Netflix and MercadoLibre Are Underperforming the S&P 500. Here's the 1 Stock I'd Buy in August.

Earnings season is a time for redemption, but sometimes even classic growth stocks can't seem to do enough to please the market. In a year when consumer-facing platforms are thriving, MercadoLibre (NASDAQ: MELI) and Netflix (NASDAQ: NFLX) are falling behind, trading 11% and 21% lower in 2026, respectively. It's a sharp contrast to the market's double-digit percentage rise this year.

And their latest quarterly updates didn't help turn sentiment around. MercadoLibre is sliding on Thursday after posting its latest results. Netflix also stumbled after disappointing investors last month.

Let's take a look at both stocks that are underperforming the market this year. I happen to own both, but let's break down where each company is now before I let you know the one that I'm considering adding more of later this month.

Image source: Getty Images.

In one corner, Netflix

Like the fifth and final season of Stranger Things, Netflix can't seem to please its audience. Netflix stock plummeted 38% over the past year, including a 9% slide in the two days following its disappointing second-quarter update in mid-July.

Revenue keeps improving, the way it has in each of its first two dozen years as a public company. Earnings increases are outpacing top-line growth for the fourth consecutive year. Netflix seems to be doing fine -- until you zoom in on the last few financial updates.

The 18% revenue growth it posted for the fourth quarter of last year was its strongest year-over-year jump in more than four years. That pace decelerated to 16% and then 13% for the first two quarters of this year, respectively. It actually missed its earlier top-line guidance in last month's second-quarter report, and its fresh outlook for the current period -- calling for an 11.7% increase -- was problematic.

Netflix went from posting its strongest quarterly revenue growth since the spring of 2021 to its weakest increase in three years in the span of just three reports. It's not the only thing weighing on the minds of Netflix shareholders. Netflix is back to offering free trial subscriptions in some markets. It also confirmed on its last earnings call that it's exploring a free subscription tier outside its home U.S. market.

With the market also seemingly punishing Netflix stock when it bids for a rival content producer and even when it falls short, it has to win back Wall Street's confidence.

In the other corner, MercadoLibre

This week's fresh financials contributor is Latin America's leading e-commerce and fintech player. MercadoLibre's stock tumbled on Thursday after it posted its second-quarter results.

The numbers seem solid at first glance. Revenue soared 50%, its strongest gain in four years. Net income declined but still landed ahead of market expectations. After falling short on the bottom line in three of the four previous quarters, it was encouraging to see it come through with a rare beat.

However, margins continue to contract, credit loss provisions keep mounting, and promotional e-commerce subsidizing in Brazil all feed into the bearish thesis that MercadoLibre is overspending to achieve its monster revenue growth. MercadoLibre stock has now fallen 23% over the past year, essentially the losses it suffered in the days immediately following its last two disappointing quarters.

And the winner is ...

Netflix and MercadoLibre are out of favor, but that shouldn't be a deal breaker for opportunistic investors. Which stock am I thinking about buying later this month? My answer is clear, even if it's perhaps unfair.

I like both stocks here, despite the obvious near-term challenges. I'm not selling into the recent weakness. I see this as an opportunity to look into two stocks that have bounced back from much larger obstacles before. They now have niche dominance and scalability.

They are also both historically cheap. Netflix is trading for just 19 times next year's projected earnings. MercadoLibre may not seem cheap at 31 times next year's profit forecast, but it has traded at a higher multiple in recent years.

MercadoLibre is the one I'm considering adding more of this year, and I'll concede it's not a fair decision. I've owned Netflix since 2002, and even after selling most of my position over the years, it's currently my second-largest holding. I have a much smaller stake in MercadoLibre, and I wouldn't mind taking advantage of this week's sale to adjust that.

Yes, MercadoLibre is more expensive based on traditional valuation metrics. Net income isn't expected to rise this year as it has at Netflix. However, MercadoLibre is growing a lot faster. The Latin American region is still earlier in the digital migration process, giving it a longer runway.

I obviously like both companies. I already own them. However, MercadoLibre is the one on my short list of potential buys in August.

Rick Munarriz has positions in MercadoLibre and Netflix. The Motley Fool has positions in and recommends MercadoLibre and Netflix. The Motley Fool has a disclosure policy.