Could Netflix’s Q3 Earnings Report Boost Its Stock?

Netflix (NFLX) stock has mostly trended downward since the company reported its second-quarter results in July. It’s the weakest FAANG stock this year. As of yesterday, Netflix stock was up less than 7.0% this year, while Apple and Facebook (FB) were up 40% and 50%, respectively. Alphabet (GOOGL) and Amazon (AMZN) stocks have risen 17% and 16%.

If Netflix’s second-quarter earnings report sparked a selloff in NFLX stock, could its upcoming third-quarter report start a rally? That depends on whether Netflix meets expectations.

Netflix stock falls on missed subscriber growth target

Netflix missed subscriber growth expectations in the second quarter, adding just 2.7 million subscribers. It missed its target of 5.0 million subscribers, and for the first quarter in almost a decade, lost thousands of US subscribers. In the third quarter, Netflix aims to have boosted its subscriber growth year-over-year to 7.0 million subscribers from 6.1 million.

Investors concerned about Netflix’s growing competition

Netflix’s growing competition has also made investors concerned and pressured its stock in recent months. Walt Disney’s (DIS) Disney+ and Apple’s Apple TV+ video services are set to launch on November 1 and 12, respectively, costing less than Netflix’s video plans.

A price war may ensue, potentially hurting Netflix. As we discussed previously, some Netflix subscribers feel they pay too much for the service. In fact, Netflix may have missed its subscriber growth target in the second quarter because customers rejected its higher prices.

In last year’s fourth quarter, Netflix aimed to add 7.6 million subscribers. It ended up exceeding its target, adding more than 8.8 million subscribers. It will be interesting to see if Netflix raises or cuts its fourth-quarter subscriber growth target in the face of growing competition.