Netflix: Down Nearly 50% Over the Past Year, Is the Stock a Buy on This Latest Dip? Here's the Real Issue Behind the Stock's Decline.

Netflix (NASDAQ: NFLX) shares have been in a slump, and things only got worse after the video streaming company reported its second-quarter results after the closing bell Thursday. After the stock's 7.3% slide on Friday, the stock is down more than 26% thus far in 2026, and its shares have been nearly cut in half over the past year.

While some investors might be tempted to buy the dip, I wouldn't rush in yet.

Turning into a cable company

Netflix's biggest issue in my view is that the company is starting to look more and more like the cable networks it helped disrupt with its streaming service. Its growth now appears to be driven more by price increases than subscriber growth, and the company hasn't been helping its case by continuing to publicly report on fewer metrics to give investors insight into its business.

The company stopped reporting quarterly subscriber numbers last year, and starting next year, it plans to scale back its reporting of viewership data to just once a year. (It currently does so twice a year.) Viewing hours were up just 2% in the first half of 2026, although that was a slight increase from the 1.5% growth it saw in the first half of 2025.

Meanwhile, like linear TV, Netflix is also starting to lean into live events and advertising. Securing highly anticipated live programming, such as major sporting events, tends to be expensive, and this year is expected to account for over 5% of Netflix's content spending despite representing only 1% of its viewing hours. However, management believes this type of programming is responsible for strong new member sign-ups, and has made it a foundation of its advertising push.

The company said it is already in "advanced stages" for upfront advertising in the U.S., and is expected to lock in commitments soon. Netflix has been offering lower-cost, ad-supported subscription tiers in certain markets to help drive growth.

For Q2, Netflix saw solid growth, with revenue rising 13% to $12.56 billion. Adjusted earnings per share (EPS) climbed 11% to $0.80. Analysts on average had been looking for EPS of $0.79 on revenue of $12.59 billion, according to estimates compiled by LSEG. Revenue growth, meanwhile, was pretty consistent across regions, ranging from 14% in the U.S. and Canada to 20% in the Asia-Pacific region.

Looking ahead, management is guiding for third-quarter revenue growth to slow to below 12%, and for EPS to come in at $0.82.

Image source: The Motley Fool.

Why I'd stay on the sidelines

Netflix has a solid business that generates strong free cash flow and is growing revenue at low-double-digit percentage rates. However, it is starting to look more like a traditional cable network operator than an industry disrupter.

With the stock trading at a forward price-to-earnings ratio (P/E) of around 20 times analysts' 2026 estimates, Netflix is reasonably valued. However, I think it needs to find a new type of investor base, as it's losing its appeal for its previous growth-oriented one. This could be a tough transitional period, and as such, I'd put the stock on my radar, but I'd look for it to drift lower into bargain territory before pulling the trigger.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.