Investors in Netflix are already aware that Tuesday’s second-quarter earnings announcement would likely bring terrible news. They are now seeking direction on what to anticipate for the second half of the year.
The streaming service’s executives issued a warning in April, noting that after losing 200,000 subscribers in the first quarter, subscriber losses in the second quarter might approach 2 million. At the time, Netflix attributed the decline in subscribers to several issues, including increased competition, password sharing, and inflation.
Another prediction of subscriber losses for the third and fourth quarters when Netflix reports after the bell on Tuesday might send the stock of the firm tumbling.
According to Street Account, analysts anticipate 1.8 million net new subscriber additions during the third quarter, ahead of earnings. The business last quarter declined to give full-year guidance but stated that the second half of 2022 will see a stronger slate of content launches. It also mentioned that price rises, which might have discouraged some customers from purchasing earlier this year, would have a smaller impact on turnover.
Around 222 million people worldwide are subscribers to the company.
Analysts disagree on whether subscriber losses will be better or worse than what Netflix expected as of the second quarter. Some forecast a loss of up to 4 million subscribers for the business, while others predict a loss of 1.5 million.
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The 2 million is, in fact, modest, according to Michael Pachter, a Wedbush analyst. “If it’s worse, I’d be surprised,” said the speaker. “I know they try to be conservative, and generally don’t miss by much.”
Pachter and other analysts have cited “Stranger Things,” a popular series on the streaming service, as evidence that they anticipate lesser subscriber losses. The second half of the second quarter and the beginning of the third saw the publication of the first half of the fourth season of the television program. According to some analysts, the split may have reduced churn or even encouraged new users to join up or come back.
“We will see more interest from investors looking at the possibility of net new subscribers the sooner Netflix can show Wall Street they are releasing new content across multiple quarters, as they did with ‘Stranger Things’ season 4 and highlight the efforts they are making to reduce churn,” said Dan Rayburn, a media and streaming analyst.
A less expensive, ad-supported subscription option is also in the pipeline and may entice former users to sign up again. Although there is no set timeframe for the option’s implementation, Tuesday’s disclosure of further details could boost investor faith in the business. The normal Netflix package in the US is more expensive than other popular streaming services at $15.49 per month.
Before the year is out, Netflix has a ton of new releases that will draw viewers. The first season of “Sandman,” the big-budget action film “The Gray Man,” Jamie Foxx’s vampire feature “Day Shift,” as well as the comedy “Me Time” starring Mark Wahlberg and Kevin Hart, will all be available to subscribers in the third quarter.
The fifth season of “Cobra Kai,” a few romantic comedies, and a few kid-friendly productions like “My Little Pony: Make Your Mark” and Roald Dahl’s “Matilda: The Musical” is also forthcoming.
According to Pachter, “I anticipate they will guide to a gain in Q3.” Even though half of the analysts that track the stock have downgraded it, “the consensus expects 1.81 million new customers for Q3. The majority are hedging their bets, so I believe a roadmap for a comeback in subscriber growth will be well appreciated.
