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Netflix To Face the 'Ultimate in Tough COVID Comps’ in Tuesday’s Q1 Report

Netflix's Los Angeles headquarters
(Image credit: Netflix)

With the Western world cocooning en masse in March 2020 amid the oncoming COVID-19 pandemic, Netflix was the first major streaming service to report a record subscriber growth quarter, adding 15.8 million customers in Q1.

On Tuesday, it will likely also be first to report what Morgan Stanley analyst Benjamin Swinburne described in a recent shareholder letter as the "ultimate in tough COVID comps,” with Netflix management issuing guidance that it will only report customer additions of around 6 million globally for Q1. 

In the second quarter, it’s predicted that Netflix could lose customers—as many as 3.5 million, according to Swinburne. 

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The analyst predicts Netflix’s subscriber ranks will start perking back up in the third quarter, growing by 5.8 million, and then by another 9.7 million in the fourth quarter. "We expect net additions to begin increasing year-over-year in the second half of 2021 and in 2022," he wrote.

There could be some surprises. 

For one, analysts believe Netflix’s recent crackdown on account credential sharing could yield some signups. 

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"Our monthly proprietary survey of 2,500 U.S. consumers suggests Netflix could add incremental subs by more aggressively deterring password sharing," Cowen analyst John Blackledge wrote in an April 12 report. "We think the roughly 45% of U.S. users who share a password per our survey leaves Netflix well positioned should they choose to aggressively tamp down on password sharing, given the ramp of originals and consistently increasing value proposition of the service. While our survey shows that password sharing has declined from 55% of households in the first quarter of 2016, it still comprises about 45% of Netflix households in the first quarter to date through February."