Netflix Is Down 42% From Its High. Here's Why I'm Buying More.
Key Points
Netflix stock has fallen from the $120s to the mid-$70s amid concerns about slowing growth.
This provides an opportunity for better-than-expected results to drive a rebound in the share price.
Netflix's burgeoning ad revenue as well as aggressive share buybacks could help make that happen.
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It's been a tough year for Netflix (NASDAQ: NFLX). Shares in what is one of the most popular streaming services are down by over 20% year to date and nearly 42% from their 52-week high.
Netflix hit a new 52-week low after its latest quarterly earnings release last month. This came on the heels of investor disappointment over the guidance updates. However, following this, investors may be coming to the same conclusion I did. Namely, that after the stock's lumpy drop over the past year, it's time for the dust to settle, especially as two catalysts could sway investor sentiment, justifying at least a partial recovery.
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Netflix and its lumpy drop since 2025
A year ago, Netflix traded for as much as $126.71 per share. Today, it's just under $75 per share. This steep decline has arrived in waves. Instead of steadily dropping since late 2025, the stock experienced a steep drop in late 2025/early 2026, a short-lived rebound in early to mid-2026, and another big drop in mid-2026.
Uncertainty surrounding Netflix's plans to acquire Warner Bros. Discovery drove the first pullback. This ended when Paramount Skydance outbid it. Backing out of the takeover battle brought relief to investors, who were concerned Netflix was overpaying for the media conglomerate.
With this latest pullback, concerns about future growth have been the key driver. The stock gave back its post-takeover-battle gains, and then some.
Why this latest rebound could last
Following Netflix's tumble over the past year, shares now trade for around 23 times forward earnings. In the past, shares have rarely traded at such a low multiple for long.
Although analyst estimates call for just 6% earnings growth next year, several factors could drive positive surprises in the quarters ahead. These factors include Netflix's surging ad revenue and its share repurchase program. Netflix still has board authorization to buy back up to $27.1 billion worth of stock, representing nearly 9% of its market cap.
With the slowdown already baked into its valuation, growth catalysts in motion, and a market perhaps ready to give the stock a second chance, consider Netflix a solid opportunity to "buy the dip" amid record-high markets.
Should you buy stock in Netflix right now?
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
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