Netflix (NFLX) is set to report its second quarter earnings after the market close on Thursday, July 18 as Bank of America and Morgan Stanley — among other firms — have raised their price targets on the streamer. Bloomberg Intelligence senior media analyst Geetha Ranganathan joins Market Domination to break down what investors can expect from the streaming giant’s earnings.
Ranganathan notes that expectations are “very, very high” going into Netflix’s second quarter earnings. “What is really ironic, though, is they are actually trying to move away from subscriber numbers. They said that they’re going to stop disclosing subscriber metrics altogether starting in the first quarter of 2025. But I think all of this optimism that we’re seeing kind of heading into the second quarter earnings is actually off of subscriber numbers.”
She notes that in the first quarter of 2024, Netflix reported 9.3 million new subscriber adds, and it is likely to top the expected 4.7 million in its second quarter.
While Netflix’s advertising growth has been slower than expected, Ranganathan points to several new opportunities that are appealing to advertisers, from its deal with WWE to the Christmas Day NFL games. She expects these deals to be “a big bump for their ad business” as the streaming competition heats up.
Ranganathan believes that “at this point, it’s safe to say that Netflix has pretty much won the streaming wars,” citing the 2 billion viewers reached every day and its broad catalog of content offerings.”The one metric that we really look at when it comes to Netflix and when it comes to all streaming players is engagement. And engagement is very, very high for Netflix. It’s higher than almost all of its other competitors.”
As Netflix continues facing high expectations, Ranganathan adds, “I think Netflix is in the best position that it’s ever been competitively, and also financially as well as fundamentally. So they’re really firing here on all cylinders.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
This post was written by Melanie Riehl
Video Transcript
Netflix is set to report results Thursday after the close and Wall Street’s expectations are high analysts at Bank of America Morgan Stanley Moffet Nathanson.
They’ve all raised their price targets on the streaming giant just yesterday ahead of the print.
Joining us now is Geeta Ragan or Bloomberg Intelligence, senior media analyst to talk to us about what to expect from Netflix and um get that those shares have been performing well.
They’re about 35% this year.
So there is that optimism going into the print, what numbers are you watching most closely?
And do you think Netflix is going to meet those high expectations?
Yeah, expectations definitely very, very high Julie.
And I think what is really ironic though is, you know, they are actually trying to move away from subscriber numbers.
They, they said that they’re gonna stop disclosing subscriber metrics altogether starting in the first quarter of 2025.
But I think all of this optimism that we’re seeing kind of heading into the second quarter earnings is actually off of subscriber numbers.
So we know that they reported really high subscriber growth in the first quarter, 9.3 million new subscriber ads.
And while the consensus for the second quarter is around 4.7 million, I think the street very much expects something much, much higher, maybe something to the tune of 6 to 7 million.
And I think what’s gonna be even more interesting is if we see 2024 actually come out as one of the record years for net uh new subscriber ads for Netflix II, I think right now, the way that they’re going, they could very well report close to almost 30 million new subscriber gains just in 2024 which will be their one of their highest ever outside of, of course COVID and G. There’s also gonna be a lot of focus, of course, on the ad tier.
What do you expect we’re gonna hear from there.
Yeah, so so far, you know, it looks like the momentum with advertising.
Of course, it’s, it’s kind of been a little bit slower than what we’d anticipated.
So one of the numbers that they did disclose Josh at their upfront was which was held in May was that they have about 40 million uh active users, monthly, active users.
We don’t know exactly how many subscribers they have because they haven’t disclosed that publicly.
But we estimate that it’s close to about 20 million subscribers.
But again, what they’re doing right now is while they haven’t actually given us an ad number in terms of the amount of revenue that it is generating, they are introducing a lot of programming that is kind of going to be very, very uh appealing to advertisers.
So, uh you know, some of the deals that they’ve done include uh WWE which they’re going to start streaming starting in 2025.
But much more important than that is the two NFL games that they’re gonna have on Christmas Day, which is going to be super, super appealing to, to advertisers and, and we think it’s going to be a big bump for their ad business.
The um Nielsen was just out with its monthly numbers on, on streaming traffic.
And I thought that some of the stuff was really interesting here.
Netflix saw the biggest increase in market share, but it’s still overall share in June was lower than that of youtube, which we don’t tend to talk as much about because it’s not a pure play.
But I’m curious how you’re thinking about competition um for Netflix or sort of where it, its weaknesses are at this point.
So in terms of that, that’s a great point, Julie.
So I think in terms of streaming competition, uh I, I think at this point it’s safe to say that Netflix has pretty much won the streaming wars.
Of course, we talk about youtube, but that’s a little bit of a different animal.
I mean, that’s a lot of user generated content and it’s going to kind of be hard to get, you know, the level of eyeballs, obviously, they have 2 billion uh viewers that they reach every day.
So it’s, it’s on, it’s on a completely different scale.
But I think what’s really positive for Netflix is that they still have only less than 10% of total TV viewing time.
And if you kind of just look at their catalog, uh it has really, really broad appeal.
Uh and the one metric that we really look at when, when, when it comes to Netflix and when it comes to all streaming players is engagement and engagement is very, very high for Netflix, it’s higher than almost all of its other competitors.
We’re seeing 2, 2.5 hours spent on average per day by a user and, and we’ve seen that across the board.
Uh you know, even if you look at some of their biggest performing titles in two Q, you know, you look at Bridgerton about 1 billion hours streamed of just that one title alone in toy.
So we’re seeing engagement numbers that are extremely strong.
So, so when we kind of think about the competitive landscape, I think Netflix is in the best position that it’s ever been competitively and also financially as well as fundamentally.
So they’re really firing here on all cylinders.
Do you think price increases could be on the way?
I know that’s a bet some, some analysts on the street are making it, it, you know, they haven’t raised prices, Josh for about two years now in the US on their standard tier, it’s been stuck at about $15.5.
So it, they’re absolutely due for a price increase.
The reason they didn’t do that is because they were introducing two new initiatives.
One was that password sharing crackdown.
The other was the advertising tier.
So they obviously didn’t want to rock the boat then.
But, you know, all of their competitors have raised prices.
We definitely think they will raise prices a little bit later this year.
All right, Netflix earnings Thursday, we’ll be watching.
I know you will as well.
Githa.
Thanks for joining us.
Thank you.
