Netflix's Worse-Than-Expected Earnings

Netflix's Worse-Than-Expected Earnings

over 3 years ago2 mins

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Investors had a few choice words for Netflix after the streaming giant announced weaker-than-expected second-quarter results late on Thursday, and its stock initially fell 12% 📉

What does this mean?

Netflix has been one of the biggest winners from worldwide stay-at-home orders, with its stock rising 75% since they came into force. That much was clear from the company’s quarterly revenue, which was 25% higher than the same time last year thanks to the 10 million new subscribers it added even as lockdowns loosened (a big jump from the 7.5 million it’d previously promised) 📺 But Netflix’s forecast for this quarter fell well short: the streaming giant’s expecting to add just 2.5 million new subscribers rather than the 5 million analysts had forecast. And that number matters: the more subscribers Netflix has, the more regular income it’s able to generate – which might make an otherwise risky tech stock seem like a safer, more “defensive” bet.

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Why should I care?

Swiss investment bank UBS downgraded its recommendation on Netflix from “buy” to “neutral” this week. It argued that with 180 million users in nearly 200 countries already, growth is only going to get harder to deliver – and tough competition from the likes of Disney+ won’t help 🌎 Goldman Sachs, on the other hand, reckons Netflix still has plenty of wiggle room in Europe, Asia, and Latin America, and recommends going all in.

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With more competition comes added pressure for Netflix to release new shows, which is only going to become more difficult what with the recent halt to film production. But the announcement on Thursday that the company’s head of content would become co-CEO suggests solving that problem might happen sooner rather than later – which is more than can be said for rival services that depend on sports and live events…

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