Has it been three months already?
Good or bad, each quarter, Netflix‘s earnings report shakes up both Hollywood Boulevard and Wall Street. There was the time in April 2022 when the streamer revealed it had lost subscribers for the first time in a decade. Or pick either of the past two quarters, when Netflix added a combined (and rounded) 22.5 million global paid subscribers.
But Netflix, which is expected to announce that by the end of June it had reached roughly 275 million subs worldwide, is kind of over this whole subscriber-adds thing. Also last quarter, Netflix revealed that by 2025 it will stop giving quarterly subscriber counts, just to make our jobs a little harder.
The internal (and Wall Street-facing) key metric has been revenue for a while now, but engagement time (which corresponds to revenue and other KPIs; yes, including membership numbers) is creeping up on the list.
It’s a whole lot, and it’s a whole lot of pressure. Netflix is always the first major media company to report its financial results for the quarter. As the pace car of the streaming business, a great quarter from Netflix can mean a good quarter for its followers.
But what constitutes a great Q2 of 2024 for Netflix? Well, the Wall Street consensus is that Netflix will report the net addition of 4.8 million global paid subscribers from April-June. Of those, 1.1 million are expected to come from the U.S. and Canada. Yes, that’d be a big decline in growth rate from the prior quarters, but those were disproportionately huge in large part due to the password-sharing crackdown.
Even Netflix has told us to hold our horses on this one: When reporting Q1 results in April, executives predicted the June quarter’s net additions would be “down sequentially” from the recent surge. In a Wednesday note to clients (obtained by IndieWire), the analysts at investment bank Rosenblatt Securities find that tempering of expectations to be “reasonable.”“We don’t see a basis for the more bullish calls that Netflix can substantially top its member growth
As they allude to, others in the investment community believe another significant beat is possible. Wall Street thought Netflix would add 4.9 million subs in that first quarter; it added 9.3 million. (In Q4 2023, the consensus analyst forecast was +8.8 million; Netflix reported +13.1 million.)
Since revenue is Netflix’s self-pronounced new KPI (key performance indicator), let’s guess that result. The Wall Street consensus foresees Netflix reporting earnings per share (EPS) of $4.74 on revenue of $9.53 billion. Netflix’s own guidance from April estimated Q2 EPS of $4.68 on $9.491 billion.
In other words, many of the analysts who study Netflix (and do not work at Rosenblatt, where they believe sub growth is still steering the ship) are a bit more bullish on Netflix than Netflix. But these analysts also have the benefit of tracking the company throughout the quarter — Netflix itself makes one early estimate and does not update the market.
If Netflix’s track record is not reason enough itself for the optimism, can we interest you in some “Bridgerton” viewership brags? Speaking of things to expect to happen on Thursday…
The third season of “Bridgerton,” which premiered its first four episodes on May 16 and its final four episodes on June 13, has already rocketed into Netflix’s all time Top 10 for English-language TV shows. As of Tuesday, it is number 6. With months of viewership still to count (roughly two months for Part 2 and one month for Part 1) in Netflix’s self-appointed cutoff, “Bridgerton” Season 1 (number 4 all-time) is well within its sites. Hell, everything not named “Wednesday” (and “Squid Game” on the non-English list) is theoretically in its crosshairs.
Another way to look at the “Bridgerton” impact: Last year, viewing hours on Netflix dropped by 12 percent in Q2 (from Q1). This year’s decline was 8 percent.
We’re not (the only ones) hating on the rest of Netflix’s new content in the June quarter. The analysts at investment bank Evercore wrote in a Monday note to clients (obtained by IndieWire) that beyond “Bridgerton,” the quarter’s content was “uneventful.” Next quarter though we’ll see the results from “Beverly Hills Cop: Axel F,” as well as new seasons of “The Umbrella Academy,” “Cobra Kai,” and “Emily in Paris.” The (rescheduled) Mike Tyson vs. Jake Paul fight would have been the icing on the cake.
Analysts will be particularly keen on updates about Netflix’s ad-tier. “Paid sharing” has proven itself; Netflix with Ads has not (yet). In a memo to their own clients (also obtained by IndieWire), analysts at private-banking firm Wedbush said they do not expect the advertising tier to materially contribute to Netflix’s ARM (average revenue/member), revenue, earnings, and free cash flow growth until 2025.
At its May upfront, Netflix said it had 40 million “viewers” on its ad-supported tier, which Wedbush estimates translates to 20 million subscribers — or about 7 percent of the streamer’s overall membership base. Netflix’s solution? Kill off its Basic Ad-Free pricing tier altogether, pushing frugal SVOD subs to AVOD.
Bank of America’s Jessica Reif Erlich, a favorite analyst of Netflix’s (she’s conducted several of the streamer’s quarterly earnings interviews solo), concurs with the timeline. How bullish is BoA? Extremely. Reif Erlich just raised her Netflix stock (NFLX) price target to $740, meaning that as of Tuesday’s close, NFLX shares still have more than $80 of growth (apiece) left in them. Buy! Buy! Buy! (Not investment advice.) Other price targets include Macquarie Capital ($685), Evercore ($700), Wedbush ($725), and the Debbie Downers at MoffettNathanson ($565), and the total bummers at Rosenblatt Securities ($554).
Netflix will report its Q2 2024 earnings after the stock market closes (4 p.m. ET) on Thursday, July 18. An interview (not moderated by Reif Erlich — Netflix now self-selects submitted questions from the greater analyst community) will follow at 4:45 p.m.
