Netflix's Co-CEO Ted Sarandos Just Gave Investors Bad News Before Earnings

Netflix (NASDAQ:NFLX) reports earnings on Tuesday, and the company's Co-CEO Ted Sarandos didn't give investors reason to be bullish about the numbers. The company is laying off approximately 6% of its workforce, and Sarandos has recently said that the business simply is "not growing as fast as I want."

These are not things that investors want to see heading into the streaming company's earnings release, as they could suggest a weak quarter is on deck. And that's bad news for a stock that's already been nosediving for much of the year.

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The company is still on track to hit its forecast

Despite the struggles Netflix is facing right now, according to a memo that CNBC has seen, management told its employees that it's still "on track to deliver our full year forecast."

When the company last released earnings in July, it reported 13% revenue growth. It also forecasted that for the full year, its revenue will rise by around 13% to 14%, totaling approximately $51 billion. It's a decent growth rate, but one that clearly management isn't thrilled with. It also comes as Netflix has raised prices this year across all of its plans; investors may have been expecting better growth.

Netflix has been investing more in content and sporting events, and thus, there may be more of a need to show a payoff from such investments.

Netflix's stock is cheap, but is it in danger of going lower?

It's been an exceptionally bad year for Netflix, as its shares have fallen more than 25% thus far, while the S&P 500 has risen by around 13%. That's not typically what investors would expect to see from a growing business, and it signifies the worry that the market has about Netflix's future growth; a premium may be hard to justify given the uncertainty ahead.

Currently, the stock is trading at a forward price-to-earnings multiple of under 19, which is in line with the average stock on the S&P 500. Arguably, however, the stock deserves a better multiple given its growth prospects, as sports, gaming, and international expansion could still open up more potential for the business in the long run.

Its growth rate remains solidly in double digits, which is an encouraging sign that even with multiple rate hikes over the years, consumers continue to see compelling value in its streaming plans. The business may need some tweaks, but I don't think it's in as dire a situation as its sell-off this year might suggest; at a reduced valuation, now could be a great time to buy the stock, as I don’t think it’s likely to go a whole lot lower.

David Jagielski, CPA 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.