Netflix's (NFLX 9.72%) second-quarter report is just around the corner. The streaming-TV company will share results for the period this coming Wednesday. While analysts seem to be in agreement that the company will post strong revenue growth, expectations for subscriber growth are more muted.
Following a year of abnormally strong subscriber growth, when demand was pulled forward as people were staying at home and looking for ways to stay entertained, the streaming service is now facing some very tough year-ago comparisons. In addition, these unprecedented times of an economic pause followed by a reopening are making it difficult to gauge how many subscribers Netflix added during its recently ended second quarter.
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Low expectations
Fortunately for Netflix, expectations for the quarter are conservative. Many analysts anticipate that the company added less than two million members during the period.
Of course, investors have management to thank for these low expectations. The company guided for just one million new members during Q1, down from four million net additions in the first quarter of 2021 and nearly nine million in the fourth quarter of 2020.
But Netflix management's forecast for one million net member additions during Q2 is only unimpressive when it's viewed without context. By zooming out a year, investors will see that the company added over 10 million subscribers in the second quarter of 2020 and an impressive 26 million in the first half of 2020 alone. Following this astounding growth amid high levels of demand as consumers around the world were sheltering at home, it makes sense for growth to cool down for a bit.
Nevertheless, one analyst thinks Netflix could have added meaningfully more subscribers during the second quarter of 2021 than the company guided for. JPMorgan analyst Doug Anmuth thinks subscriber net additions during the quarter could come in as high as two million. He's basing this off of his recent analysis of Netflix app downloads during the period.
Don't count on a blockbuster quarter
But investors who have followed Netflix for a long time should note that there's no guarantee the company beats its own guidance for subscriber growth. Unlike many companies who provide conservative forecasts they're almost certain to outperform, Netflix management has a policy of aiming for accuracy with its forecasts. This means the company misses its guidance from time to time. Indeed, the company's first-quarter net subscriber additions of four million were two million below its forecast for the period.
On the other hand, Netflix occasionally crushes its own guidance. So investors shouldn't rule out a big beat either.
Whatever Netflix achieved during the quarter, investors will find out after market close on Wednesday, Jul. 20.
