Netflix (NFLX) stock price down before high-stakes earnings

Lights, camera, earnings!

Streaming giant Netflix is set to release its first-quarter earnings report on Tuesday, and investors will be watching to see whether the company can bounce back from a disappointing fourth-quarter earnings release in January, which showed slowing subscriber growth.

Following the release of its last report, Netflix’s stock price dropped more than 25%. In an increasingly crowded streaming market, investors are likely anxious to see whether the company was able to course-correct during the first quarter. But it comes as little comfort, too, as competitors have been springing up left and right, eating into Netflix’s market share at a time when inflation-weary consumers are becoming more price conscious.

In all, that’s led to Netflix’s share price dropping around 43% since the beginning of the year.

“Consumers have always had many choices when it comes to their entertainment time – competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” the company wrote in its Q4 2021 letter to shareholders. “While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched.”

Boasting 222 million paid users, Netflix does still lead the streaming pack. But competition is heating up.

Disney is on its heels with 196.4 million between Disney+, ESPN+, and Hulu; it’s targeting up to 260 million by 2024. HBO Max and HBO ended 2021 with almost 74 million combined subscribers, Paramount+ has more than 56 million, and NBCUniversal’s Peacock has 9 million paid subscribers, according to Variety. Apple, which doesn’t report subscriber numbers for its Apple TV+ streaming service, had fewer than 20 million paid subscribers less than a year ago.

With that all in mind, here are some things to keep an eye on when Netflix releases its earnings report on Tuesday at 3 p.m. PST:

• Subscriber growth: Will Netflix deliver an about-face in terms of subscriber growth, after a sharp decline in 2021? Some analysts noted that Netflix did have a stronger start to Q1 than anticipated, and if it managed to keep it up, investors may be in for a pleasant surprise. The company expected to add 2.5 million new subscribers for the quarter.
• Content arms race: Netflix continues to bring out big names and A-listers to beef up its original content, a list that includes former President Obama, Ryan Reynolds, Duane Johnson, and Gal Gadot. But will it be enough to go toe to toe with other blockbuster originals from rival streaming services? This year, HBO Max will release a Game of Thrones prequel series, and Amazon Prime will release a Lord of the Rings show—which are just two of the many movies and TV shows with built-in audiences that could peel away subscribers from Netflix.
• Expanding offerings: The key to more subscribers? Another outstanding question is whether Netflix’s attempts at expanding its offerings will pay off. That includes Netflix’s foray into gaming, and experimental new content like Exploding Kittens, which will be a TV series-game combo.