Netflix Inc’s plans to revive slowing subscriber growth will be the center of attention when it releases its second quarter results on Tuesday, as excessive lockdown oversight eases and competition from Disney + and HBO Max are stepping up.
Netflix predicted it would add just one million subscribers globally in the second quarter, a tenth of what it added a year ago when COVID-19 restrictions forced people to look for home entertainment.
The streaming pioneer has also lost market share to new services such as Disney +, Apple TV + from Apple, HBO Max from WarnerMedia and Peacock from Comcast. To be sure, the industry’s overall growth in subscriber numbers has also slowed as the US market saturates.
Chart: Netflix demand drops as competition peaks: https://graphics.reuters.com/NETFLIX-RESULTS/egpbknnqovq/chart_eikon.jpg
Some Wall Street analysts have said that a first-mover advantage will not be enough and that Netflix needs to produce new content, renew content licenses and explore other revenue streams such as live sports and advertising to boost the growth.
Co-CEO Reed Hastings has long opposed adopting an advertising model saying it should compete with market leaders Google, Facebook and Amazon.
The company is exploring an ecommerce push to sell content-related merchandise and recently hired Facebook CEO Mike Verdu to anchor its gaming expansion.
But analysts are skeptical about the evolution of games.
“While this strategy may be marginal to Netflix’s membership growth and revenue, we doubt the platform will be truly competitive with endemic gaming platforms or content publishers anytime soon,” said Matthew Thornton. , analyst at Truist Securities.
For now, Netflix is under intense pressure to produce new content, after big hits like “Emily in Paris”, “Bridgerton”, “The Queen’s Gambit” and “The Crown” in 2020. The pandemic has delayed production , but the company has announced new seasons of “Stranger Things” and “Ozark” among others coming next year.
Graphic: Fewer new registrations for Netflix as restrictions ease: https://graphics.reuters.com/NETFLIX-RESULTS/oakveddwopr/chart_eikon.jpg
* Analysts estimate Netflix’s second-quarter revenue will grow 19% to $ 7.32 billion. Revenue in North America, its largest region in terms of revenue, is expected to increase 13.4%.
* Earnings per share is estimated at $ 3.16
* Its stocks have lost 1.5% year-to-date, while the benchmark S&P 500 has gained 13.4%.
* The stock, which climbed 67% in 2020, is also the weakest among FAANG stocks this year.
Chart: FAANG stocks vs. S&P 500: https://graphics.reuters.com/NETFLIX-RESULTS/NETFLIX-RESULTS/azgvoqqgkvd/Pasted%20image%201626712264751.png
WALL STREET FEELING
* Wall Street analysts are largely bullish, with 36 of 46 rating the stock as “buy” or higher, while six have a “hold” rating and four rating it as a “sell” or less.
* The median price target is $ 620 from the current price of $ 532.30
QUARTER REAL SURPRISE%
END OF THE IBES ESTIMATE
2.97 March 3.75 Beat 26.4
Dec. 1.39 1.19 Missed -14.2
Sep 2.14 1.74 Missed -18.8
Jun 1.81 1.59 Missed -12.2
Tue 1.65 1.57 Missed -4.9
Dec. 0.53 1.30 Beat 146.8
September 1.04 1.47 Beat 41
June 0.56 0.60 Beat 6.6