Netflix (NFLX -1.13%) shareholders lost ground to a falling market on Monday morning. Its shares had shed 4% by 11:30 a.m. compared to a 1.1% drop in the S&P 500. That decline added to the year's big losses for investors in the streaming video giant. Its shares are down roughly 70% so far in 2022.
Monday's slump came as investors grew more worried about what they will see when Netflix reports its second-quarter results on July 19.
Netflix's last earnings report was particularly jarring, both for its shareholders and for the wider tech industry. The company revealed worsening engagement trends, a notable contrast to the soaring streaming demand it enjoyed during the earlier phases of the pandemic. Competition was an especially big concern as Netflix admitted that its advertising-free approach has left it vulnerable to lower-priced services.
That report in mid-April set a bleak tone for the flood of Q1 earnings announcements that followed it. Many investors are worried about another round of bad news ahead.
Management projected that Netflix would lose around 2 million net subscribers in Q2, and the pending report will largely be judged based on how well the company performs compared to that target. On the downside, competition remained fierce in the streaming industry, and consumers likely looked for more ways to save money as inflation accelerated.
On the plus side, the release of a new season of Stranger Things likely spurred more interest in the service, and the delayed release of its final episodes might have convinced subscribers to stick around for longer. Watch for co-CEO Reed Hastings and his team to discuss that strategic win next week.
The stock might remain in Wall Street purgatory until executives can show progress in moving growth back toward that 20% year-over-year rate that allowed for steadily rising profit margins. The Q2 forecast calls for less than half that expansion rate, and management might project another weak period for Q3 if its new content is failing to convince users to pay up for its premium streaming service at a time when free options have flooded the market.