Netflix Q2 earnings preview: what to look for?

It won’t be much of a surprise even if Netflix Inc (NASDAQ: NFLX) ends up losing more than the guided for 2.0 million paid subscribers this quarter, says Alex Sherman. He’s a Media Reporter at CNBC.

Netflix to report Q2 results after the bell

The streaming giant is scheduled to report its Q2 financial results today, after the bell. Ahead of earnings, Sherman said the macro headwinds may just prove to be a bigger challenge for Netflix than it had anticipated.

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Between rising inflation and a likely, or at least a possible recession, it would not surprise me at all if the number was even worse than 2.0 million.

The U.S. central bank is slated for its next policy meeting in the final week of July. A more hawkish Fed after CPI hit a new forty-year high of 9.1% in June could minimise the probability of a soft landing by that much.

More important, however, would be the forecast for the balance of 2022. “NFLX” may be rewarded if executives express confidence that things will likely improve in the third and fourth quarter.

Should you a build a position in Netflix?

Investors will also be interested in finding out the reason for picking Microsoft – the not-so-obvious option as its global advertising partner. They’ll also look for cues on how does Netflix intend to deal with password sharing to unlock revenue growth.

According to Sherman, rising competition will continue to be an overhang for the company, especially since its subscription costs the most when compared to its rivals. On “Worldwide Exchange”, he noted:

The bad news is if you’re entering a period of economic downturn when consumers are going to be tightening their discretionary spend, Netflix may be the first to go as it’s the most expensive streaming service.

NFLX is up 4.0% this morning. Wall Street currently rates the stock at “hold”.