Thursday is when Netflix Inc. reports its second-quarter results. More and more people on Wall Street think that the company has pretty much won the streaming wars. Analysts thought it would stay the winner for that quarter. What will a company do next that keeps making money and selling lots of things?
Nvidia stock NFLX, -0.79% has gained about 33% so far this year. That’s better than a lot of its old- and new-media competitors, some of whom have had trouble keeping up as they try to make money from their own streaming platforms after years of aggressive growth. Netflix’s stock price briefly stayed near its all-time high in 2021 last month. While some analysts think Netflix’s growth will slow down in the coming years, they also say the company still has a lot of big money-making opportunities left.
Some analysts say that as Netflix’s lead grows, live events will become the next big area of competition for the company. Right now, live events are the domain of Big Tech and traditional TV.
“Netflix is the market leader and has been the biggest innovator in entertainment streaming,” eMarketer analyst Paul Verna said in an email. “However, it’s playing catchup with Amazon, YouTube, Disney, and NBCUniversal in live events and sports.”
In spite of that, he said that Netflix’s stock has grown faster than stocks like Walt Disney Co. and DIS, +0.55% and Comcast Corp. CMCSA, +1.43%, which owns NBC. Two years ago, Wall Street turned the streaming industry on its head by pushing for profits instead of subscriber growth. Since then, Netflix has done many things that investors liked, even if viewers and employees didn’t like them. It has increased sales and cut costs by firing people, raising subscription fees, adding more ads, cancelling shows, and making it harder to share passwords.
It also does more live shows. For example, it plans to show NFL games, a hot dog eating match between Joey Chestnut and Takeru Kobayashi, and a boxing match between Jake Paul and Mike Tyson. During the second quarter, JPMorgan analysts said that shows like “Baby Reindeer” and the third season of “Bridgerton” stood out.
Netflix is going to stop reporting membership numbers next year, which is when the results will come out. This is something that investors were very interested in a few years ago. In April, executives said that time spent on the platform was a better indicator of how satisfied viewers were. They also said that memberships were “just one component of our growth” as the platform made more money, expanded its advertising business, and added more streaming plans.
Some investors were scared when the company moved away from subscriber counts. Wedbush analysts wrote in a research note on Friday that they saw the move as part of a change to a business with slower growth and higher profits. But they still said that evolution was “a long way from being finished.”
“Netflix has built a lead that is almost impossible to overcome in the streaming wars, and we expect competitors to keep failing as they try to copy Netflix’s business model,” they said.
But Verna said that as Netflix moves away from metrics like subscriber count, its real finances, including things like ad revenue and content spending, will become more important.
The appointments you need to make
Shares of JPMorgan Chase & Co. JPM, -1.21% fell on Friday after one of its banking segments set aside more money to cover bad credit in the second quarter. This was done because investors are still worried that consumers won’t be able to keep up with their bills because prices and borrowing costs are still pretty high. The bank said that people were more eager to make deals. Even so, Jamie Dimon, the CEO, said there were “multiple inflationary forces in front of us” as well as deeper geopolitical tensions.
Allow us to now listen to what other banks have to say about the state of Wall Street and Main Street. This week, Goldman Sachs Group (GS, +0.14%), Bank of America Corp. (BAC, -0.53%), Morgan Stanley (MS), Discover Financial Services (DFS), -0.15%, and American Express Co. (AXP), -0.05% all have earnings reports.
This week in money made
FactSet says that this week, 45 S&P 500 companies, including five members of the Dow 30, will report their quarterly results.
Among them is the huge health insurance company UnitedHealth UNH, +1.42%, which is facing worries about its Medicaid business, stricter rules on middlemen for prescription drugs, a cyberattack, and rising medical costs. The company Johnson & Johnson JNJ, +0.12% also has earnings to report.
According to Domino’s Pizza Inc. DPZ, +3.89%, more people are staying home to eat because food prices are going up, and analysts are trying to figure out who the winners and losers are in the industry. A company called J.B. Hunt Transport Services Inc. JBHT, +1.75% also reports.
The number to watch
United Airlines passenger profits: United Airlines Holdings Inc. UAL, -2.02% reports results on Wednesday, as its industry peers start to raise concerns about profitability and travel demand. The air carrier reports after rival Delta Air Lines Inc. DAL, -3.05% on Thursday offered up a disappointing sales forecast and said second-quarter profit per passenger took a hit despite solid travel demand, as airlines try to expand flight coverage without over-expanding — and leaving too many seats empty on planes.
