Top Stocks to Watch as Earnings Season Approaches

This has been a wild year for investors. While most stocks fell sharply in February and March during the coronavirus market crash, many have already recovered. Even more, some stocks have soared to new all-time highs, serving up incredible returns to shareholders.

With earnings season nearly upon us, many of these companies will have to justify their stocks' rapid gains by demonstrating strong underlying business performance. Three hot stocks worth watching when they report earnings this month are Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), and Apple (NASDAQ:AAPL). These three companies' stocks are up about 60%, 250%, and 30% year to date, respectively. Making these gains even more impressive, they happened during a period in which the S&P 500 fell 1.4%.

Ahead of their earnings reports, here's a look at each of these stocks.

As one of the first growth stocks to report its second-quarter results this month, streaming-TV company Netflix will get a shot at setting the tone for earnings season this week. The company is scheduled to release its latest business update after market close on Thursday, July 16.

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Among the key metrics to watch when Netflix reports earnings will be its earnings per share. On average, analysts expect earnings per share of $1.81, up an incredible 202% year over year. This bottom-line momentum is expected to be driven by operating margin expansion and strong subscriber growth. Management guided for 7.5 million net subscriber additions during the quarter — a steep increase compared to the 2.7 million subscribers Netflix added in the year-ago quarter.

Following a nearly 500% run-up in its stock price over the past 12 months, lots of people will be watching Tesla's second-quarter update.

The company already announced vehicle deliveries for the quarter that crushed analysts' estimates, setting the stage for a potential profit during a period in which its main factory in California was shut down for half of the quarter. Most analysts, however, still think the automaker won't be able to deliver a profit for the period. The consensus estimate for Tesla's adjusted earnings per share is a loss of $0.71.

Investors will also likely look for an update on management's guidance for full-year deliveries. Will the company reconfirm its initial full-year outlook for more than 500,000 deliveries in 2020, or have temporary factory shutdowns earlier this year set the company too far behind to meet this target?

Tesla reports its second-quarter results after market close on July 22.

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When Apple reports its fiscal third-quarter results after market close on July 30, investors will look to see whether the tech giant's business is recovering from the hit it took to both supply and demand during its fiscal second quarter.

iPhone revenue, in particular, will be important, as the key product segment still accounts for more than half of Apple's total revenue. Did iPhone revenue return to growth during the period?

In addition, investors should look for more strong growth in Apple's wearables and services segments, as these are important long-term catalysts for the company that investors are counting on to help Apple keep growing in the years to come. In fiscal Q2, services revenue rose 17% year over year and its wearables, home, and accessories segment saw revenue jump 23%.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Netflix, and Tesla. The Motley Fool has a disclosure policy.

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