Netflix Expected to Post 2Q Subscriber Gains

Netflix will report its second-quarter earnings Wednesday afternoon, and Wall Street expects to see the streamer to continue to grow its subscriber base.

Analyst Mark Mahaney of RBC Capital Markets expects Netflix to add about 300,000 subscribers, which is about what the company forecast, but 50,000 below the Wall Street consensus estimate.

Similarly, RBC sees Netflix gaining 4.7 million international subscribers, again in line with Netflix guidance, but below the Wall Street consensus of 4.81 million.

The company’s financial metrics should also be solid, with Mahaney expecting revenue of $4.93 billion and earnings of 55 cents a share, in line with both Netflix’s guidance and Wall Street sentiment.

“We believe that Netflix has achieved a level of sustainable scale, growth, and profitability that isn’t currently reflected in its stock price,” said Mahaney, who rates the stock as “outperform.”

“Netflix has a very robust original content slate in [the second half of 2019] with Stranger Things: Season 3,Orange Is The New Back Season 7 and 13 Reasons Why: Season 3 premiering on the platform,” he adds.

Richard Greenfield, analyst with BTIG Research, posted a number of questions he’d like to hear Netflix management answer.

“The narrative around content companies taking their content back-in house has been “the” topic this past quarter,” Greenfield said, noting Disney’s plan to tall all its content in house in the U.S. and the decisions by AT&T and Comcast to move Friends and The Office to their soon-to-be-launched competing streaming services.

The loss of popular programming could put pressure on Netflix’s original content, but Greenfield notes that only Disney appears to be taking a hard line on not selling domestic content to Netflix.

So Greenfield asks: “Has anyone other than Disney signaled they will not sell externally in the U.S.?”

And with 80% of Netflix sub growth taking place internationally, he asks, “what are you seeing outside the U.S.?”

Greenfield is also interested in Netflix’s growing relationships with would be advertisers. Observing reports that there were more than 100 brand integrations in Stranger Things 3, Greenfield want to know how significant the dollars are from integration in helping to pay for programming. He’d also ask: “Do you worry about annoying viewers with brand integrations?”

Another Greenfield wants to know is how Netflix will spend another $5 billion that’s going into the programming budget. 

“The increase is actually even more significant dollar wise, as part of the existing $15 billion is being freed up as third-party licensed titles move away,” he notes. “Should we think of the increase from $15 billion to $20 billion annually being driven almost entirety by movies and local international content? Are there newer forms of original content that will see outsized investment such as Food, Lifestyle and/or Travel given recent success?”

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.