It's been a rough few months for Netflix (NFLX -3.92%). As we head into the final trading day of June, its shares are down by a stunning 70% year to date.
A lot has gone wrong for the leading premium streaming service. In April, it delivered an ugly quarterly report, and it followed that with two small rounds of layoffs in May and June. The stock was already weak through the first three months of this year, but its sell-off only intensified as the fundamentals began to crumble.
All that said, I'm not ready to give up on Netflix yet. Let's go over some of the things that could help the pioneer of premium on-demand video bounce back in the month ahead.
Image source: Getty Images.
1. July 19 will be a good day to Netflix and thrill
Netflix is routinely one of the first consumer-facing companies to report during earnings season, and its next financial update is now less than three weeks away. It will announce its second-quarter results on July 19, shortly after the market close.
I realize that the last time that the company stepped up to report, investors were seriously disappointed. Management had targeted 2.5 million in net subscriber additions in the first three months of this year. It wound up reporting a net loss of 200,000 subscribers. Management also warned that it expected 2 million net defections for the second quarter. This was a company that used to routinely issue conservative guidance. Now, it has missed its subscriber targets in three of the last five quarters.
The pattern isn't pretty. Netflix stock has taken double-digit percentage hits the day after reporting fresh financials in back-to-back quarters. However, there is so much pessimism baked into the stock right now that even a ho-hum earnings report could send its price higher. Netflix remains the undisputed leader in this niche, and it's definitely not just 30% of the company it was when the year began.
2. There are a lot of catalysts on the stove
Netflix actually has a lot of new things it's working on, and success on any of those fronts could move the needle appreciably for the company.
We're talking about a gaming initiative that has included buying indie developers to help beef up user engagement with its content. That gaming segment could also improve the value proposition of a Netflix subscription.
And after two decades of shunning commercials, Netflix is also talking about launching an ad-supported tier. That would give marketers access to its huge audience while offering consumers a cheaper way to watch. Netflix is also kicking the tires on a host of potential changes such as launching live streaming and giving some of its films theatrical releases prior to making them available on its platform.
You don't have to agree with all of these moves. The point here is that Netflix isn't taking its stock price retreat lightly. It's working hard to make sure it gets back to delivering shareholder value by improving the ways it monetizes its audience, content, and viewership data.
3. Stranger Things have happened -- and will again
Have you binged the latest season of Stranger Things yet? Well, you're not done. Netflix released just the first seven episodes of the popular series in May. That set ended on a cliffhanger that should be resolved in the final two movie-length installments of the fourth season, which are rolling out on Friday.
This was a brilliant move. It can't be a coincidence that the highly anticipated conclusion of the season drops on July 1, the day after the end of the second quarter. That should help keep cancellations in check for Q2. If it works, don't be surprised to see Netflix go back to this approach in the future to get a firmer grip on its churn.
Netflix is still the top dog among streaming services. It's the only one spending $18 billion on content this year, and it has weathered recessionary storms in the past. One of the stock market's biggest losers in the first half of 2022 could be one of its biggest winners in the second half.
