Technology heavyweight Netflix (NASDAQ: NFLX) is among the worst-performing stocks in 2022. Shares of Netflix are down 75% from all-time highs, valuing the company at a market cap of $77.5 billion.
Netflix stock is currently priced at $174.50, and the company has wiped out most of its gains since 2017. In the last five years, Netflix has returned a paltry 8.3% to investors in cumulative gains, grossly underperforming the broader markets.
Netflix is scheduled to report its earnings for Q2 of 2022 on Tuesday, July 19th at 6:00 pm Eastern Time.
To listen to the call and access the earnings transcript, as well as the shareholder's letter and the company's financial statements for the quarter, all you need to do is go to Netflix's investor relations page.
The upcoming earnings report and Netflix's guidance will be a crucial driver of its share price this week. Let's see what Wall Street expects from Netflix in Q2 of 2022.
Netflix is the largest streaming platform in the world. The cord-cutting phenomenon is expected to be a key driver of growth for Netflix. Cord-cutting is the practice of ending a cable TV subscription in favor of connected TV options.
Netflix enjoyed a first-mover advantage, allowing the company to increase revenue from $15.79 billion in 2018 to $29.8 billion in 2021. However, the ongoing pandemic also acted as a massive tailwind for Netflix as entertainment options were limited, and people were glued to their TV sets.
But the reopening of economies, a rise in competition, and Netflix's exit from Russia are expected to decelerate the company's top-line growth in 2022.
In Q2 of 2022, Netflix is forecast to report revenue of $8.05 billion and adjusted earnings per share of $2.96. In the year-ago period, its revenue stood at $7.34 billion, while adjusted earnings were $2.97 per share. So, Netflix's sales are expected to rise by 9.6%, while adjusted earnings might decline by a marginal 0.3% in Q2.
In addition to revenue and earnings, investors and analysts will closely watch the company's subscriber growth. Netflix ended Q1 with 221.6 million subscribers, 7% higher than the year-ago period but 200,000 lower than Q4 of 2021.
Netflix's management had also forecast subscriber growth to decline by two million in the June quarter, driving its shares lower after its Q1 results.
Despite a lower subscriber base, Netflix remains a top bet given its depressed valuation. It still has the potential to gain traction in several international markets across Asia and Latin America. The company's focus on creating original content should continue attracting future subscribers.
Additionally, during its Q1 earnings call, Netflix hinted it might explore an ad-supported business model, unlocking another revenue stream in the process.
Netflix is valued at 2.4 times forward sales and a price to earnings multiple of 16x, which is quite reasonable. Analysts expect Netflix stock to gain almost 70% in the next 12 months, given its average price target of $294.
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