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Netflix (NFLX) has not yet recovered from its stock decline in July, when the company announced it has added about 1 million fewer subscribers than expected. in the second quarter.
The company is huge – Netflix had about 130 million subscribers in total when it last released its results, far surpassing competitors like Hulu, which had about 20 million subscribers this spring. (WarnerMedia, CNN's parent company, owns 10% of Hulu.)
And although the most recent numbers – Netflix – 5.2 million subscribers in all – would have seemed very impressive for any other media company looking to set up a streaming service, that was not enough for investors who demand a dominant performance from the industry leader. pack.
Netflix shares are still down about 20% from what they were trading in mid-July. A big tech sale last week did not help things, either.
Wall Street expects Netflix to announce more modest growth when it publishes its third quarter results on Tuesday afternoon. Analysts at research firms Cowen and Imperial Capital both believe the company will report adding 5 million subscribers.
These muted numbers are not necessarily a bad thing. Both companies expect Netflix to report that the vast majority of new members come from outside the United States. This would be a great benefit for a company that is pushing for a global audience.
David Miller, chief executive of Imperial Capital, wrote last week that Netflix enjoyed a "strong hold" in Europe and a "continued improvement" in Australia and Canada. New Zealand. Its target price for the company is $ 494 per share.
India is another promising place for growth and Netflix has invested heavily in the country. "The Sacred Games," the company's first original Indian series, was a "big hit" on its first release this summer, content manager Ted Sarandos said at the latest earnings presentation.
Cowen analysts, meanwhile, mention the excessive success of Netflix compared to its competitors to remain optimistic.
Last week, the company released a new study showing that Netflix was the primary platform used by customers to view video content on their TVs. The streaming service beat the basic cable, broadcast and a host of other broadcasters. Cowen raised his price target for Netflix from $ 349 to $ 400.
Even with his momentum and size, Netflix will face headwinds if he hopes to remain king of streaming.
The streaming media is becoming more and more competitive. First, there are existing competitors, including Prime Video by Hulu and Amazon (AMZN).
But a host of other challengers are on the horizon. WarnerMedia, the AT & T (T) division of HBO, Turner and Warner Bros, announced last week the launch of a new streaming service next year. Walmart (WMT) is reinforcing its free advertising-based Vudu service via MGM and other partners. And Apple (AAPL) is recording offers for original content, even though the details of its ultimate plan are still elusive.
Then there is what is probably the most anticipated service of all: the streaming service of Disney, which has yet to be named, which is expected to debut by the end of next year.
Disney (DIS) has already announced that it would pull content from Netflix before this launch. The company is also about to finalize the acquisition of most of 21st Century Fox, which will give it an even larger library of popular movies and shows. This agreement will also give Disney a majority stake in Hulu, further strengthening the company's influence in streaming.
If Netflix wants to fight these competitors, it will probably have to spend a lot of money to create more original programming. And the construction of this library has already started. Earlier this year, CFO David Wells said the company plans to offer approximately 700 programs to customers by the end of the year.
Cowen analysts predict that the company will spend about $ 13 billion on its productions this year. That's $ 5 billion more than what the company estimated for 2018.
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