to the price.

ALEXANDRA CANAL: Yeah. Polar opposite of what we saw with Netflix, Tesla, American Airlines. They disappointed on guidance. J&J, they boosted guidance. And that is being rewarded on Wall Street right now. We're also seeing some increased demand for surgeries, especially among those older adults that push that off during COVID. But overall, Johnson & Johnson's really looked at it as a bellwether in the health care sector.

And I think health care is having a moment right now. I mean, we're talking about pickleball at one point, leading to more procedures done, as more people are getting involved in pickleball. We had the first over-the-counter FDA approval for birth control drug. There's just a lot happening right now. And it seems like health care is just very strong. And Johnson & Johnson's results certainly proves that.

SEANA SMITH: Yeah, certainly. The stock is still down year-to-date but now off just about 4%. Not everyone on the Street was at least as encouraged or somewhat I should-- maybe the better way to put it, still have some questions just about what the business is going to look like here in the near term.

JP Morgan's reaction, they have a neutral rating on the stock. They're still worried about that talc overhang. They're hoping to get a little bit more clarity regarding that impact here throughout the current quarter, the third quarter, but again, taking a look at the Street's reaction, at least for now. We talked about the fact that companies are under pressure to beat and raise their guidance. And at least in the case of Johnson & Johnson, it seems to have satisfied investors for now.

ALEXANDRA CANAL: Yeah. We'll see what the back half of the year holds for that, especially with those lawsuits overhanging. Moving on to Tesla. Shares closing way down there more than 9% following second quarter results that were a mixed bag for investors. And the earnings call wasn't much better. Among the things investors were disappointed to hear from the EV maker were slow down in production in the third quarter due to factory upgrades and the lack of specifics given about the start of Cybertruck production.

It's crazy to me that the Cybertruck is what investors care about, because, personally, I just think this is a bit of a side show for Netflix. I think the larger story here is the margin disappointment, also the pricing war that we have going on, Netflix guiding that they'll probably have to continue to cut prices as we see more EVs come to market. And that's not just something that's happening in the US. It's also happening overseas in China.

SEANA SMITH: Yeah. It's happening overseas in China. This is really a global price war when it comes to EVs. These companies like Tesla trying to increase adoption. Tesla, there were some questions just about the demand picture, how significantly that was deteriorating given the macro environment. So the fact that Elon Musk left the door open to further price cuts, that's one of the big reasons why we're seeing such a massive drop in the stock today.

And like you said, Allie, this has already-- this has been pressuring margins now. This is the second quarter that this has happened. So certainly something that investors, analysts are keeping a very close eye on. When it comes to what's going to be really move the needle here for Tesla going forward, a lot of the excitement in the stock was surrounding its relation here with AI and how much of this is really an AI play versus an EV play and the demand.

Lots of questions about that. And whether or not the massive run up that we've seen since the start of the year of a gain of over 113%, whether or not that's justified. And at least for today, following these results, analysts are still a bit cautious about Tesla's current valuation, saying that it could be a bumpy couple of months because of some of these concerns.

SEANA SMITH: Yeah. It's an overheated stock, clearly. I mean, Elon Musk, he's one of those CEOs that just gets a rise out of most people. I mean, this quote, he said, "The Cybertruck demand is so far off the hook, you can't even see the hook." That is such an Elon Musk quote right there. We're going to be diving deeper into the Cybertruck story a little later on in the show with our auto reporter Pras Subramanian, because there's a lot to talk about when we think about Elon Musk and the future of this Cybertruck. I mean, look--

SEANA SMITH: You talk about your Elon Musk impression, that was pretty good.

ALEXANDRA CANAL: Thank you. I've been working on it, you know, practicing in the mirror.

SEANA SMITH: I know. You got to debut it. And this is the perfect time. All right. Let's also talk about Netflix, the stock there. I know you are very closely watching here. Closing the day, off just about 8.5%. The streamer fell short of expectations when it comes to its forecast. That, of course, was a big reason why we saw shares under pressure.

There was also a lot of talk about the password crackdown, what that would do to subscriber numbers. On that side of things for Netflix, that was a very impressive report here. It was nearly triple what the Street was expecting in terms of new additions. Whether or not that momentum can continue, I think that's also a question--

ALEXANDRA CANAL: Yeah. That's a big question. And if you think about where we were last year, Netflix lost a million subscribers. So now, we're seeing 6 million added, which is definitely a positive for Netflix heading into the back half of the year. On the earnings call, they did stress that those certain revenue initiatives, like the crackdown on password sharing, like the ad-supported tier, that's going to take time to see the full impact. And it's going to play out in a few quarters to come.

I read a note from Wells Fargo analyst Steve Cahall earlier this morning. And he said patience is a virtue, especially when it comes to those long-term Netflix investors. So you have to be patient. And you have to wait things out in order to really see the benefits of some of these initiatives.

But we also saw profitability metrics like operating margins, free cash flow come in above those estimates. So compared to a lot of media out there that's a lot of turmoil right now in the industry, they're doing pretty well.

SEANA SMITH: And also, we haven't even brought up the issue of the Hollywood strike right now on the writers side, on the actor's side. Many analysts out there saying that Netflix is best positioned among its peers, given the fact that it has a very deep shelf when it comes to content, also its international exposure. But you've got to ask the question, I know it's something that you've been looking into, too, how long this strike drags on? At what point are we going to see a material impact on Netflix?

ALEXANDRA CANAL: Yeah. Netflix, specifically, talked about these strikes, was the first question on the earnings calls co-CEO Ted Sarandos. He said, we want a deal. We want to get this done. No one expected this to happen and to last for as long as it's happened. And I think the longer it goes on, the more pressure it's going to put on Netflix and all of these media companies to make a deal.

SEANA SMITH: Yeah. Certainly, Netflix one of the worst performers in the S&P today.