Should You Buy Netflix Stock While It's Down 27% From Its Record High?

Netflix (NASDAQ: NFLX) operates the world's largest streaming platform for movies and television shows. Its stock peaked at around $134 last June following an incredible run of gains, but a period of consolidation turned into a sharp sell-off when the company announced plans to acquire Warner Bros. Discovery in a massive $82.7 billion deal.

Netflix stock fell by as much as 42% from its all-time high as investors fretted over the enormous cost of the acquisition. However, Warner decided to go with a competing offer from Paramount Skydance instead, which sparked a recovery. The stock is still down 27% from last year's peak, but that might be an opportunity for investors.

On April 16, Netflix released its operating results for the first quarter of 2026 (ended March 31). Its revenue and earnings topped management's expectations thanks to better-than-expected subscriber growth, so the early signs point to a very strong year ahead.

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Live events are supercharging Netflix's subscriber growth

Netflix has over 325 million paying subscribers, placing it comfortably ahead of rivals like Walt Disney's Disney+ and Warner's HBO Max, which boast around 131 million subscribers each. Staying at the top requires creative growth strategies, which include outspending the competition to deliver unique content, and offering different subscription options that cater to consumers of all income levels.

On the content side, Netflix is betting big on live programming, which is a massive draw for new users. The company streamed over 70 live events during the first quarter of 2026 alone, including the World Baseball Classic in Japan, which attracted 31.4 million viewers. It became Netflix's most-watched program ever in Japan, and it drove a record day of new sign-ups across the country.

In the U.S., Netflix recently streamed the Major League Baseball (MLB) opening night matchup between the New York Yankees and the San Francisco Giants. Looking ahead, the platform will exclusively show the Tyson Fury vs. Anthony Joshua boxing match, which is slated for November this year, and it will also stream both Christmas Day National Football League (NFL) games for the third year running.

But sporting events are also helping Netflix build its advertising business, because live programming tends to command higher prices for ad slots. This is key because the streaming platform's cheapest subscription tier, which is supplemented by ads, accounted for over 60% of all new signups during the first quarter (in countries where it's available). At just $8.99 per month, it's far more affordable than the standard ($19.99 per month) and premium ($26.99 per month) tiers.

Netflix also ended the quarter with over 4,000 advertising clients, up a whopping 70% year over year. I would expect that number to increase as the platform invests more heavily in live events.

Netflix topped expectations in the first quarter

Netflix generated a record $12.25 billion in revenue during the first quarter, a 16% year-over-year increase. The company also delivered earnings of $1.23 per share, which soared by 86%. Management had forecast $12.15 billion in revenue and earnings of $0.76 per share, so the streaming giant performed far better than expected, partly thanks to Japan, which contributed more new subscribers during the quarter than any other country.

Netflix launched its advertising business in November 2022, but it takes time to build a subscriber base large enough to attract corporate marketing dollars, so its recent momentum is certainly positive.

Netflix stock looks attractive on a forward basis

Based on Netflix's trailing-12-month earnings of $3.10 per share, its stock is trading at a price-to-earnings (P/E) ratio of 31.3. Considering the Nasdaq-100 technology index trades at a P/E ratio of 30.8, you could argue Netflix is fairly valued right now.

However, Wall Street expects Netflix to grow its earnings to $3.59 per share in 2026, and then to $3.86 per share in 2027, placing its stock at forward P/E ratios of 27.1 and 25.2, respectively. If those estimates prove to be accurate, Netflix stock would have to rise 24% by the end of next year just to maintain its current P/E ratio of 31.3.

With that said, there might be room for multiple expansion, which is when a company performs so well that investors assign it a much higher valuation. If Netflix's P/E ratio returns to above 40, which is where it spent most of the past year, its stock would experience significantly more than 24% upside.

In summary, the dip in Netflix stock over the last few months has given investors a chance to buy it at an attractive level, and they could reap significant rewards over the next couple of years.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.