Is Netflix Stock a Buy on the Dip? Here's What History Says

Netflix (NASDAQ: NFLX) entered earnings season with high expectations. Between recent price hikes and the windfall it got from its failed acquisition attempt, investors were excited about the company's results. However, the market was not impressed once all was said and done. Netflix's results weren't bad, but the company's guidance implies decelerating growth for the second quarter, a big no-no considering its rich valuation. The stock fell sharply after its quarterly update. Should investors take this opportunity to scoop up its shares on the dip? A look back at some of Netflix's post-earnings declines may help provide an answer.

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There is a clear trend

Netflix is no stranger to post-earnings sell-offs. Sometimes, they are fairly modest. Other times, they aren't -- Netflix's stock has dropped by 10% or more after a quarterly update on several occasions. The most recent notable drop was after its third quarter of 2025. One major decline -- one of the largest on record -- occurred after it reported its first-quarter results for the fiscal year 2022 in April of that year. Netflix posted declining subscribers, leading to a sell-off of massive proportions.

NFLX data by YCharts

In July 2019, after reporting its second-quarter results, Netflix saw a significant dip as well.

NFLX data by YCharts

Another one happened after its second quarter of 2018.

NFLX data by YCharts

After these drops, and provided investors hold the stock for several years (at least three, let's say), Netflix usually delivers excellent returns. Let's take just one example. Here's how Netflix has performed since its Q1 2022 post-earnings meltdown.

NFLX Total Return Level data by YCharts

It has been about six months since it released its Q3 2025 results, and about a week since its Q1 2026. Netflix hasn't had that much time to recover from those post-earnings drops yet. But if history is any guide, investors should seriously consider buying the stock now, as it could deliver market-beating returns over the next three years and beyond.

Putting history in context

Some might point out that a lot has changed for Netflix over the years. The company performing well after poorly received financial results in the past in no way guarantees that the same thing will happen this time around. This is true. However, Netflix's core business still has massive growth fuel ahead, just as it did five years ago. The company's ability to pounce on lucrative opportunities while maintaining its lead in the streaming market could help it rebound.

Let's look into several ways Netflix could jump-start growth. First, the company is doubling down on the sports streaming niche. According to some estimates, this market was worth about $34 billion in 2024 and will grow rapidly through the end of the decade. It is dominated by several media giants. But Netflix's brand name and large existing ecosystem could allow it to make a dent here. Acquiring the rights to more sporting events could increase engagement on the company's platform.

Second, Netflix is diving into video podcasts. This could be another source of growing engagement, one that will likely cost less on average than creating original content or licensing famous, popular TV shows and movies. Third, Netflix continues to ramp up its advertising business. The company still expect ad sales to reach $3 billion this year, doubling its total from 2025.

The efforts mentioned above should have a positive impact on the company's advertising business. Lastly, Netflix will soon launch a vertical video discovery feed along with a recommendation algorithm powered by artificial intelligence. Initiatives of this kind have proved highly successful for other companies. And Netflix already has a deep user base that spends countless hours on the platform. This is another change that could, once again, boost engagement and advertising revenue.

Meanwhile, the company still has a large addressable market in streaming, given that it accounted for less than 50% of television viewing time in the U.S. as of February. Netflix's habit of bouncing back after a post-earnings decline isn't the only reason to buy the stock on the dip. The streaming specialist still has exciting growth opportunities ahead and the means to capitalize on them. That's why its shares are attractive.

Prosper Junior Bakiny 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.