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Leveraging Consumer Momentum In Earnings Season: How LikeFolio Predicted Netflix and Tesla's Slump

April 21, 2023

Momentum is palpable.

You may not be able to rattle off the physics of it off the top of your head, but you can certainly sense it in your daily experiences, especially if you're a sports fan.

A change in momentum can greatly impact the outcome of a game, and as a fan, you can feel it in action.

The noise level of the crowd rises, your heart races, beads of sweat form on your forehead, and your legs bounce you out of your seat.

Players can feel it too.

"Once we got momentum, we just kept rolling. It's like a snowball effect." - Mike Eruzione, captain of the 1980 US Olympic hockey team that won the gold medal, describing the team's momentum during their historic victory over the Soviet Union.

Despite being outshot 39-16, the US team rallied back from a 3-2 deficit in the third period to win 4-3, in what has become known as the "Miracle on Ice."

Momentum is easy to spot in a game like this.

Leveraging Consumer Momentum In Earnings Season

As a trader, spotting momentum is a bit more nuanced, but it can be just as important.

Imagine if you could see the energy unfolding - either positive or negative - in real-time, for publicly traded companies.

This is where LikeFolio comes in.

LikeFolio measures the change in key consumer metrics, like buzz, demand, and sentiment, to quantify company-level momentum.

Georgetown University referred to this as the “unexpected component of sales growth” when it reviewed LikeFolio metrics.

Traders can reference a company’s Earnings Score, LikeFolio’s proprietary consumer momentum indicator, to make informed decisions during earnings season.

The higher the score, the more bullish the outlook, while a lower score indicates a more bearish outlook. This method is simple, quantifiable, and increasingly predictive.

During the first week of 23Q2 earnings season, LikeFolio accurately predicted the loss of momentum for two major companies: Netflix and Tesla.

Netflix (NFLX) Shares Slide on Weak Subscriber Numbers

NFLX Earnings Score heading for 23Q1 earnings was -59.

Bearish.

What was going on?

New subscriber growth AND viewership mentions were losing steam.

Data indicated Netflix demand growth was slowing…losing momentum.

We were right.

Netflix shares traded as much as -10% lower immediately following a disappointing earnings report.

Tesla (TSLA) Shares Sink on Margin Decline, Uncertain Outlook

Investors were tightly focused on Tesla price cuts ahead of the company’s 23Q1 earnings results.

Namely, how price cuts would impact margins.

While LikeFolio data can’t speak to Tesla’s margins, it can speak to the number of consumers purchasing a Tesla vehicle.

Unfortunately for Tesla, demand appeared to be waning in the early days of the second quarter.

You can see this highlighted on the chart below:

This slowdown in demand growth translated to a TSLA Earnings Score of -42: Bearish.

TSLA shares sank following the earnings print.

Margins were impacted by lower prices.

Musk also indicated demand remained “uncertain.” Looking ahead, high interest rates and economic “stormy weather” could mean consumers are more likely to postpone a large capital purchase…like a new car.

LikeFolio’s early glimpse of Q2 helped us to predict Tesla’s price cuts may be reflective of a loss of demand momentum.

To be fair, Netflix and Tesla are the resounding leaders of their respective industries.

But even top players can have a bad game.

That’s why it helps to have a real-time performance checker on your tool belt.

Suffice to say, we’re excited for the rest of this earnings season – we’ve got 9 action-packed weeks ahead of us.

Let’s go!

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About LikeFolio

LikeFolio analyzes social media data to accurately predict shifts in consumer behavior. We sell data and insights to professional investors, corporate research teams, and software providers.

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