Netflix (NFLX) will report its second-quarter earnings on Tuesday after the market closes as the company struggles with continued inflationary pressures, increased competition and increased subscriber turnover.
This is what Wall Street expects, according to Bloomberg consensus estimates:
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Revenue: $ 8.50 billion is expected
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Adj. earnings per share (EPS): $ 2.99 expected
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Subscribers: A loss of 2 million users is expected
The streaming giant’s projected loss of 2 million paid users for the second quarter would be the worst quarterly drop in the company’s history.
Netflix announced an unexpected first-quarter subscriber loss of 200,000 users in April.
On Monday, Morgan Stanley (MS) warned that a possible “streaming recession” could be on the horizon, lowering the shares of both Paramount Global (PARA) and Fox Corporation (FOXA).
“We are lowering net expectations to add overall to reflect the increased risk of consumers dropping their streaming portfolios in a more difficult economic environment,” analyst Benjamin Swinburne said in the note.
He added that the vulnerability to the recession could also negatively affect EBITA as advertisers withdraw in the midst of economic uncertainty, with Morgan Stanley also lowering its advertising estimates “everywhere”.
“A possible recession creates a risk for advertising estimates, which can be exacerbated by the addition of Disney and Netflix advertising inventory as advertising budgets are put under more pressure,” the analyst explained.
Overall, though, Wall Street still expects an ad level to be the answer to at least some of Netflix’s problems, and will seek greater clarity about the launch during the company’s second-quarter earnings call.
The platform, which revealed last week that it has partnered with Microsoft (MSFT) to help launch the new ad-based tier, expects the offering to hit the market later this year (though some analysts think otherwise given Microsoft’s lack of experience in the third … party tech business.)
The story goes on
Other things to see on Tuesday include any indication of possible spikes in subscriber penetration in the U.S. and Canada, as well as rising currency pressures, as the dollar remains incredibly strong relative to other currencies.
Bank of America said it expects “currency (FX) to enter more into the discourse,” estimating that Netflix could see about $ 267 million in foreign exchange earnings during the second quarter.
“Strange Things”: Bright spot in the second quarter?
“Stranger Things” (Courtesy: Netflix)
Season 4 of “Stranger Things” could be the only bright spot of the quarter with the debut surpassing even Netflix expectations, according to employee sources, quoted by Bloomberg.
In addition to breaking the record for Netflix’s biggest premiere weekend, the Duffer Brothers’ production also garnered the largest audience of all English Netflix seasons, with 930.3 million hours viewed on its first 28 days.
Netflix tends to outperform big releases of big hits, suggesting that the loss of subscribers might not be as severe as previously expected. However, third-party data shows an increase in dropouts and cancellations, as well as a greater slowdown in app downloads.
Shares of Netflix, which currently trade at around $ 198 per share, have fallen about 70% to date.
Alexandra is a senior entertainment and food reporter at Yahoo Finance. Follow her on Twitter @ alliecanal8193 and send her an email to alexandra.canal@yahoofinance.com
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