Netflix shares rising after earnings report? | News

Streaming giant Netflix announced yesterday its results for the second quarter after the market close. Markets waited with bated breath as previous performance reports had plunged the company’s stocks sharply and announced offers on major indices. This time Netflix beat analysts’ expectations and the share price rose almost 8% from the market opening, but are the results really that good?

Revenue: $ 7.97 billion vs. $ 8.05 billion expected ($ 7.87 billion in Q1 2022)

EPS: $ 3.20 versus $ 2.99 expected ($ 3.53 in Q1 2022)

Subscriptions: loss of 970,000 vs. forecast -2 million (loss 200 thousand in Q1 2022)

The company released preliminary guidelines for the third quarter of 2022:

Revenue: $ 7.87 billion versus $ 8.18 billion expected

EPS: $ 2.14 compared to $ 2.74 expected

Subscriptions: Expected increase of 1 million compared to 1.8 million

  • Netflix’s results have been mixed, but demand is strong as the company has lost more than half as few subscribers than expected. In addition, Netflix has beaten its earnings per share forecast. At the same time, however, sales fell short of expectations and the company expects a further slowdown.

  • It’s worth noting that the company’s first-quarter forecast of losing 2 million subscriptions was less conservative than catastrophic. The bar has been set so low that it would actually be difficult not to exceed it, especially with the premiere of the new season of Stranger Things. The company admitted it has lowered its forecast of paid subscription revenues for the current quarter, partly due to currency risk affecting revenues.

  • Bloomberg Intelligence analysts share concerns about the company’s weaker forecasts for Q3 this year, emphasizing the lack of catalysts (Stranger Things was one of them this quarter) and currency pressure, which represent an unfavorable scenario for Netflix with increasing competition and shifting household spending. All of this raises concerns about the continued demand for Netflix stocks.

  • A strong dollar could weigh Netflix down in the future. Nearly 60% of the company’s revenues come from outside the US, and Netflix spends most of its spending in dollars, so it doesn’t use a strong currency. In particular, in response to the currency crisis, Netflix published a section on currency-neutral operating margins disclosure to show how the impact of the conversion has affected margins. The company noted the negative impact of the dollar appreciation on the current results. Revenues grew by almost 9% year-on-year, but would have increased by almost 13% had it not been for the negative impact of the currency market. Operating profit and margin were slightly above the company’s estimates.

  • Despite the widely publicized launch of Stranger Things, Netflix lost nearly one million subscribers this quarter, still almost 500% more than in the previous quarter. It also appears that the strategy of lowering forecasts every quarter to create an atmosphere of “positive surprise” seems unsuccessful. The market expects Netflix to accelerate revenue growth and new subscriptions to keep the company as a leader in the streaming platforms market in the face of declining and increasing competition.

  • The company is still able to gather millions of viewers in front of the screens, and in June Netflix’s share of US TV viewership almost exceeded the results of the giants NBC and CBS combined, reaching almost 7.7% of the total viewership high. However, this is indirectly due to the successful new season of Stranger Things, which in the first four weeks after its premiere generated 1.3 billion viewing hours and conquered the viewership of older seasons.

Advertising and account sharing

  • The letter to shareholders did not specify the exact date of the advertisement’s appearance on the streaming platform. However, Netflix estimated this date to be around the beginning of 2023. The company had previously announced that it would introduce new business models later this year.

  • The company said it is in the early stages of making money from the nearly 100 million homes that use its services for free. In 2023, Netflix plans to introduce a simplified model of paid home password sharing in all countries (current account sharing prices in selected Latin American countries are $ 2.99).

Netflix (NFLX.US) on the MN Chart. The company was in a strong upward trend for many years, which was questioned in 2022. After huge price drops that caused Netflix to lose almost 67% of its valuation since early 2022, the stock is trying to rebound, with today’s opening suggesting levels close to $ 220. At yesterday’s session Netflix closed above $ 200, while closing above 23.6% retracement of the downward wave, which raises hopes for a rebound to $ 270, where we are monitoring a 32.8% retracement. Source: xStation 5

Disclosure under 80 WpHG for possible conflict of interest

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