Down 46%, Is Netflix a Better Buy than SpaceX and the "Magnificent Seven" Stocks in July?

Once upon a time, Netflix (NASDAQ: NFLX) was a component in that era's "Magnificent Seven" club. I'm reminiscing about the FANG or FAANG groups, of course.

Netflix was the "N" in both of these market-moving stock lists. The original 2013 handful also included Facebook, Amazon (NASDAQ: AMZN), and Google. Apple (NASDAQ: AAPL) added another "A" four years later. But the FANG/FAANG lists are so old that Facebook changed its name to Meta Platforms (NASDAQ: META), and Google is now known as Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

Over the years, Netflix fell out of favor while the Magnificent Seven became market darlings. More recently, investors got excited when Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, entered the market.

Last summer, Netflix's stock peaked at a record price of $134 per share and a market cap of $567 billion. Instead of marching on to earn a seat in the trillion-dollar club, the stock was hamstrung by a couple of canceled buyout ideas. As of June 25, Netflix's stock is down 46% from its 2025 high.

The next ultra-elite stock grouping will probably include SpaceX and most of the Magnificent Seven, but not Netflix. Does that make Netflix an undervalued buy today or just another fallen giant with limited prospects?

Netflix shares are on sale right now

Let me cut to the chase. In my eyes, Netflix is the kind of durable winner that deserves a look even at scary share prices. These days, you get all of the upside at a very reasonable stock price. Netflix trades at 23 times trailing earnings and 25 times free cash flow, well below the average S&P 500 (SNPINDEX: ^GSPC) stock at 30x and 28x, respectively.

So Netflix is one of my top picks in this market. I'm not saying it's a perfect setup, and the true bottom may still be ahead, but that's all right. Market timing is an impossible game, after all. I would still hit the buy button on Netflix before any of the Magnificent Seven stocks or SpaceX right now.

The company lost a few bidding wars, not its mojo

Netflix is having one of those years. The company tried to buy Warner Bros. Discovery, got outbid, shrugged, and moved on. Then it eyed Roku until Fox swooped in like a rival, showing up with a bigger buyout budget. As recently as this week, rumor has it that the company also considered bidding for Lionsgate, though Netflix's management denies it.

Backing away from the Warner Bros. bidding sent Netflix's stock higher, but share prices have been sliding back through the spring and early summer.

Here's the thing, though: Netflix didn't get rejected because something's broken. Management simply refused to overpay. That's not desperation; that's fiscal discipline.

Meanwhile, the company still commands less than 10% of U.S. TV viewing time, according to Nielsen, leaving substantial runway to capture share from linear television's 40%-plus hold on American eyeballs. Beyond that, it's a big world out there, and Netflix isn't even the top streaming service in many countries. You say "po-tah-to," I say "opportunity."

Image source: Netflix.

Netflix has more tricks up its sleeve than Wall Street thinks

The Magnificent Seven get all the attention because AI is the shiniest object in the room. Fair enough. Netflix lacks that narrative right now. But narratives shift, and Netflix has many potential growth drivers in its pocket, from video games and international expansion to Netflix House entertainment venues and a booming advertising platform.

I'd much rather buy more of that innovative entertainment veteran's stock at a reasonable price than pay through the nose for SpaceX, Nvidia (NASDAQ: NVDA), and Tesla (NASDAQ: TSLA).

Netflix isn't broken. It's just unfashionable. And unfashionable stocks often come at tempting prices.

Anders Bylund has positions in Alphabet, Amazon, Netflix, Nvidia, and Roku. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Netflix, Nvidia, Roku, Tesla, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.