Earnings season is a high-stakes time. Fortunes can be won or lost depending on whether a company beats or misses Wall Street expectations. For some companies, the stakes are particularly high. Analysts and investors have put some companies on notice after recent earnings flops that a turnaround is needed. Many high-profile concerns have struggled this year amid declining demand and sales, effectively making them “show me” stocks.
While it’s still early days, earnings season has already proven to be a mixed bag. With the big banks reporting results first, some like Goldman Sachs (NYSE:GS) saw their stocks jump on better-than-expected results, while other such as JPMorgan Chase (NYSE:JPM) sank as their guidance disappointed. With the earnings train shifting into high gear and several marquee companies scheduled to report in the coming weeks, we look at three stocks with the most potential to plunge on Q1 results.
Tesla (TSLA)
Expectations are that Tesla’s (NASDAQ:TSLA) print on April 23 will be bad. The only question appears to be: how bad? The company has been telegraphing for months that demand and sales are weakening. First-quarter vehicle delivery numbers released on April 2 (the closest approximation to sales) were 386,810, a decline of 8.5% from a year earlier. More recent news that Tesla is cutting 10% of its global workforce and has paused manufacturing of its Cybertruck due to technical problems also hasn’t inspired confidence.
Tesla’s stock is already in the doldrums. Down 37% on the year, TSLA stock is the second worst performer in the benchmark S&P 500 index. The company’s market capitalization has dropped below $500 billion as the share price sinks. Tesla has now erased $290 billion in shareholder wealth this year, and that loss could get worse with the upcoming Q1 results. Management says they are pivoting to focus on self-driving vehicles, with plans to unveil the long-promised “Robotaxi” in August. Wall Street remains skeptical.
Apple (AAPL)
Apple’s (NASDAQ:AAPL) stock has been struggling since the company’s last earnings report was delivered in early February. Year to date, AAPL stock has been down nearly 10% and is badly trailing the market. The company has also lost its crown as the biggest publicly traded company in the world to rival Microsoft (NASDAQ:MSFT). The main concern heading into the Q1 print is declining sales of Apple’s hardware devices, particularly the iPhone. Preliminary results are not encouraging.
Recent data from International Data Corp. claims that iPhone shipments declined nearly 10% globally in this year’s first quarter due to rising competition in China. According to IDC, Apple shipped 50.1 million iPhones from January through March, down 9.6% from 55.4 million shipments a year earlier. Rival Samsung has also taken over the top sales spot from Apple with a 20.8% market share and having shipped 60.1 million devices in Q1. Apple’s share of the global smartphone market has fallen to 17.3% from 20.7% a year ago.
Apple reports earnings on May 2.
Nvidia (NVDA)
The question facing Nvidia (NASDAQ:NVDA) heading into its May 22 Q1 financial results is: how long can the company continue to grow at a blistering pace and beat extremely difficult comparables and forecasts? After all, this is a company whose Q4 2023 sales rose 265% from a year earlier while its profits grew 769% year over year. Eventually things have to slow down, right? The consensus among analysts is that Nvidia will have a hard time jumping the high earnings bar it has set for itself in Q1.
Should Nvidia’s Q1 print miss the mark, it will no doubt be bad for the company’s stock and the overall market. In the lead-up to recent earnings reports, the stock market has wavered and then rallied when Nvidia beat expectations. The reverse could easily happen if Nvidia’s Q1 numbers disappoint. NVDA stock has continued to be a high-flier this year, gaining 77% and notching the second-best performance among securities listed on the S&P 500. Whatever the results, investors should prepare for the market to move.
On the date of publication, Joel Baglole held long positions in AAPL, MSFT and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.