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Netflix investors already know they expect bad news when the company reports its second-quarter results on Tuesday. They will now look for guidance on what to expect for the second half of the year.
Streaming service executives warned in April that subscriber losses could reach 2 million during the second quarter, after falling by 200,000 during the first quarter. At the time, Netflix blamed factors such as intensified competition, password swapping, and inflation from falling subscribers.
When Netflix reports after Tuesday’s bell, another forecast of subscriber losses for the third and fourth quarters could cause the company’s shares to spiral up.
Ahead of earnings, analysts forecast, on average, 1.8 million new net subscribers during the third quarter, according to Street Account. The company declined to offer year-round guidance last quarter, but noted it has a stronger list of content releases in the later half of 2022. It also said price increases, which they may have caused some customers to drop out earlier this year. be less a rotation factor.
The company has about 222 million subscribers worldwide.
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Starting in the second quarter, analysts are divided on whether subscriber losses will be better or worse than Netflix predicted. Some expect the company to lose up to 4 million subscribers, while others anticipate a loss of 1.5 million.
“I think the 2 million are conservatives,” said Michael Pachter, an analyst at Wedbush. “I know they try to be conservative and generally don’t miss much, so if it’s worse, it surprises me.”
Pachter and other analysts expecting smaller subscriber losses have pointed to the streaming service’s popular “Stranger Things” series. The fourth season of the show premiered in two parts, one at the end of the second quarter and another at the beginning of the third. Some analysts hope the split may have limited turnover or even push new subscribers to sign up or return.
“As soon as Netflix can show Wall Street that it’s releasing new content in several quarters, as it did with season 4 of‘ Stranger Things, ’and highlight the efforts they’re making to reduce the loss, we’ll see more interest from investors who look at the possibility of new net subscribers, “said Dan Rayburn, a media and streaming analyst.
A subscription plan with cheaper advertising is also being worked on and could attract expired customers or encourage new sign-ups. No date has been set for the deployment of the option, but more information on its development on Tuesday could improve investor confidence in the company. Netflix’s standard plan in the U.S. costs $ 15.49 a month, making it more expensive than other major streaming services.
Netflix also has many titles coming out 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 “Sandman,” Jamie Foxx’s vampire movie “Day Shift,” as well as a comedy called “Me Time” starring Mark Wahlberg and Kevin Hart.
Also on the way is the fifth season of “Cobra Kai,” several romantic comedies and a handful of children’s titles, such as “My Little Pony: Make Your Mark” and “Matilda: The Musical” by Roald Dahl.
“I expect them to lead to a gain in the third quarter,” Pachter said. “The consensus is 1.81 million new subscribers for Q3, although half of the covering analysts have downgraded the rating of the shares. Most are covering their bets, and I think a guide to return to subscriber growth will be received positively.