2 months ago
13
Rick Munarriz, The Motley Fool
Mon, July 27, 2026 astatine 4:53 AM CDT 4 min read
As a Netflix (NASDAQ: NFLX) shareholder for the past 24 years -- yes, 2 twelve years this October -- I'll beryllium the archetypal to concede that the worth of my involvement successful the starring premium video streaming level has withered lately. The shares are down much than 40% implicit the past year, chopped astir successful fractional from the all-time precocious it notched successful June of past year.
I was hoping that its second-quarter results earlier this period would reverse the bearish narrative. I was wrong. The banal went connected to plummet 9% successful the 2 trading days pursuing its July 16 fiscal update. Despite inching higher implicit 3 of the 4 consequent trading days, Netflix investors are inactive down 6% since its net report. My fiscal presumption successful holding has weakened, but the aforesaid can't beryllium said astir my conviction.
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I was incorrect
Ahead of Netflix's net report, I argued that it was excessively inexpensive to ignore. Netflix was trading for 24 times earnings, a humanities debased extracurricular of the market's short-lived but potent 2022 swoon. Expectations seemed debased for the 2nd quarter. I was astir to larn that inexpensive stocks tin get cheaper, and debased expectations tin beryllium undercut by reality.
Netflix did person a challenging 2nd quarter. Revenue came successful lighter than its ain guidance 3 months earlier. Guidance was worse. The 11.7% top-line maturation that the institution is targeting for the existent 4th would beryllium its weakest gross summation successful 3 years. Netflix did travel done with a humble bushed connected the bottommost line, but it was a forgotten cherry connected apical of a melting crystal pick sundae.
Netflix banal present carries a P/E ratio of 22. Expectations are understandably adjacent little present than they were before. It's not a bully spot to be, but this doesn't person to beryllium wherever the communicative ends.
I mightiness inactive beryllium close
Everything seems truthful wide successful the rearview mirror. Netflix's willingness to wage a premium for Warner Bros. Discovery, chatter astir escaped entry-level tiers successful prime markets, and analysts' cautionary notes and terms people reductions successful the days starring up to July 16 were signs of weakness.
Year-over-year gross is present apt to decelerate for the 3rd consecutive quarter. Netflix investigating a instrumentality to free-trial subscription offers and exploring a escaped tier extracurricular of the U.S. should question adjacent the astir ardent bull's cognition of pricing elasticity. Netflix not posting subscriber oregon engagement metrics anymore lone makes the tempest unreality darker.
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