NFLX shares have plunged in 2022. The chart below illustrates the performance of Netflix shares year-to-date compared to a few peers, Roku ROKU and Disney DIS.
Subscriber Slowdown & Rising Competition
A rapidly increasing number of digital streaming services has no doubt impacted Netflix. A few of these streaming services include Amazon Prime Video AMZN, Apple TV AAPL, Roku ROKU, and Disney+ DIS.
These services have been gaining rapid traction, making the industry much more competitive. Simply put, Netflix is no longer the go-to streaming service that it once was for many people.
Peeling back the pages, in 2021 Q4, the company provided disappointing guidance that it expected new subscriber adds of 2.5 million in 2022 Q1 vs. the consensus of seven million expected.
This is where the trouble began.
Fast-forward to 2022 Q1, and the company reported losing more than 200,000 subscribers in the quarter. It was the company’s first subscriber loss in a decade, and the market priced in this growth slowdown – shares plunged 35% the following day.
Netflix provided further disheartening guidance, forecasting a drop of two million subscribers in 2022 Q2. It seemed that NFLX investors just couldn’t catch a break.
However, Netflix posted a much stronger than expected earnings report yesterday, reporting that it had lost fewer subscribers than the previous guidance of two million.
In turn, NFLX shares soared in pre-market trading. Let’s break down the earnings release to see if Netflix shares are worth another look amid a growth slowdown.
Q2 Earnings Recap
Netflix reported quarterly earnings of $3.20 per share, good enough to pencil in a sizable 10% bottom-line beat and exceed the Zacks Consensus EPS Estimate of $2.90. Quarterly revenue of $7.9 billion came in marginally under expectations but reflected an 8.6% year-over-year change.
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