NFLX Stock Gains 6% Because Its Earnings Weren’t That Bad

  • Netflix (NFLX) stock is rising after reporting it lost fewer subscribers than expected in the second quarter.
  • The streaming company also revealed more details on its plan to launch an ad-supported streaming tier next year.
  • Netflix also outlined plans to crackdown on password sharing, particularly in Latin America.


NFLX stock - NFLX Stock Gains 6% Because Its Earnings Weren’t That Bad

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Shares of Netflix (NASDAQ:NFLX) are up 6% today after the streaming giant reported better-than-expected second quarter financial results. Year-to-date, NFLX stock is down 66% and trading at $201.63 per share.

Specifically, investors are reacting to the fact that Netflix lost one million global subscribers in the second quarter, which was half the number the company had forecast. While a loss of one million subscribers is not great, it is literally half as bad as had been expected, which is helping to bolster investor sentiment toward NFLX stock.

What Happened With NFLX Stock

In addition to the global subscriber loss, Netflix reported that it lost 1.3 million subscribers in the U.S. and Canada during the April through June period, marking the third time in the last five quarters the company has lost paid subscribers in its most profitable market. Some of those losses were offset by gains in the Asia-Pacific and European markets, the company said.

Netflix announced its share of total television viewing in the U.S. reached an all-time high in June of 7.7%. The company’s revenue grew 8.6% during the second quarter to $7.97 billion . That missed Wall Street estimates of $8.04 billion in revenue. Total subscribers in Q2 came to 220.7 million, compared with estimates of 220.2 million. Earnings per share of $3.20 beat analysts’ average estimate.

Looking ahead, Netflix forecast that it will add about one million new subscribers during the third quarter that runs through the end of September. That is below the 1.8 million additional subscribers expected on Wall Street, according to Refinitiv data. The company forecast its Q3 earnings will come in at $2.14 per share, compared with analyst estimates of $2.72.

Why It Matters

The second-quarter print shows the bleeding at Netflix may have stopped. Losing fewer subscribers than forecast appears to have come as a huge relief to Netflix investors. It indicates the streaming company might be able to turn its fortunes around despite facing growing competition and fickle consumer tastes.

In releasing its second-quarter earnings, Netflix provided more details on its turnaround plan, specifically through a new advertising-supported streaming tier. The company said the new ad-supported plan will launch early next year. Last week, Netflix announced it will partner with Microsoft (NASDAQ:MSFT) on the new advertisements that will appear on its platform.

Netflix also detailed plans to crackdown on password sharing that hurts its revenue, particularly in Latin America.

What’s Next for NFLX Stock

Netflix is benefiting from a relief rally today following the company’s Q2 earnings print. While the financial results weren’t great, the losses weren’t as bad as anticipated. That appears to be good enough for investors.

On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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