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Bloomberg
Netflix Inc. will make its most important announcement of the year on Tuesday, reporting how many new customers signed up for the world’s largest paid online TV service over the past three months. With tech stocks taking a drubbing this month, investors will be seeking reassurance that the company’s disappointing second quarter was just a blip and not a sign of more to come. Netflix has tripled in value over the past three years by posting record subscriber growth that consistently exceeds Wall Street forecasts.
The company has been one of the world’s best-performing stocks because investors believe it has years of growth ahead. Most Wall Street analysts parrot the company’s projection that it can grow from 130 million customers to 400 million subscribers, if not more.
Better-than-expected growth in the third quarter will keep that narrative alive, while another miss will probably prompt a major sell-off. The stock has fallen 20 percent from its July 9 closing high of $418.97, though some of that is due to the weakness in so-called FAANG stocks, including Facebook Inc., Apple Inc., Amazon.com Inc., Netflix Inc. and Google, whose parent is Alphabet Inc. Netflix is the top performer among those stocks, with a gain of 74 percent this year.
Netflix’s counts on original series to attract new customers. That’s why the Los Gatos, California-based company releases multiple new programs every week. Most analysts blamed Netflix’s disappointing second quarter on a light programming slate. That’s light in quality, not quantity. While the service released 452 hours of new work, according to a report from Cowen & Co., the lineup didn’t include new seasons of any top shows. Nor did many of the new releases seem to break through.
While Netflix blamed the poor quarter on bad forecasting, the company’s actions suggested programming was a factor. In the third quarter, Netflix released 676 hours of new programming, according to Cowen, more than double a year earlier.
The slate included new seasons of “Ozark’’ and “Bojack Horseman,’’ the new series “Insatiable’’ and “Maniac,’’ as well as standup specials from Jim Jefferies and Iliza Shlesinger. If the quarter’s record-setting slate doesn’t move the subscriber needle, Netflix may have to reassess its programming strategy.