Netflix Stock Has Fallen 35% or More Before. History Says Every One of Those Drops Ended at a New High.

Shares of Netflix (NASDAQ:NFLX) trade near $78 as of this writing, about 38% below their 52-week high of $124.86, set last October.

Measured from June 2025's all-time high of about $134, the drop is closer to 42% -- and at the stock's July low, it was about 50%.

That's a brutal stretch for shareholders. But it isn't new territory. Netflix stock has fallen 35% or more from a high six times before, by my count, since 2004, measured on closing prices.

Image source: Netflix.

Six declines, six recoveries

The first ran from January 2004 to March 2005 and cost the stock 77% of its value. A 56% crash followed, from April to October of 2008. Then came an 82% collapse from July 2011 to September 2012, a 37% slide from December 2015 to February 2016, and a 44% decline from July 2018 to December 2018.

The sixth, a 76% crash from November 2021 to May 2022, was the deepest fall in the decade-plus I've covered the company.

Every one of those declines was eventually erased, with the stock going on to new highs. But the trips back varied a lot. The fastest, following the 2008 crash, took about 11 months from the old high to a new one. The 2016 slide took about 13 months, and the 2018 decline just under two years. The three collapses of 75% or more took the longest: about two years and two months after 2011, almost three years after 2021, and more than four years after 2004.

Most of the bottoms came with bad news

Most of those bottoms formed during the scariest moments in Netflix's business history.

The September 2012 bottom followed a price increase of as much as 60% and a scrapped plan to spin the DVD business into a service called Qwikster. Netflix lost 800,000 U.S. subscribers in a single quarter.

The December 2018 bottom came while the streaming giant was spending more cash than it generated (free cash flow was negative $3 billion that year) to build its content library. And the May 2022 bottom followed the company's first quarterly decline in paid memberships in more than a decade, with 2 million more losses forecast for the quarter ahead.

Annual revenue, worth noting, grew right through all three episodes. The scares were about where the business was headed, not what it was reporting.

The 2008 crash was the exception -- a marketwide collapse rather than a Netflix story. Revenue grew 13% that year, and operating income rose 32%. It's probably no coincidence that this was the decline the stock recovered from fastest.

Recoveries from the business scares, meanwhile, got going once the company answered them. In 2022, the answer arrived before the stock even bottomed. The same letter that reported the membership losses said Netflix would work on making money from the millions of households sharing accounts. Combined with a new ad-supported plan, it worked well enough that the stock was back at record levels by August 2024.

Is the seventh decline different?

Today's decline looks like a blend of the two kinds. As in 2008, the business itself is in record shape.

Second-quarter revenue rose 13% year over year to $12.6 billion, and operating income of $4.2 billion, up 11% year over year, was the company's largest for any quarter. Management forecasts full-year revenue growth of 13% to 14% and an operating margin of 31.5%, up from 29.5% in 2025. That implies operating income growth of more than 20%, helped by advertising revenue roughly doubling to about $3 billion.

But there's a scare attached this time, too. Netflix's revenue growth rate topped out at 17.6% in the fourth quarter of 2025. Three quarters later, management's third-quarter forecast has it at about 12%. However, that's arguably a milder problem than losing subscribers or burning cash.

Shares trade at about 20 times next year's expected earnings -- a reasonable price, it seems to me, for a business growing revenue 13% with an expanding operating margin. Of course, the math could change if the growth rate keeps sliding.

Does the record say to buy a decline this deep? Not on its own. Netflix stock has always made it back, on timelines running from about a year to more than four. And the fastest recoveries came when the business stayed healthy through the fall, while the worst business scares took the longest to unwind.

That pattern is the best argument for today's Netflix, which has never been more profitable. Ultimately, though, I'd rather buy after the growth rate shows signs of leveling off than bet today that it will. I'll stay on the sidelines for now.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.