Breaking News
Investing Pro 0
Free Webinar - What Is a Gold IRA? Fees, Advantages, and Risks - December 7, 2022 | 01:00PM EST Enroll Now

Netflix Q1 Earnings Preview: Slowing Subscriber Growth Remains Key Risk 

By Investing.com (Haris Anwar/Investing.com)Stock MarketsApr 18, 2022 09:31AM ET
www.investing.com/analysis/netflix-q1-earnings-preview-slowing-subscriber-growth-remains-key-risk-200622338
Netflix Q1 Earnings Preview: Slowing Subscriber Growth Remains Key Risk 
By Investing.com (Haris Anwar/Investing.com)   |  Apr 18, 2022 09:31AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
NDX
-0.45%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DIS
-0.15%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NFLX
+0.94%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Reports Q1 2022 results on Tuesday, April 19, after the market close
  • Revenue Expectation: $7.94 billion
  • EPS Expectation: $2.92

When streaming giant Netflix (NASDAQ:NFLX) reports its latest quarterly earnings tomorrow, investors may discover the entertainment services company has been finding it hard to attract new subscribers amid stiff competition and a tough macroeconomic environment.

NFLX Weekly TTM
NFLX Weekly TTM

Due to these headwinds, analysts have trimmed their earnings estimates for the Los Gatos, California-based company whose shares have fallen more than 40% in 2022. The stock has also been among the worst performers on the NASDAQ 100 Index so far this year.

Netflix was forecast to add just 2.5 million subscribers in the first quarter that ended on Mar. 31, a number that marks the slowest start to a new year for the company in at least a decade.

There could be additional downside as well since Netflix decided to exit Russia after its invasion of Ukraine. The entertainment company has between one to two million subscribers in Russia, according to media reports.

This situation has made it clear to investors that NFLX is entering a slow-growth period after a remarkable run during the pandemic. Netflix added 18.2 million customers in 2021, down about 50% from the previous, record year.

Morgan Stanley, in a note last week, lowered its price target on the stock ahead of earnings—to $425 from $450. Its note adds:

“Long term, we believe Netflix will deliver compelling revenue and margin growth. Near term, we see risk to consensus net adds expectations. Valuation is not stretched here, but we think it is unlikely shares can outperform with falling net adds estimates.”

Barclays also lowered its price target to $380 per share from $425, saying in a note:

“Based on the average predicted value across various short and long term models, Netflix appears to be on a path to ~4mm subs, better than company guidance, but still weak in the absolute for a Q1.”

Intensifying Competition

Adding to the difficulty of subscriber growth momentum, consumers have more choices now, courtesy of some of the world’s top entertainment content providers. The Walt Disney Company (NYSE:DIS), Netflix's most formidable competitor, announced in March that it would offer a lower-priced version of its streaming service, Disney+, with advertising later this year. The new offering will begin in the US in late 2022 and expand internationally next year. The company plans to release details about price and timing at a later date.

The post-pandemic weakness and intensifying competition are the two major catalysts that have divided analysts on Netflix in recent weeks.

NFLX Analyst Consensus
NFLX Analyst Consensus

Chart: Investing.com

In an Investing.com poll of 43 analysts, though the majority of those surveyed provided an 'outperform' rating, significantly, 20 participants don't currently recommend buying the stock.

Despite this dismal short-term earnings outlook, Netflix stock offers a buying opportunity for long-term investors, given the company’s ability to attract new subscribers with best-in-class content, boosting margins and cash flow along the way. The recent share sell-off has the stock trading at a discount to its historical averages. Netflix now sells for 32 times forward earnings, less than half its five-year average.

J.P. Morgan analysts see Netflix having a strong second half of 2022. They've provided an overweight rating and a $605 price target on NFLX. That target implies 77% upside from Thursday’s closing price of $341.13.

An additional long-term development worth considering: Netflix isn’t dependent on debt to fuel its growth. After years of borrowing to fund production, the company said it no longer needs to raise outside financing to support day-to-day operations.

Bottom Line

Netflix may not provide a positive surprise tomorrow when it reports, but its stock has become an attractive buy after the recent slump. After solidifying its cash and competitive positions during the pandemic boom, the company is better positioned to return to growth.

Netflix Q1 Earnings Preview: Slowing Subscriber Growth Remains Key Risk 
 

Related Articles

Netflix Q1 Earnings Preview: Slowing Subscriber Growth Remains Key Risk 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Mohd Izhar Muslim
Mohd Izhar Muslim Apr 18, 2022 2:57PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Alright, Thanks 💯
CS Greer
CSGreer Apr 18, 2022 3:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
People are probably getting sick of the propaganda heavy Netflix made movies and shows.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email