Netflix faces ‘make or break’ third quarter, analyst says

Netflix corporate headquarters
Netflix predicts it will return to growth and add 7 million paid memberships (800,000 in the U.S. and 6.2 million internationally) in the third quarter. (Netflix)

Netflix posted a surprisingly down quarter this summer, which led to a stock selloff in the ensuing months. Now investors are anxiously awaiting the company’s third-quarter results.

After a rare domestic subscriber loss in the second quarter, Bank of America analyst Nat Schindler said investors will be watching Netflix’s subscriber numbers closely when the company posted results on Oct. 16.

“Heading into 3Q earnings, we see a make or break quarter for Netflix,” wrote Schindler in a research note. “Investors likely remain focused on signals from Netflix on the competitive landscape in advance of the launch of Disney and Apple’s direct-to-consumer services.”


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The concern around Netflix’s future has heightened as competing services from Apple, Disney, NBC and HBO prepare to launch soon – both Apple TV+ and Disney+ arrive in November. Ahead of those launches, legacy media companies have been pulling back their licensed content from Netflix. Disney is taking back its Star Wars, Marvel and Pixar movies; NBCUniversal took back to “The Office,” which is the most popular series on Netflix; and HBO Max took back “Friends,” which is the second most popular series on Netflix.

As popular licensed titles prepare to flee, Netflix is also still hurting from its first domestic subscriber loss in eight years. The company dropped approximately 130,000 subscribers in the U.S. during the second quarter and only added 2.7 million paid memberships, dramatically fewer than the 5 million it had forecast.

Netflix predicts it will return to growth and add 7 million paid memberships (800,000 in the U.S. and 6.2 million internationally) in the third quarter. But since its second-quarter miss, Netflix stock has dropped nearly 30% and wiped out its 2019 gains.

But Schindler sees some upside ahead of Netflix and said that services like Apple TV+ – that doesn’t have much of a content library compared to Netflix – are only seen as “nice to have” by consumers, and not “must have” or worthy of replacing Netflix.

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