Netflix (Nasdaq: NFLX) is set to report its fiscal second-quarter earnings on Tuesday after market close as the company battles ongoing inflationary pressures, increased competition, and an uptick in subscriber churn.
Here’s what Wall Street expects, according to Bloomberg consensus estimates:
Revenue: $8.05 billion expected
Adj. earnings per share (EPS): $2.99 expected
Subscribers: Loss of 2 million users expected
The streaming giant’s anticipated loss of 2 million paying users for the second quarter would be the worst quarterly decline in the company’s history.
Netflix announced an unexpected first-quarter subscriber loss of 200,000 users in April.
On Monday, Morgan Stanley warned that a potential “streaming recession” could be on the horizon — downgrading shares at both Paramount Global and Fox Corporation as a result.
“We are lowering net adds expectations across the board to reflect rising churn risk from consumers trimming their streaming portfolios in a more difficult economic environment,” analyst Benjamin Swinburne said in the note.
He added that recession vulnerability could also negatively impact EBITA as advertisers pull back amid the economic uncertainty, with Morgan Stanley lowering its advertising estimates “across the board,” as well.
“A potential recession creates risk to advertising estimates, which may be exacerbated by Disney and Netflix adding advertising inventory as ad budgets come under more pressure,” the analyst explained.
Generally, though, Wall Street is still hopeful that an ad tier could be the answer to at least some of Netflix’s problems — and will be looking for greater clarity on the rollout during the company’s Q2 earnings call.
Netflix Short (Sell)
Enter at: 185.88