| | | Netflix lost fewer subscribers than expected and projects to win them back quickly, boosting stock
Last Updated: July 19, 2022 at 4:10 p.m. ETFirst Published: July 19, 2022 at 4:09 p.m. ET
By Jon Swartz
After guiding for record net loss of 2 million subscribers, streaming service loses less than a million and forecasts more will join this quarter
Netflix Inc. lost fewer subscribers than expected in the second quarter and expects to add even more in the current quarter, helping the stock shoot higher in late trading Tuesday.
Netflix NFLX, +5.61% reported a net loss of 970,000 paid subscribers in the second quarter, while analysts on average were forecasting a reduction of 2 million net additions, according to FactSet. Netflix told Wall Street to expect 2 million subscribers to leave three months ago, while reporting its first subscriber decline in more than a decade.
In a letter to shareholders, Netflix executives said they expect 1 million new subscribers to join in the third quarter, with revenue forecast to grow to $7.84 billion from $7.48 billion a year ago. Analysts on average were estimating revenue of $8.09 billion and a net subscriber gain of 1.4 million, according to FactSet.
Shares jumped more than 6% in after-hours trading following the release of the results, after closing with a 5.6% increase at $201.63.
Netflix announced earnings of $1.6 billion, or $3.20 a share, up from $2.97 a share a year ago. Netflix revenue improved to $7.97 billion in the quarter from $7.34 billion in the same period a year ago, but missed diminished expectations. Analysts polled by FactSet expected earnings of $2.95 a share on sales of $8.03 billion, estimates that had fallen in recent weeks.
Netflix has pulled out the steps to reverse subscriber losses: It scheduled “Stranger Things” on a split season straddling quarters to retain more members, and it is partnering with Microsoft Corp. MSFT, +2.08% to bring a cheaper, ad-supported platform to the service. In a blog post Monday, Netflix said it plans to make customers in several Latin American markets pay extra if they want to add additional homes to their accounts in a move to crack down on shared accounts.
The streaming-video giant’s downturn after a pandemic-boosted surge has only intensified pressure from rival streaming services at Walt Disney Co. DIS, +4.06%, Apple Inc. AAPL, +2.67%, Amazon.com Inc. AMZN, +3.91%, Warner Bros. Discovery Inc. WBD, +2.67%, Comcast Corp. CMCSA, +1.90% and Paramount Global PARA, +2.16%.
Netflix’s subscription woes in large part are a result of its decision to raise prices this year, according to a streaming satisfaction survey by tech-entertainment firm Whip of nearly 2,500 U.S. respondents. HBO Max led the industry in customer satisfaction, with 94% of respondents saying they were “satisfied” or “very satisfied” with the service. Netflix, which ranked second in 2021, dropped to fourth this year at 80%, behind Disney+ (88%) and Hulu (87%).
“This is a pivotal moment in time for Netflix. The competition is catching up and, in some ways, surpassing the once-untouchable giant. Price-conscious consumers now have other choices to satisfy their streaming entertainment needs,” Forrester Research Director Mike Proulx said.
The steady drumbeat of disappointing subscription news has pummeled Netflix shares, which have declined 67% so far this year while the broader S&P 500 index SPX, 2.76% has declined 19%. |
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