Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Netflix Q2 Earnings Preview: As COVID Boom Slows, Holding Ground The New Goal 

By Investing.com (Haris Anwar/Investing.com)Stock MarketsJul 19, 2021 16:56
au.investing.com/analysis/netflix-q2-earnings-preview-as-covid-boom-slows--holding-ground-the-new-goal-200477773
Netflix Q2 Earnings Preview: As COVID Boom Slows, Holding Ground The New Goal 
By Investing.com (Haris Anwar/Investing.com)   |  Jul 19, 2021 16:56
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • Reports Q2 2021 results on Tuesday, July 20, after the market close
  • Revenue Expectation: $7.32 billion
  • EPS Expectation: $3.1

There is consensus among Wall Street analysts that the streaming entertainment giant, Netflix (NASDAQ:NFLX) won’t have much to impress markets with when it releases second-quarter earnings tomorrow.

NFLX Weekly TTM
NFLX Weekly TTM

The major boom during the stay-at-home environment of the past year, fueled by pandemic related lockdowns, that pushed the company’s number of subscribers to more than 200 million in more than 190 countries is already over. Indeed, during the first quarter, the Los Gatos, California-based company added just 3.98 million subscribers, compared with an average analyst estimate of 6.29 million and its own forecast of 6 million.

That marked the weakest start of a year since 2013, when Netflix added about 3 million customers, according to Bloomberg data.

If the company’s forecast for adding just one million subscribers holds for the period that ended on June 30, it will be the worst three-month stretch for Netflix since the early days of its streaming service.

In the short-run, that sudden reversal in growth is having a negative effect on the company’s share price. After gaining more than 60% in 2020, its stock has hardly budged this year. It’s down 2% for the year, closing at $530.31 on Friday.

Still, for investors following management's guidance closely since the pandemic began, this outcome is hardly a surprise. Netflix has been warning for months that growth would slow after customers emerge from their COVID-19 restrictions and restart their normal routines.

Unprecedented Competition

Nevertheless, if the battle in the post-pandemic world is to keep subscribers from cancelling their subscriptions, then it’s clear Netflix remains well-positioned to win this race. According to the company's quarterly letter to shareholders, the churn rate, or number of subscribers ditching the app, was down from a year ago—even after the service raised its subscription price.

Netflix is facing unprecedented competition in the video streaming market where rivals such as Disney+ (NYSE:DIS), HBO Max (NYSE:T) and Peacock (NASDAQ:CMCSA) along with other deep-pocketed providers, such as Amazon (NASDAQ:AMZN), are vying for market share.

As the pandemic gradually recedes, Netflix plans to produce more shows after a year of production drought. The company is aiming to spend $17 billion in cash on programming this year, up from $12.5 billion last year and $14.8 billion in 2019. NFLX is prioritizing investments in programming outside the U.S., where most of its new customers reside.

Another positive development long-term investors should take into account: Netflix is no longer dependent on debt to fuel its growth. After years of borrowing to fund production, Netflix has said it no longer needs to raise outside financing to support day-to-day operations. The company plans to reduce debt and will buy back up to $5 billion of shares.

Bottom Line

After the “pull-forward” effect of COVID-19, Netflix's subscription growth will continue to slow when compared with last year. But the streaming company has emerged much stronger from the unique environment of the past year, solidifying its cash and its market position. Any post-earnings weakness in its stock provides a buying opportunity for long-term investors.

Netflix Q2 Earnings Preview: As COVID Boom Slows, Holding Ground The New Goal 
 

Related Articles

Netflix Q2 Earnings Preview: As COVID Boom Slows, Holding Ground The New Goal 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email