Netflix’s second-quarter earnings preview: the number of paying users continues to decline, and the market value falls below $90 billion – yqqlm

Beijing time on the morning of July 19th, according to reports, Netflix will announce its second-quarter earnings report on Tuesday local time, and it is widely expected that the situation may be very bad. Shareholders now hope that Netflix’s fundamentals are strong enough to withstand a shock.

Netflix remains the world’s largest streaming video service, but the company reported earlier this year,Paid subscribers see first quarterly decline in more than a decadeand warned that,Global paid subscribers to drop by 2 million in second quarter. This will be the largest quarterly loss of paid subscribers in Netflix’s history.

The problems facing Netflix may be more serious than expected. Macroeconomic trends are full of uncertainty. Concerns about a possible recession and high inflation may have prompted Americans to cut back on spending. Netflix’s standard plan in the US is $15.49 a month, more expensive than every other major video service. Therefore, people may cancel Netflix in the first place to save money.

Market competition is also intensifying. By the end of the year, HBO Max will likely have all of Discovery+’s content on its service. The plan for HBO Max is $14.99 for the ad-free version and $9.99 for the ad-supported version. Disney announced last week that it would raise the price of ESPN+ by $3 to $9.99 a month. However, the price of the Disney+, Hulu and ESPN+ bundle remains unchanged at $13.99 per month. This could be seen by users as an alternative to Netflix and bring more subscribers to Disney.

“I don’t know if it’s going to be a bad quarter, but it’s certainly not going to be a good story,” said Andrew Rosen, a former Viacom digital media executive and founder of video industry media PARQOR.

In early 2022, many analysts predicted,Netflix will add more than 20 million paid subscribers this year. As recently as April, JPMorgan analyst Doug Anmuth predicted that the company would add 17.95 million paid subscribers in 2022. However, he lowered his full-year forecast to 4 million new additions after seeing how bad it was last quarter.

One of the big questions about Netflix’s share price performance after the earnings report is how much bad news has been factored into the stock price. In less than a year,Netflix’s market cap has fallen from $300 billion to less than $90 billion.

“For now, I think the market will focus on paying subscriber numbers,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “There’s a wide range of possible outcomes in terms of how bad it actually is and where it goes.”

During last quarter’s earnings call, Netflix Chief Financial Officer Spencer Neumann assured investors of positive growth in the third and fourth quarters. He said that the number of paid subscribers is expected to fall by 2 million in the second quarter, but that does not mean that the churn will continue: “We will increase our revenue and there will be a net increase in the number of paid subscribers.”

Netflix looks to boost growth with stronger content lineup, which includes the new season of “The Crown,” and the nearly $200 million action movie “Grey.” Rosen said Netflix needs to deliver better-than-expected results in international markets, including Latin America, Asia-Pacific and Europe, Middle East and Africa, in order to deal with increasingly unfavorable conditions in the U.S. and Canada.

Netflix also has many advantages over other streaming video companies. First, the company is making money. All indications are that Netflix will continue to be profitable. Most analysts expect the company to post a net profit of nearly $5 billion this year. By comparison, Peacock, which is owned by NBC Universal, will lose $2.5 billion this year. While Disney+ has attracted nearly 140 million paying subscribers worldwide since its launch at the end of 2019, Disney’s losses across all streaming media products reached $887 million last quarter.

Before the latest numbers, Netflix had 222 million paid subscribers worldwide and remained the world’s largest streaming video service. This is a huge draw for any content creator looking to reach a larger audience. Netflix is ​​also a potentially important platform for advertisers. Netflix will launch its first paid, ad-supported plan before the end of the year, when advertisers can try to reach Netflix’s audience.

Netflix also plans to crack down on shared passwords globally, a move expected to bring in tens of millions of new paying subscribers. Netflix estimates that,More than 100 million households worldwide currently use Netflix without payingof which more than 30 million are located in the United States and Canada.

However, the effects of longer-term moves won’t be immediately apparent, and the theme of Tuesday’s earnings report will remain how to manage losses. Shares of Netflix rose 1 percent to $190.92 on Monday, having fallen more than 68 percent so far this year.