Netflix Must Blow These Numbers Away When It Reports Earnings

Netflix Stocks treading water year-round as Wall Street worries about the company’s growth rates after the pandemic.

And if the streaming giant doesn’t easily surpass its second-quarter net additions of 1 million and signals a robust second half of new subscriber growth when it reports earnings on Thursday, the stock is unlikely to emerge from that pool of water.

In fact, the stock could come under more pressure, even if it outperforms net additions in the second quarter, given the currently high numbers on the key metric.

“Our analysis of global downloads suggests Q2 net additions of ~2 million – up from the previous 1.6 million, which was based on data through June 10 – we believe this is driven by strong content in the second half of June, including “Fatherhood,” “Manifest,” and “The Ice Road.” The data suggests an increase in our 1.2 million net additions for the second quarter, and slightly above investor’s broader expectations of 1.50 million-1.75 million based on recent discussions, but it’s still small at absolute basis, especially on a base of 200 million+ subscribers.” JP Morgan Doug Anmuth wrote in a research note ahead of the results.

Anmuth — and most other sales analysts on the street — are counting on a re-acceleration of Netflix’s new subscriber growth later this year amid a slew of new content. Major releases include “The Kissing Booth 3” (August 11 Debut), “Money Heist” Season 5 (Part 1: Debut September 3 & Debut Of Part 2: December 3), Season 3 of “Sex Education” (17 September debut)), and “The Witcher” Season 2 (December 17 debut).

SPAIN – 07-13 2021: In this photo illustration, a close-up of a hand holding a TV remote can be seen in front of the Netflix logo. (Photo illustration by Thiago Prudencio/SOPA Images/LightRocket via Getty Images)

Wall Street will be looking for clues on this within the company’s third-quarter guidelines this week.

“While 2Q expectations are low after the 2020 pull-forward, lighter content slate, reopening and typical 2Q seasonality, we expect content slate to improve significantly in the second half of 2021 and investors will be fully focused on the 2H net adds outlook. We model net additions of 14.25 million in 2H21, with year-over-year growth in both 3Q (5.25 million) and 4Q (9.0 million). We believe the content from 2H is weighted more heavily towards 4Q and that it is a seasonally stronger quarter, so while Netflix won’t lead to 4Q, we think it’s important for management to talk about the full six-month slate and overall confidence in the back half,” explains Anmuth.

Sure, fear is high on the streets on Netflix, given how the first quarter played out.

The number of paid subscribers in the first quarter was 3.98 million, excluding analyst estimates of 6.29 million. The company blamed the lack of engaging new content,

The company forecast revenue growth in the second quarter of 18.8%, sharply lower than the 24.2% in the first quarter. Operating margins are set at 25.5%, down from a record 27.4% in the first quarter.

Netflix shares are down 3% since the company reported its first quarter results on April 20, leaving the Nasdaq behind 1.5%.

“Given the seasonally small net gains in the second quarter (~0.5% of total subs), we do not expect a beat of miss to be as significant to investors and expect the 3Q guidance (Street at 5.9 million and BofA at 6 million) will tell us more about whether or not Netflix can get back to its pre-COVID 25mn+ net sub-adds/year trend. We’re looking at 2H major content launches (eg. ‘Stranger Things’ and ‘The Witcher’) as drivers of sub-growth over the next year,” Bank of America analyst Nat Schindler said in a note Monday.

At least, that’s what the Strait hopes.

Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.