Netflix, which continues to dominate the streaming platform market, is set to announce its second-quarter earnings on Thursday. This report will provide valuable insights into the current trends and performance in the streaming industry.
Netflix’s stock has surged 36% this year, reaching about $657. In comparison, stocks of Paramount Global and Warner Bros. Discovery have both declined, by 26% and 36% respectively. Netflix’s growth surpasses all but two of the “Magnificent Seven” tech stocks: Meta and Nvidia.
The streaming landscape is constantly evolving, with new platforms emerging, alternative revenue models such as ads becoming more prevalent, and significant mergers like the recent Paramount-Skydance deal occurring.
Key points to look for in Netflix’s upcoming earnings report include:
A Potential Dip in Subscribers:
In its last quarterly earnings report, Netflix warned of a potential subscriber decline in the second quarter due to “seasonality” and efforts to crack down on password sharing. Netflix also announced plans to stop reporting subscriber statistics starting in 2025, signaling a shift in focus from subscriber growth to profit.
However, Doug Anmuth from JPMorgan, who recently raised his price target for Netflix to $750, predicts that Netflix will report 5 million to 6 million net new subscribers for the second quarter, exceeding the FactSet consensus estimate of about 3.7 million.
Netflix’s Advertising Strategy:
Netflix and other streaming services are increasingly relying on advertisements to boost profitability. While streaming once seemed like it would replace traditional TV commercials, most streaming services now offer ad-supported plans. Netflix introduced ads to its service in 2022.
In May, Netflix reported that its ad-supported plan had grown to 40 million active users, and 40% of all new signups were for its $6.99 ad-supported tier. Netflix also plans to launch an in-house advertising technology platform by the end of next year. Goldman Sachs estimates that Netflix could generate nearly $3 billion in advertising revenue in 2024.
More Live TV:
While on-demand content has been a major selling point for streaming services, live programming is becoming increasingly important for driving subscriptions. Netflix has experimented with live programming and announced future programs such as NFL games on Christmas and a food-eating competition featuring champion Joey Chestnut and his rival Takeru Kobayashi. However, Netflix still trails competitors like Amazon, YouTube, Disney, and NBCUniversal in live events and sports.
“While Netflix is the market leader and has been a major innovator in entertainment streaming, live events and sports are areas where it is catching up with competitors,” Paul Verna, an analyst at eMarketer, told MarketWatch.