Netflix's (NASDAQ:NFLX) third quarter earnings report is due out after hours on Oct. 20, and it could be one of the more pivotal reports for the streaming giant.

Netflix's subscriber base surged through the first half of the year as the streaming pioneer added 25.9 million subscribers, nearly the same number who signed up in all of 2019. Following its strong growth during the lockdown period, management tamped down expectations for the second half of the year, saying it expected just 2.5 million new members in the third quarter, compared with 6.8 million subscriber additions in the quarter a year ago. The company also forecast revenue growth of 20.6% to $6.32 billion, and sees earnings per share of $2.09, up from $1.47 a year ago.

Beyond the headline numbers, let's take a look at three questions investors should be looking to get answered from the upcoming report.

The Netflix menu featuring Stranger Things

Image source: Netflix.

1. Is subscriber growth stalling out?

Most "stay-at-home" stocks have continued to shine in recent months as the pandemic has shown little sign of abating, and social distancing and remote work remain the norm. However, Netflix hasn't gotten nearly the lift that popular pandemic plays like Zoom Video Communications and Peloton have since March, even as cord-cutting has clearly taken a big step forward during the crisis.

That may be because co-CEO Reed Hastings said in the last earnings report that the company is assuming that customers that would have joined in the second half signed up during the peak months of the pandemic, meaning subscriber growth will be slower over the second half of the year and potentially into 2021. A chart in the report also seemed to show total subscribers falling toward the end of the second quarter, implying that some customers may have joined the service just for the lockdown and then quit.

Still, COVID-19 continued to affect much of the world in the third quarter, especially Latin America, and there could be a correlation between subscriber growth and the geographies most affected by the pandemic.

Subscriber growth in the third quarter could be noisy as there was a brief backlash against the Cuties documentary, though Netflix seemed to command the streaming conversation again in the quarter with releases like Cobra Kai

In addition to the third quarter subscriber figure, investors will want to keep an eye on fourth quarter guidance as well as any commentary on the long-term subscriber growth trajectory and if that's changed from the pandemic. Subscriber growth is the company's most closely watched figure, and it's likely to determine the stock's movement after the report comes out.

2. Is a price hike coming up?

Netflix COO Greg Peters dropped a subtle hint about raising prices on the July earnings call, explaining that value creation will determine future price hikes. If the additional value was there, he explained, "it might be time to go back to them and ask them for a little bit more so that we can then invest that further into amazing stories, great content, better product experiences and create even more value for them."

Given the boom in subscriber growth, Netflix's vast content library, and the additional hours being spent with the service during the pandemic, it wouldn't be surprising for Netflix to raise prices again, even though it did so in the U.S. early last year. Of course, Netflix faces much more competition than it did then as Disney+Apple+, HBO Max, and Peacock have all launched since then, giving viewers more options.

Jefferies analyst Alex Giaimo recently said that the company was likely to raise prices, at least in some markets soon, and on Oct. 7, Netflix said it would raise prices on standard and premium plans in Canada by C$1/month and C$2/month, respectively, though pricing on the basic plan remained the same. 

In a statement reported by the CBC, Netflix said, "Members tell us how much they value variety, and we're updating our prices so that we can continue to invest in more shows and films. As always, we will continue to offer a range of plans so that people can pick a price that works for their budget."  

Netflix essentially has two ways of increasing revenue. It can add new subscribers or raise prices. Therefore, it's important for investors to pay attention to price hikes, especially as its subscription model allows the vast majority of the price increases to flow to the bottom line.

3. How's the content pipeline?

While the pandemic has been a clear driver of demand for Netflix, it's caused significant disruptions on the production side across the entertainment industry, and that is translating into a slowdown in some new content, though management has said production has a long lead time. The company recently announced that it was canceling the last season of GLOW due to pandemic-related complications.

Netflix's financial results have benefited from the delay in production as content spending actually fell in the first half of the year, and the company even posted positive free cash flow, despite projections of another loss. 

Still, the company would like to get back to its planned production budget and schedule. In July, it told shareholders its biggest priority was to restart productions safely and according to local regulations, and said it's slowly resuming productions in many parts of the world with the Asia-Pacific region being the furthest along. The company said that due to the disruption, releases in 2021 would likely be weighted toward the second half of the year. Netflix has also made acquisitions to add to its library, including Cobra Kai, Aaron Sorkin's The Trial of the Chicago 7, and The Spongebob Movie while production has been delayed. 

With another quarter gone by, Netflix should have more specific production updates, and will hopefully shed light on how any gaps in new content might affect the business and when its normal schedule might return.

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