Por qué Wall Street no puede dejar de mirar a Netflix

(CNN)– Everyone is watching Netflix this week, meaning Netflix earnings. And it will be a watershed moment for the company that has made its name synonymous with streaming.

Here’s the thing: this Tuesday afternoon, after the stock market closes, Netflix will present what is perhaps the most important earnings report in its 25-year history. Investors are on the edge of their seats to see if this quarter was just Regular Bad or Holy Crap Bad. There is no realistic expectation that Netflix will surprise with the kind of good news that made it one of the most hyped companies on Wall Street.

Key Background:

  • Netflix, the N of so-called FAANG and the virtual space that everyone huddled in for content during the 2020 lockdowns, is having a terrible year. And not just because all media and technology stocks are going through a rough patch.
  • Fast forward to April, when Netflix reported losing subscribers in the first quarter of 2022, the first time that had happened in any quarter in more than a decade.
  • But it wasn’t just the loss of 200,000 subscribers that rattled investors. It was also the forecast that the second quarter would see a further loss of 2 million paying customers.
  • Following that report, Netflix shares plummeted, and are now down 70% for the year. This caused billions in market value to be lost and management to lay off more than 400 employees.

So when Netflix reports, the 2 million figure will be on everyone’s mind. If by some miracle the figure is lower, investors will be able to breathe a sigh of relief. Secondly…

“There will be hell to pay if they report a figure significantly higher than the 2 million loss being released,” Andrew Hare, a senior vice president of research at Magid, told CNN Business.

The new Netflix rule that limits the use of your account in Argentina 0:44

Other things to keep in mind:

Details on Netflix’s shift (which some would say was long overdue) to an ad-based model.

  • CEO Reed Hastings long maintained that Netflix would remain ad-free and subscription-based. But the platform’s rivals have not been so averse, allowing them to offer cheaper subscriptions and lure customers away from Netflix’s monthly fee, which is currently $16 for the standard plan.
  • The company has teamed up with Microsoft to create an ad-supported option that will likely be available later this year.
  • BUT… ads aren’t exactly a savior in an economy reeling from recession.

Measures against password sharing:

  • For years, the company was pretty lax about password sharing, which made sense when it was a small business: the more eyes on the platform, the better. But now, the login details of your ex-roommate’s boyfriend’s mother are draining the company of potential subscription dollars.
  • Netflix has already begun testing a feature that charges password sharers a few dollars more per month in some markets and is expected to announce a national rollout this year.

Final score

Netflix remains the king of streaming, with 221.6 million subscribers worldwide. But the competition is quickly winning, offering premium content at a lower price. Disney+ has only been around since the end of 2019 and already has more than 135 million global subscribers. Hulu, which is also owned by Disney, has more than 41 million (and, as The Wall Street Journal reported Monday, Hulu has become Disney’s fastest-growing streaming service in the United States).

Wall Street will no doubt take that huge market share into account, but analysts say Netflix needs to pad Tuesday’s bad news with some concrete ideas about how it’s going to keep the throne. Times are tough, but as Hare says, “No one has the stomach for a business that loses millions of subscribers every quarter.”