Could This Be a Sign of Trouble for Netflix's Stock?

Netflix (NASDAQ: NFLX)'s stock is off to a poor start to 2026. As of Jan. 26, it's down 9% to start the new year. The company has been involved in a bidding war to buy Warner Bros. (which is still currently part of Warner Bros. Discovery), and that has spooked investors who may be wondering if the move is necessary given the steep $83 billion price tag.

The company also recently released its latest earnings numbers, which may have led to even greater worries about the stock. While the business is still growing and its margins remain strong, there was a cause for concern, namely, in its guidance.

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Netflix projects growth between just 12% and 14% for 2026

Netflix's revenue for the fourth quarter of 2025 totaled $12.1 billion and was up around 18% year over year. It was a solid performance for the streaming giant. Its full-year growth rate was a bit lower at 16%, which rose to 17% when excluding the effects of foreign exchange.

Looking ahead to 2026, however, Netflix anticipates a growth rate that will be within a range of 12% to 14%. It's a notable slowdown, particularly with the company projecting that its ad revenue will double. With strong ad revenue, investors may have expected less of a dip in the growth rate for the current year. It may be a sign that consumers are less willing to pay for higher-priced streaming plans and are downgrading to the company's cheaper ad-based plan.

The stock's high valuation comes with high expectations

The problem for Netflix is that its valuation isn't cheap, and a premium-priced stock is going to come with heightened expectations, and falling short of them could result in a significant correction. Even though the stock has been struggling of late and it's getting close to its 52-week low, it's still trading at a fairly high price-to-earnings (P/E) multiple of 34. By comparison, the S&P 500 averages a P/E multiple of just 27.

Investors appear to be adjusting what they're willing to pay for the stock, given not only the potential for a Warner Bros. deal to drag down earnings, but also in light of the guidance, which looks to be a bit underwhelming. Given that Netflix's valuation still doesn't appear all that low, the streaming stock may still be due for a larger decline in the weeks and months ahead.

If you're planning to invest in the business for the long haul, Netflix can still be a good buy today, but you may want to brace for some volatility in the near term.

David Jagielski, CPA 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.