Netflix's Post-Earnings Crash: Should You Buy the Stock While It's Below $70?

Netflix (NASDAQ: NFLX) reported earnings last week, and the numbers didn't give investors much of a reason to be bullish. The results weren't bad, as the company generated solid double-digit growth, but investors remained concerned about its future, as the guidance didn't provide enough assurance that the business is on the right path.

Earlier this year, Netflix's stock went into a tailspin after investors learned co-founder Reed Hastings was leaving the company. And amid continued questions about its future growth prospects, investors are even more bearish of late.

But could Netflix, which is still very much a leader in its industry, make for a good investment, especially with its stock now dipping below $70 and being the lowest it's been in nearly two years?

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Netflix's Q2 numbers were mixed, and its guidance was soft

For the second quarter, which ended on June 30, Netflix's earnings per share totaled $0.80, a penny above analyst estimates. Meanwhile, revenue of $12.56 billion narrowly missed Wall Street expectations of $12.59 billion. While it was technically a miss, the company came very close to meeting expectations. Its revenue was up 13% year over year.

But with the company's guidance calling for just 12% growth for the current quarter amid questions about how engaged users are with its shows -- there have been concerns about a drop-off after a show's first season -- it may have simply reinforced investors' concerns about the business moving forward. The unconvincing results led the stock to fall after the release of the earnings results, hitting a new 52-week low of $65.08 on Friday.

Has Netflix stock become a cheap buy?

In the past 12 months, Netflix's stock has declined by 44%. It's currently trading at around 21 times its trailing earnings, which is relatively cheap given that the average S&P 500 stock trades at a multiple of more than 25. Netflix is modestly priced by comparison, especially given its reasonably solid growth numbers.

While Netflix's growth rate is slowing down, it's not a steep enough drop-off to suggest that there is something fundamentally wrong with the business. The market may be overreacting, as the stock still hasn't recovered from the news of Hastings' departure.

However, with excellent fundamentals and the streaming stock trading at a reasonable valuation, I think Netflix can make for a great buy right now.

David Jagielski, CPA 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.