1 Reason Netflix's Sell-Off Is a Gift for Investors
Key Points
Netflix's expansion into live events and podcasts is driving growth.
In the first quarter, Japan led global member growth as 31 million viewers tuned into watch the World Baseball Classic.
Netflix believes it has captured only 7% of its long-term revenue potential.
- 10 stocks we like better than Netflix ›
Netflix (NASDAQ: NFLX) stock tanked after its first-quarter earnings report, and a few culprits could be blamed for the drop. Two obvious ones were that guidance disappointed, and co-founder Reed Hastings is stepping down from the board. On top of that, skeptics saw Netflix's offer to buy Warner Bros. Discovery's entertainment assets earlier this year as a sign that it's running out of growth opportunities.
But the naysayers seem to be missing the momentum Netflix is building by expanding into new categories, such as live events and video podcasts. There was clear evidence in the first-quarter earnings report that these initiatives are translating into increased engagement and member growth.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: The Motley Fool.
There's a reason Japan led global member growth for the quarter. Series and films are still the heart of Netflix's content, but live events and sports are increasingly grabbing viewer attention. In the first quarter, for instance, the World Baseball Classic in Japan drew more than 31 million viewers.
Meanwhile, Netflix is just beginning to dip its toe into video podcasts. This could become another meaningful driver of new members over time. So far, Netflix says podcast content "over-index[es] on daytime viewing and on mobile devices."
"We've captured about 7% of addressable revenue," co-CEO Greg Peters said. The pursuit of Warner Bros. wasn't a sign that Netflix is out of ideas. It reflected its strong profitability and the resources it has to pursue opportunities when they arise. That's an advantage, not a warning sign.
Netflix posted a 32% operating profit margin last quarter as it continued to ramp up investment in new content. Its ability to expand its content library while still delivering strong margins and earnings growth is exactly why Netflix stock looks like a buy on the dip.
Should you buy stock in Netflix right now?
Before you buy stock in Netflix, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $496,797!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,282,815!*
Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 200% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of April 30, 2026.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
Recommended Articles
