A Red Flag Was Just Raised Ahead of Netflix’s July 16 Earnings Report — Here’s What It Means for the Stock Price
On July 9, The Wall Street Journal reported that Netflix (NFLX 0.35%) executives have been discussing adding live channels to its service. According to the article, programs, shows, and films from certain genres could be continuously streamed.
That news, coming just ahead of Netflix’s second-quarter report on July 16, could be a warning flag to expect disappointing or underwhelming results.
Image source: The Motley Fool.
Keeping subscribers more engaged
Subscriber engagement (the amount of time people spend watching shows and movies on the platform, and how often they finish them) was a talking point at the company’s annual business review in the spring, according to the article. Since then, however, the topic has reportedly come up more frequently.
To address that issue, executives have considered launching the live channels mentioned earlier and creating a bundle with other streaming services, according to The Wall Street Journal.
Today’s Change
(-0.35%) $-0.26
Current Price
$73.27
Key Data Points
Market Cap
Day’s Range
$73.15 – $75.06
52wk Range
$70.86 – $127.75
Volume
991.6K
Avg Vol
42.3M
Gross Margin
49.44%
Having a game plan ready
The idea that Netflix is exploring new options to keep subscribers engaged should not be viewed as a negative. In a competitive space, it will need to continuously evaluate its current business plan, considering what else it could offer or what it may need to pivot away from. But the timing of this news could foreshadow a disappointing quarter.
The talking points for adding live programming or bundles could be proactive measures to address any underwhelming or weak stats in the second-quarter report.
The outlook for Netflix
To be fair, Netflix may still report a great quarter and begin to reverse the downward trend the stock has been on in recent months.
The Wall Street Journal‘s reporting about its live programming plans could turn out to be an early preview of a new strategy at the streaming giant. But again, if viewers are spending less time watching its shows and movies and aren’t finishing them at the rates they used to, that points to an issue brewing in terms of its ability to hold onto its subscribers.
I still like Netflix’s potential as a long-term investment, considering its opportunities to grow revenue through its gaming division, video podcasting, and its entertainment complex concept, Netflix House. But the Q2 report may not offer much to help reignite investor enthusiasm in the short term.
