Netflix faces tough road ahead even after subscriber beat

Netflix Inc. may have calmed investors’ worst fears with a second-quarter subscriber loss that was better than expected, but a closer look at the streaming giant’s results indicate it still faces significant hurdles.

Wall Street cheered on Tuesday’s subscriber numbers, which were only half as bad as the company forecast. Netflix also projected a return to subscriber growth in the current quarter. The shares rose 7.4 percent on Wednesday and the positive sentiment lifted other media stocks, including Walt Disney Co. and Paramount Global.

But Netflix still lost 970,000 subscribers globally in the quarter and is seeing increased competition from rivals. To generate more revenue, it’s cracking down on password sharing and launching a new lower-priced tier featuring advertising, moves that are departures from how it operated in the past.

“Netflix may be better than feared, but it’s still not good,” market commentator Adam Crisafulli wrote in a post on his site Vital Knowledge.

Netflix has shed subscribers in the US and Canada, and is also shrinking in Europe, the Middle East and Africa, its two largest regions. It’s seen subscriber growth in Asia, but that’s not without price decreases in India.

The company’s forecast for 1 million new subscribers in the current quarter is below analysts’ projections. And that forecast may be “overly optimistic, given an uncertain economic backdrop,” according to the research firm Third Bridge.

The competition is certainly not letting up. HBO Max has an August release date for House of the Dragon, a prequel to one of its top-performing shows Game of Thrones. Amazon Prime’s new series The Lord of the Rings: The Rings of Power, debuts in September. The fourth season of Netflix’s hit series Stranger Things offered renewed interest in the service, but analysts are still unsure whether the company can continue to splurge on new shows the way it has in the past.

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