Netflix tumbles on dark outlook; ASML still sees strong demand Netflix tumbles on dark outlook; ASML still sees strong demand Netflix tumbles on dark outlook; ASML still sees strong demand

Netflix tumbles on dark outlook; ASML still sees strong demand

Equities 7 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Netflix's decade of uninterrupted growth came to a halt in Q1 as the company lost 200K subscribers and to make things worse Netflix is estimating to loss another 2mn paying subscribers in Q2 as competition is heating up and inflation is potentially putting pressure on households to cut down on less essential things. We take a look at the four drivers that Netflix can tap into to get back on the growth track. In today's equity update we also take a look at ASML earnings which are showing investors that demand is still very strong for semiconductors but the risks in the industry has gone up dramatically because of the war in Ukraine.

Netflix shares tumble 26% on Q2 outlook

Netflix has been this unstoppable growth train for over a decade but that ended in Q1 2022 with the video streaming company losing 200K paying subscribers (the chart below does not include the Q1 2022 figure). Even if we factor out the 700K loss from Russia it was a big miss against its own guidance of adding 2.5mn. In addition, Netflix is guiding a loss of 2mn paying subscribers in Q2 vs estimates of +2.5mn. The market got spooked sending Netflix shares down 26% in extended trading and to levels 65% below the recent all-time high back in late 2021.

What does that tell us about Netflix and sell-side analysts? It says that both analysts and the company itself have difficulties understanding the post-pandemic demand picture and especially the competitive landscape that is changing with e-sports and gaming, but also the impact from higher inflation. While some households can substitute into lower priced consumer goods when facing inflation the video streaming services are all priced at the same level and are offering the same product, so substitution does not happen. Cancellation is more likely the outcome of inflation.

So what are the drivers that can pull Netflix back to an interesting growth trajectory?

  1. Advertising models. Netflix could adopt a three-layered pricing model with a free advertising model as the entry followed by an advertising model with less advertisement but a small monthly payment, and finally the advertising-free model with the most expensive subscription. This could widen the distribution and extract more revenue from their global customer base.

  2. Limiting password sharing. Netflix has a big issue involving password sharing with some estimates suggesting a 3-to-1 factor of logins from non-paying users that have lent a password to those that pay. Making this practice harder could regain some revenue growth.

  3. E-sport and gaming. With almost a quarter of a billion paying customers Netflix could do more to harness its distribution. The company has previously said that its biggest competition threat is from e-sports and gaming. If Netflix sees itself as an entertainment company rather than a video streaming service making movies and series, then it could aggressively branch into e-sport streaming and even gaming on the platform.

  4. Improve hit-making. While Netflix did not touch on this issue, the fact is that over the previous year the quality of Netflix productions has deteriorated and the company has not been producing enough hits which is dangerous longer term and must be changed.
Source: Statista
Source: Saxo Group

ASML Q1 result calms investors

The semiconductor industry has had a tough 2022 with our semiconductors theme basket down 24% this year and down 9% alone this month. Rising interest rates have impacted lofty equity valuations and the war in Ukraine has caused a major operational risk to the industry as the majority of the world’s production of neon gas is produced in Ukraine. In addition logistical problems in the global supply chain and rising raw material prices are putting pressure on semiconductor profitability.

This morning ASML, the world’s leader in ultraviolet lithography machines for the semiconductor industry, reported what looks like bad figures but the majority of the miss is due to timing issues related to revenue recognition which is a function of delivery issues due to logistics bottlenecks. Overall, ASML says demand remains very strong and far exceeding the current production capacity.


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.