Notably, Netflix has moved towards staggered releases of hits such as Stranger Things, which could reduce churn and help renew subscriber strength. Regardless, it’s the upcoming quarter that has the market concerned as Netflix is guiding for a loss of 2 million subscribers. Netflix reported a subscriber miss of 200,000, yet excluding Russia, the company had net adds of 500,000 as Russia contributed to a miss of 700,000. The recent quarter was positive $802 million, yet the company still holds gross debt of $14.6 billion on the balance sheet and net debt of $8.6 billion.
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However, the issue with Netflix has been the lumpy free cash flow since the company began producing original content with the majority of the company’s history being deep in the red on cash flow. Netflix has maintained a healthy operating margin above 20% for most quarters and EPS beat estimates at $3.53 compared to $3.75 EPS a year ago. Net cash from operations was up from $777 million to $923 million. The company guided for 10% growth in the upcoming quarter for $8.05 billion in revenue. Excluding FX headwinds, the revenue growth in the quarter was 14%. The company reported revenue of $7.9 billion, up 10%. Yet the path to adding more subscribers is finally clear for Netflix and will pay off long-term especially during times of inflation or muted consumer confidence as it drives down household costs across fragmented subscriptions.
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Patience, though, will be required, as Netflix has work to do (minimum one to two years for full global roll-out). In other words, I would argue the day that Netflix’s stock price dropped 35% was consequently one of the most important days in the company’s history in terms of its chances for a boost in revenue and a renewed uptrend. The key point is this: the global juggernaut in media is essentially stating that CTV ads are the future for streaming.īelow, we discuss why a new perspective is needed as the 200,000-miss last quarter and the 2 million miss this quarter pales in comparison to the 100 million viewers who are sharing passwords that Netflix intends to monetize. Primarily, this is because we have consistently discussed why the trend of CTV ads has plenty of runway even during an epic market selloff. In our Netflix coverage following its earnings report, we had stated “we can’t help but salivate” over which ad platform Netflix might choose to power ads to hundreds of millions of viewers. Bill Ackman sold his Netflix shares for a loss of $450 million in three months, with some goading him for his decision while others congratulated Pershing Capital for being bold and walking away from a losing position. The earnings report caused the stock to immediately lose 35% of its value. The company also forecast a decline of 2 million paid subscribers for the second quarter. This was partly due to the company reporting it lost subscribers for the first time since 2011, with a loss of 200,000 subscribers in the most recent quarter. The stock’s fall from grace includes dropping its FAANG-status as the company’s market cap has decreased from $300 billion to $75 billion. Netflix’s stock is down a staggering 71% year-to-date. This article was originally published on Forbes on Jun 24, 2022,01:43am EDT
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