by Louis Juricic and Sarina Isaacs

Investing.com – Here’s your weekly Pro recap on the biggest tech headlines this week: Tesla and Netflix slump in Q2, but analysts are upbeat; Taiwan Slips on Semiconductor Alert; And Wall Street applauded Microsoft’s newly announced price.

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Tesla

Shares of Tesla (NASDAQ: NASDAQ: TESLA ) tumbled last week as investors fretted over the EV maker’s recent price cuts to boost volumes and combat growing competition in the electric vehicle market. The decision led to a record high of $24.93 billion during the three-month period.

But excluding the impact of regulatory credits from the move, it also hit its gross profit margin from automotive operations, which fell to 18.2% from 18.8% in the first quarter and 26.2% last year. Although the decline was not as large as many analysts had expected, Tesla’s stock declined after Chief Executive Elon Musk later suggested that further price cuts could occur this year.

As far as key figures go, Tesla reported EPS of $0.91 on revenue of $24.93 billion. Analysts polled by Investing.com estimated EPS of $0.79 cents on revenue of $24.29B.

The price cut helped the company grow its installed base and add new customers, with deliveries rising 86% to 466,140, ​​a record quarter for the company.

Wedbush called the move a “smart strategy”, after reporting that the price cut “has been successful domestically in China, Europe and the US… In short, we see Tesla where Apple was in the 2008/2009 period as Cupertino was starting to monetize its services and the gold ecosystem, while the Street did not see a broader gold outlook at the time.”

Needham & Co reiterated its hold rating because of the valuation, and both BofA and Goldman Sachs — which said the report was “solid” but adverse conditions remain — reiterated their neutral ratings on the stock.

Meanwhile, Wells Fargo said Tesla posted “low-quality” EPS driven “mostly by other income.”

Netflix

Meanwhile, Netflix’s (NASDAQ:) ban on password sharing between users — and its cheaper ad-supported tier — is working, with the company seeing a “low” number of cancellations and adding 5.9 million subscribers in Q2 — well above Wall Street’s estimates.

However, this trend was dampened by a lower-than-expected $8.2B, even though EPS came in at a better-than-expected $3.29 (vs. estimates of $2.84). Netflix’s $8.5B estimate for the top-line figure in the third quarter also missed forecasts.

Co-CEO Greg Peters warned investors that it would take “several quarters” for the returns from all these initiatives to be realized.

Shares of Netflix declined and ended the week down 4% at $427.50.

But Evercore ISI raised the price target to $550 and removed its Tactical Underperform rating on the stock after it called it the “mother of a quarter.” The firm attributed the decline in shares to a correction in expectations, not a fundamental correction, and “would encourage investors to buy NFLX shares on this (small) pullback.”

Meanwhile, BofA raised the price target on buy-rated NFLX shares from $35 to $525 per share. Analysts said the results were “healthy”, adding:

Within the media ecosystem, we believe NFLX’s depth/breadth of content positions them well to withstand production cuts.

Taiwan Semiconductor

Taiwan Semiconductor Manufacturing (NYSE: ), or TSMC, reported a bigger-than-expected profit on Thursday on some resilience in chip demand, but warned that the boom in artificial intelligence won’t be enough to offset a broader industry slump.

Stocks trading in New York fell sharply after the results, with American Depositary Receipts ending the week down 7.1% to $97.25.

The company — which is the world’s largest contract chip maker, and also a major supplier to Apple Inc (NASDAQ: ) and Nvidia (NASDAQ: ) — said Q2 net income per share fell 23% to 7.01 Taiwan dollars (US$1 = T$31.07), or US$1.14 per ADR. The per-ADR figure of $1.07 was above expectations, according to analysts polled by Investing.com.

While the year-over-year decline in profit was partly due to last year’s strong performance, it also reflects a slowdown in semiconductor demand through 2023 amid rising interest rates and worsening global economic conditions.

Profitability is expected to worsen in the coming quarter, with the chip maker’s gross profit margin expected to decline to 51.5% from 53.5% in the third quarter, up from 54.1% in the second quarter, while operating profit margin is also expected to decline from 42% to between 38% and 40%.

The firm said it faced headwinds exacerbated by the macroeconomic slowdown, which had reduced chip demand after a bumper 2022 forecast. TSMC also sounded a less optimistic note on artificial intelligence boosting chip demand than some of its peers.

Following the results, research firm CFRA downgraded the company’s rating to Buy from the previous Strong Buy.

Microsoft

Microsoft (NASDAQ: NASDAQ: ) said 365 CoPilot users will be charged $30 per month for Microsoft 365 E3, E5, Business Standard and Business Premium when they become generally available.

Following Tuesday’s announcement — accompanied by higher-than-expected pricing for a very widely used product — Microsoft’s shares soared to record highs for the session.

Analysts were also generally upbeat about the news.

For example, Barclays described the move as “a major next step for MSFT’s AI monetization. We believe the price increase (53% on E5) is at the upper end of investor expectations and should propel shares further.” Wells Fargo (NYSE: ) similarly said that the pricing “represents a significant increase in existing license costs.”

Meanwhile, BofA estimated that it represents a $1.52B opportunity based on its estimate of 422 million Office 365 customers and an expectation of 1% penetration in that user base. It also believes that “M365 CoPilot’s ability to sift through relevant business data” is a “key differentiator to existing AI products.”

Mizuho was also very positive, writing:

We believe the growth opportunity for MSFT in the medium term and beyond is greater than many are expecting, and includes significant Generative AI monetization. And MSFT remains our top pick among companies reporting for the June quarter. We reiterate our Buy rating and increase our PT to $420 (from $390).

After Tuesday’s surge, shares retreated and eventually closed marginally lower for the week at $343.77.

Senad Karahmetovic, Amber Varick and Scott Kanovsky contributed to this report.

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