What happened
Netflix (NFLX -5.15%) shareholders lost on Monday morning as the market fell. Its shares were down 4% by 11:30 a.m., compared with a 1.1% drop in the S&P 500. The drop compounded a year of heavy losses for investors in the streaming video giant. Its shares are down roughly 70% in 2022.
Monday’s decline came as investors began to worry about what they’ll see when Netflix reports its second-quarter results on July 19. This may interest you : The best sci-fi movies on Prime Video.
So what
Netflix’s latest earnings report was particularly startling for both shareholders and the broader tech industry. The company revealed worsening engagement trends, a stark contrast to the soaring demand for streaming in the earlier phases of the pandemic. Competition was a particularly big issue, with Netflix admitting that its ad-free approach had left it vulnerable to lower-priced services.
That mid-April report set a gloomy tone for the flood of Q1 earnings announcements that followed. See the article : ‘Keep Breathing’: Melissa Barrera stars in Netflix’s survival thriller (PHOTOS). Many investors are worried about another round of bad news.
Now what
Management projected that Netflix would lose about 2 million net subscribers in the second quarter, and the pending report will largely be judged on how well the company performs against that target. On the same subject : Transylvania meets California in the first trailer for Netflix’s Day Shift. On the downside, competition remained fierce in the streaming industry, and consumers likely looked for more ways to save money as inflation accelerated.
On the plus side, the release of the new season of Stranger Things likely generated more interest in the service, and the delay in releasing its final episodes may have convinced subscribers to stick around longer. Watch co-host Reed Hastings and his team discuss this strategic win next week.
The stock may remain in Wall Street purgatory as long as executives can show progress in returning growth to the 20% annual rate that allowed for a steady rise in profit margins. The Q2 forecast calls for less than half that rate of expansion, and management could predict another weak period in the third quarter if its new content fails to convince users to pay for its premium streaming service at a time when free options have flooded the market.
Demitri Kalogeropoulos holds positions in Netflix. The Motley Fool has positions in Netflix and recommends it. The Motley Fool has a disclosure policy.
Demitri Kalogeropoulos holds positions in Netflix. The Motley Fool has positions in Netflix and recommends it. The Motley Fool has a disclosure policy.
