December 5, 2022

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Will Netflix keep losing subscribers?  Investors are waiting for guidance

Will Netflix keep losing subscribers? Investors are waiting for guidance

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

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Netflix Investors already Know to expect bad news When the company announces its second-quarter results Tuesday. They will now be looking for guidance on what to expect in the second half of the year.

The streaming service’s executives warned in April that subscriber losses could approach two million subscribers during the second quarter, After declining by 200,000 during the first quarter. At the time, Netflix blamed factors including intense competition, password-sharing and inflation for the decline in subscribers.

When Netflix reported after the bell on Tuesday, another forecast of subscriber losses for the third and fourth quarters could send the company’s stock up.

Before earnings, analysts, on average, expect to add 1.8 million new subscribers during the third quarter, according to a Street Account. The company declined to provide full-year guidance in the last quarter, but indicated that it had a stronger slate of content releases in the back half of 2022. It also said the price increases, which may have led some customers to leave earlier this year, would To be less than the rupture factor.

The company has about 222 million subscribers worldwide.

As it is or the second quarter, analysts are divided on whether subscriber losses will be better or worse than Netflix expected. Some expect the company to lose up to 4 million subscribers, while others expect to lose 1.5 million subscribers.

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“I think two million people are conservative,” said Michael Butcher, an analyst at Wedbush. “I know they try to be conservative and generally don’t miss a lot, so if it’s worse, I’d be surprised.”

Butcher and other analysts expecting fewer subscriber losses have pointed to the streaming service’s popular series Stranger Things. The fourth season of the show was released in two parts, one at the end of the second quarter and the other at the beginning of the third. Some analysts expect the split to be limited or might prompt new subscribers to sign up or come back.

“The sooner Netflix can show Wall Street that they’re releasing new content across multiple quarters, as they did in ‘Stranger Things’ season 4, and highlight their efforts to reduce disruption, the more interest we’ll see from investors looking at the possibility,” he said. Dan Rayburn, Live Media and Broadcast Analyst, For “Net New Subscribers”.

A cheaper, ad-supported subscription plan is also in the works and can attract stale customers again or encourage new signups. No date has been set for the start of this option, but more information about its development on Tuesday could improve investor confidence in the company. The standard US Netflix plan costs $15.49 per month, which makes it more expensive than other major streaming services.

Netflix also has a lot of titles arriving 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,” season one of “Sandman,” the vampire movie Jamie Foxx “Day Shift,” as well as a comedy movie starring “Me Time.” Mark Wahlberg and Kevin Hart.

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Season 5 of “Cobra Kai,” several romantic comedies, and a handful of children’s titles including “My Little Pony: Make Your Brand” and Roald Dahl’s “Matilda: Music” will also take place.

“I expect them to lead to gains in the third quarter,” Butcher said. “The consensus is 1.81 million new subscribers for the third quarter, despite the fact that half of the analysts covering their news downgraded the stock. Most of them are hedging their bets, and I think evidence of a return to increased subscriber count will be received favorably.