Will Netflix keep losing subscribers? Investors are waiting for guidance

In this photo illustration, the Netflix logo is displayed on a smartphone screen with a stock market graphic in the background.

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Netflix investors already know to expect bad news when the company releases its second-quarter results on Tuesday. They will now be looking for guidance on what to expect in the second half of the year.

In April, executives at the streaming service warned that subscriber losses could be around 2 million in the second quarter, after falling by 200,000 in the first quarter. At the time, Netflix blamed factors such as increased competition, password sharing, and inflation for declining subscriber numbers.

When Netflix reports back after Tuesday’s call, another forecast of third and fourth quarter subscriber losses could send the company’s stock soaring.

Outperforming the earnings report, analysts predict an average of 1.8 million new subscribers in the third quarter, according to Street Account. The company declined to provide a full-year forecast last quarter, but noted that it has a stronger schedule for content releases in the second half of 2022. be less than the churn factor.

The company has about 222 million subscribers worldwide.

In the second quarter, analysts were divided on whether subscriber losses would be better or worse than Netflix had forecast. Some expect the company to lose as many as 4 million subscribers, others foresee a loss of 1.5 million.

“I think 2 million is conservative,” said Michael Pachter, an analyst at Wedbush. “I know they try to be conservative and generally don’t miss much, so if it gets worse, I’ll be surprised.”

Pachter and other analysts who expect fewer subscriber losses pointed to the streaming service’s popular series Stranger Things. The show’s fourth season aired in two parts, one at the end of the second quarter and one at the beginning of the third. Some analysts expect the split could limit churn or even force new subscribers to sign up or return.

“The sooner Netflix can show Wall Street that they are releasing new content within a few quarters, as they did with Stranger Things season 4, and highlight the efforts they are making to reduce churn, we will see more interest from side of investors considering net new subscribers,” said Dan Wrayburn, media and streaming analyst.

A cheaper, ad-supported subscription plan is also in the works and could attract former customers or encourage new signups. No date has been set for the option to roll out, but more information about its development on Tuesday could boost investor confidence in the company. The standard Netflix plan in the US costs $15.49 per month, making it more expensive than other major streaming services.

Netflix also has a lot of games coming before the end of the year to attract subscribers. In the third quarter, subscribers will have access to the big-budget action movie The Gray Man, the first season of The Sandman, the Jamie Foxx vampire film Day Shift, and the comedy Time for Me starring Mark Wahlberg and Kevin Hart.

Also on the way is the fifth season of Cobra Kai, several romantic comedies, and several children’s films, including My Little Pony: Make Your Mark and Roald Dahl’s Matilda: The Musical.

“I expect them to lead to growth in the third quarter,” Pachter said. “The consensus is 1.81 million new subscribers in the third quarter, despite the fact that half of the analysts covering the stock downgraded the stock. Most are hedging their bets, and I think the guidance to resume subscriber growth will be received positively.

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