Ocado, ASML, Tesla, EasyJet, And More

Look ahead to FTSE 350, other companies reporting & economic events from 17 – 21 July

• Can Ocado Group PLC (LON:OCDO) overcome a difficult economic backdrop?
• Will sluggish market conditions chip away at ASML Holding NV (NASDAQ:ASML)’s order book?
• Tesla Inc (NASDAQ:TSLA) sales keep their foot on the pedal
• Mass cancellations hit easyJet plc (LON:EZJ)’s summer schedule
• Can IDS PLC (LON:IDS) deliver some positive news as pay disputes at Royal Mail near an end?
• All eyes will be on Netflix Inc (NASDAQ:NFLX)’s subscriber metrics
• How will Vistry Group PLC (LON:VTY) deal with rising interest rates?

Ocado Group, Half Year Results, Tuesday 18 July

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:

“Ocado’s retail arm saw revenue rise 3.4% in the first quarter to £583.7m. The increase reflects a 7.5% drop in the number of items per basket, offset by an 8.3% increase in average prices. This meant average basket value was flat at £124.

Broadly speaking, the group acknowledged conditions remain challenging because of the economic backdrop. There have been complaints from M&S that it’s unhappy with the current set up and that improvements and more favourable M&S product placing are needed – commentary around this will be important to monitor.

More important will be details on the Solutions business. Ocado’s valuation has been sorely punished for progress, or lack thereof, in its high-tech grocery picking division. While the product and proposition are best-in-class in many respects, the group’s costs and ability to sign deals with partners at the desired pace have left a sour taste in investors’ mouths.

Ideally next week, Ocado will be able to signal a stabilisation and proof of demand, but there’s no guarantee this will be on the cards given the difficult environment.”

ASML, Half Year Results, Wednesday 19 July

Derren Nathan, head of equity analysis, Hargreaves Lansdown:

“Next week’s second-quarter results will reveal if ASML remains on track to hit its full-year target for 25% revenue growth to around €26.5bn. A near doubling of sales in the first quarter and a strong forward order book provide a solid foundation for this target.

Markets are forecasting second-quarter sales to land in the middle of ASML’s €6.5bn to €7.0bn guidance. But analysts are anticipating the rate of growth to slow as the year progresses, reflecting sluggish conditions at chip foundries.

However, ASML is likely less sensitive to short-term fluctuations in demand for chips and stands to benefit from longer-term drivers for ever more powerful processors, such as the boom in artificial intelligence.

It’s a complex picture and analysts will be focussing on where the order book has moved which, at the last count, stood at €39bn. There’s also hope for more clarity on the effect of tightening export controls to China.”

Tesla, Half Year Results, Wednesday 19 July

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

“Tesla had a fight on its hands to swerve back into the fast lane in China, but sales have accelerated thanks to the strategy of cutting prices to lift volumes. The firm delivered a record number of vehicles in the three months to the end of June, helped by surging Chinese sales where the competition from home grown EV manufacturers is fierce. 

Offering more affordable price tags has been a shrewd move in other markets too, where consumers have been grappling with the cost-of-living crisis but are still eager to join the electric vehicle revolution.

The question is whether Tesla can continue to drive high volumes, as it becomes much busier on the EV highway ahead, with more big players accelerating their manufacturing efforts. Operating margins dropped 11.4% at the last count, so keeping cars rolling off the production line rapidly will be essential to boost flagging profitability.

Software sales should help here, so any signs they are revving up will be welcomed.  Investors will also be keen for any update on production of the Cybertruck, which was scheduled to start at the Texas gigafactory later this year.

Tesla shares have surged by around 150% since the start of the year, as investors have shown approval for the affordability at scale strategy, but they are still down around 34% from the peak in November 2021. Concerns about CEO Elon Musk stretching himself too thinly across his business empire are still causing some headwinds.’’

easyJet, Q3 Trading Statement, Thursday 20 July

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:

“easyJet’s hitting the headlines for all the wrong reasons recently, with mass cancellations affecting its important summer schedule, because of industrial action in Europe. While this is largely outside the group’s control, it will be important to quantify the impact on revenue and profits.

UK holiday demand has been formidable this year, so it’s likely that forward bookings and demand have remained robust, but there’s likely to be short-term pain because of the latest disruption.

easyJet recorded a pre-tax loss of £415m, despite the higher revenue, in the first half, because of higher costs. While some of the worst of this should be behind the group, an added boost to sentiment could be found if easyJet’s successfully been able to carry on increasing its ticket prices to help offset lingering margin pressure.”

IDS, Q1 Trading Statement, Thursday 20 July

Matt Britzman, equity analyst, Hargreaves Lansdown:

“It’s been difficult to find too much to get excited about at IDS recently, as the owner of Royal Mail has felt the hefty impact of Union battles over the past year or so. There’s light at the end of the tunnel, as Royal Mail and the Union (CWU) agreed on a pay deal earlier in the year – but there’s still the hurdle of a vote from members to overcome.

Next week’s trading update will likely point to further challenges ahead. As IDS looks for a new CEO at Royal Mail, the wider group is hoping to return underlying operating profit to positive territory this financial year.

The consensus among analysts is that it’s achievable, currently forecasting £66m of EBIT for the year, with around £300m of losses at Royal Mail being offset by profit at GLS, the international logistics business.

Real estate disposals are on the cards to help offset cash outflows from Royal Mail, while the trading environment remains tricky with volumes trending lower in both businesses. Fixing the relationship with workers is one thing, bringing growth back to the underlying operation is another – there’s a lot to do.”

Netflix, Half Year Results, Thursday 20 July

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:

“Streaming giant Netflix has had a supercharged year-to-date, with investors rewarding the stock as part of a broader tech uplift, as well as optimism about the group’s subscriber numbers. Subs will be the number on metric that will move the dial where Netflix is concerned, with the group adding 1.75m subscribers last quarter, which was behind analyst expectations.

The ad-supported tier was reported to have been doing well, but there’s pressure for this feature to be propelling meaningful growth as the marketplace for streamers has become increasingly crowded.

Netflix has previously said it’s on track to meet its full-year expectations and expects revenue of $8.2bn in the upcoming results. A deviation from that number will evoke a strong reaction from the market. We’re cautiously optimistic the group can come good on these plans, but forward guidance will be very important to monitor. As interest rates are expected to hike again in the important US market, there’s a limit to consumer resilience which has ramifications for Netflix.”

Vistry, Q2 Trading Statement, Thursday 20 July

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

“Back in May, Vistry gave a positive update covering year-to-date performance. Things were largely heading in the right direction, with sales rates improving and the forward order book ticking higher. The positive momentum led the group to nudge up its full-year pre-tax profit guidance from more than £440m to above £450m.

While analysts don’t expect next week’s trading update to bring with it any big surprises, there has been a key change. The Bank of England recently hiked interest rates by half a percentage point to 5.0%, as inflation’s proving stickier than previously thought. And with interest rates now expected to remain higher for longer, challenges look set to mount for buyers.

As a result, the continued use of incentives is anticipated, particularly aimed at first-time buyers, which will likely squeeze Vistry’s margins over the rest of the year. Investors are keen to see how the group plans to deal with these challenges and to get an update on the net cash position, which was looking slim compared to peers at the last count.”

FTSE 100, FTSE 250 and selected other stocks scheduled to report next week:

17-Jul

No FTSE 350 Reporters

18-Jul

19-Jul

20-Jul

21-Jul