Will Netflix continue to lose subscribers? Investors are waiting for guidance

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

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Netflix investors already know to expect bad news when the company reports its second quarter results on Tuesday. Now they want to look for guidance on what to expect for the second half of the year.

The power service̵[ads1]7;s leaders warned in April that subscriber losses could reach about 2 million during the second quarter, after falling by 200,000 during the first three months of the year. At the time, Netflix blamed factors such as increasing competition, password sharing and inflation for the decline in subscribers.

When Netflix reports after Tuesday, another subscriber loss forecast for the third and fourth quarters could send the company’s shares spiraling.

Ahead of earnings, analysts forecast an average of 1.8 million net new subscribers during the third quarter, according to Street Account. The company declined to provide year-round guidance last quarter, but noted that it has a stronger list of content releases for the second half of 2022. It also said that price increases, which may have led some customers to leave earlier this year, would be less of a churn factor. .

The company has around 222 million subscribers globally.

As for the second quarter, analysts are divided on whether the loss of subscribers will be better or worse than Netflix predicted. Some expect the company to lose as many as 4 million subscribers, while others expect a loss of 1.5 million.

“I think the 2 million are conservative,” said Michael Pachter, an analyst at Wedbush. “I know they try to be conservative, and generally do not miss much, so if it’s worse, I’ll be surprised.”

Pachter and other analysts who expect less loss of subscribers 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 one at the beginning of the third. Some analysts expect that the split may have limited churn or even driven new subscribers to sign up or come back.

“The faster Netflix can show Wall Street that 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 the churn, we will see more interest from investors watching on the possibility of net new subscribers, “said Dan Rayburn, a media and streaming analyst.

A cheaper ad-supported subscription plan is also in the works and can lure out expired customers or encourage new users. No date has been set for the launch of the option, but more information about the development on Tuesday may increase investor confidence. Netflix’s standard plan in the US costs $ 15.49 a month, making it more expensive than other major streaming services.

Netflix also has many titles coming before the turn of the year that may 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 its way is the fifth season of “Cobra Kai”, several romantic comedies and some children’s titles, including “My Little Pony: Make Your Mark” and Roald Dahl’s “Matilda: The Musical”.

“I expect they will lead to a win in Q3,” Pachter said. “The consensus is 1.81 million new subscribers for the third quarter, despite the fact that half of the analysts covering the downgraded stock. Most secure their bets, and I think a guide to a return to subscriber growth will be positively received.

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