Netflix Is Down 21% This Year. History Says This Is the Time to Buy.

At the time of this writing, shares of Netflix (NASDAQ: NFLX) are down 21% year to date and 42% over the past year -- a rough stretch to say the least. For a company that spent years as one of the market's favorite growth stories, the mood has soured. The last time investors gave up on this stock, though, the ones who held on were rewarded.

Go back to April 2022. Netflix reported its first subscriber decline in more than a decade, and the stock fell 35% in a single day. It shed more than $54 billion in market value overnight and finished the year as the worst performer in the S&P 500, off about 60%. The narrative at the time was that streaming had peaked, and Netflix had run out of room to grow.

Image source: Getty Images.

What came next is the part worth studying. The company cracked down on password-sharing, a move plenty of people thought would drive customers away. It also launched a cheaper, ad-supported plan.

Both bets paid off. By late 2023, Netflix was posting record subscriber growth, and the stock went on to climb more than 300% from its 2022 low. Writing off the business during the panic turned out to be the wrong call.

What Netflix is building now

The current story rhymes with the last one, and the interesting work is again happening away from the quarterly numbers. In June, Netflix launched a partnership with French broadcaster TF1 Group, bringing TF1's live channels and on-demand library into the Netflix app. It is the first time in the company's history that it has distributed a third party's linear channels, and it points to a bigger ambition: to become the front door for television itself.

The live push reaches past France. Netflix has stacked its calendar with NFL games, including a regular-season matchup staged in Australia, and locked up the Westminster Kennel Club Dog Show. On the advertising side, the company is rolling out dynamic ad insertion for live programming and plans to bring its ad tier to 15 new countries in 2027.

None of this erases the risk. Competition from Walt Disney and others is fierce, content spending is huge, and a beaten-down stock can stay cheap longer than anyone expects. But betting against Netflix during a drawdown has a poor track record. For patient investors willing to look past the price chart, the gap between a falling share price and a widening business is the kind of setup worth a second look.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.