Sopa Images | Lightrocket | Getty Images Netflix investors already know to 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. Executives at the streaming service warned in April that subscriber losses could reach about 2 million in the second quarter, after falling by 200,000 in the first three months of the year. At the time, Netflix blamed factors such as increased competition, password sharing and inflation for the subscriber drift. When Netflix reports after the bell on Tuesday, another forecast of subscriber losses for the third and fourth quarters could send the company’s stock soaring. Before earnings, analysts on average forecast 1.8 million net new subscriber additions in the third quarter, according to Street Account. The company declined to provide full-year guidance last quarter, but noted that it has a stronger content release schedule for the second half of 2022. It also said that price increases, which may have driven some customers away earlier this year, will be less tipping factor. The company has approximately 222 million subscribers worldwide.
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As for the second quarter, analysts are split on whether subscriber losses will be better or worse than Netflix had forecast. Some expect the company to lose up to 4 million subscribers, while others predict a loss of 1.5 million. “I think 2 million is conservative,” said Wedbush analyst Michael Pachter. “I know they’re trying to be conservative and generally don’t lose much, so if it’s worse, I’d be surprised.” Pachter and other analysts who expect smaller subscriber losses have pointed to the streaming service’s popular “Stranger Things” series. 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 the split may have had limited churn or even driven new subscribers to sign up or return. “The sooner Netflix shows Wall Street that it’s releasing new content over multiple quarters, as it did with Season 4 of ‘Stranger Things,’ and emphasizes the efforts it’s making to reduce disruption, we’ll see more interest from investors looking at the potential for net new subscribers,” said Dan Rayburn, media and streaming analyst. A cheaper ad-supported subscription plan is also in the works and could attract lapsed customers or encourage new users. No date has been set for the option’s launch, but more information on its development on Tuesday could boost investor confidence. Netflix’s standard US plan costs $15.49 per month, making it more expensive than other major streaming services. Netflix also has several titles arriving before the end of the year that could attract subscribers. In the third quarter, subscribers will get access to the big-budget action movie “The Gray Man,” the first season of “Sandman,” the Jamie Foxx vampire movie “Day Shift,” and a comedy called “Me Time” with starring Mark. Wahlberg and Kevin Hart. Also on the 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 drive a profit in the third quarter,” Pachter said. “The consensus is 1.81 million new subscribers for the third quarter, despite half of the analysts covering the stock downgrading. Most are hedging their bets and I think a guide to returning to subscriber growth will be positively received.
