Should You Buy Netflix Stock After Its 51% Plunge?

Netflix (NASDAQ: NFLX) operates the world's largest streaming platform for movies and television shows, boasting over 325 million paying subscribers. The company isn't growing as quickly as it used to, which is to be expected given its sheer scale, but shareholders are starting to wonder if its best days are officially in the rearview mirror.

Netflix released its operating results for the third quarter of 2026 (ended Sept. 30) on Wednesday, and they didn't do much to squash those concerns. Its stock sank by 6% in after-hours trading, and it's now down by a whopping 51% from last year's record high.

On the bright side, Netflix made some personnel changes that could supercharge its content slate going forward. Plus, its stock is now trading at a bargain valuation, so this might be a great buying opportunity given the company's stellar ability to execute over the long term. Read on.

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Netflix just disappointed investors in one important area

Netflix generated $12.9 billion in revenue during the third quarter, an 11.8% increase from the year-ago period. While the result was in line with expectations, it was the slowest growth rate in three years. But that wasn't the most concerning part.

In late 2022, Netflix launched an affordable subscription tier which is currently priced at $8.99 per month -- significantly below its Standard ($19.99 per month) and Premium ($26.99 per month) tiers. In exchange for the lower price, members have to watch ads, which unlocked an entirely new revenue stream for the company.

The ad-tier subscription consistently accounts for more than half of all new signups in countries where it's available, and in 2025, revenue from selling ad slots to businesses more than doubled to $1.5 billion. Netflix initially predicted it would double again to $3 billion in 2026, but on Wednesday, it revised that forecast down to $2.7 billion. Management said it was because some advertising capabilities are rolling out slower than originally planned, so this might be a temporary blip, but shareholders are worried given the importance of ad revenue to the company's overall growth story.

On a more positive note, Netflix continues to invest in live sporting events which are a major drawcard for new members and also advertisers. The company shows ads to members in every tier during live programming, giving businesses an opportunity to tap into an enormous, highly engaged audience. So far, Netflix is having a lot of success with boxing matches, weekly World Wrestling Entertainment (WWE) events, and National Football League (NFL) and Major League Baseball (MLB) games. Live content is likely to remain a central part of the growth strategy going forward.

Shareholders should have even more confidence in Netflix's future slate following the recent appointment of Peter Rice as chief content officer. He is an industry veteran who previously held senior roles at Walt Disney, 21st Century Fox (which is now owned by Disney), and independent film studio A24. The networks under his leadership aired major live events like the Superbowl, the National Basketball Association (NBA) Finals, the FIFA World Cup, and more.

Rice will now lead Netflix's entire global content organization, overseeing movies, television shows, and live events across every region.

Netflix stock is now trading for a bargain price, so it could be a great long-term buy

Based on Netflix's trailing 12-month earnings of $3.46 per share, its stock is trading at a price-to-earnings (P/E) ratio of 18.5, which is less than half its five-year average of 38.8. Plus, it's cheaper than both the S&P 500 and the technology-heavy Nasdaq-100 indexes, which have P/E ratios of 23.5 and 30.2.

Although Netflix's growth rate is slowing, management says the company has only captured around 7% of its $670 billion opportunity across streaming subscriptions, advertising, gaming, and more. Netflix is in a great position to increase its share in all of those markets, because it's one of the only profitable pure-play streaming companies, so it can continue to outspend its peers to create and license content. This will be a huge competitive advantage over the long term.

Therefore, investors who are willing to hold Netflix stock for a long-term period of 5-to-10 years could do extremely well, especially if they buy it at around the current price.

Anthony Di Pizio 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.