Netflix’s Story Is Going From Bad to Worse, But Now Could Actually Be the Best Time to Buy NFLX Stock

Things have gone from bad to worse for Netflix (NFLX) stock over the last year. NFLX stock fell sharply on July 17 after markets gave a thumbs down to the company's second-quarter report. While earnings were broadly in line with estimates, Netflix's Q3 guidance spooked markets.

Notably, NFLX stock also plunged following the Q1 confessional earlier this year for pretty much the same reasons. That quarter, earnings easily beat estimates, but management still did not raise the annual guidance, which was seen as a sign of a slowdown in the coming quarters. In the Q2 release, management narrowed its annual revenue guidance to a range of $51 billion to $51.4 billion, increasing the lower end by $300 million while also cutting the top end of the range by a similar amount. Netflix’s Q3 revenue guidance of $12.86 billion also fell short of Street estimates.

Tepid Guidance and Reduced Engagement Updates Have Spooked Investors

That was not all, as Netflix said it would reduce the frequency of its “What We Watched” report from biannual to annual. These metrics help gauge engagement numbers, and the company is cutting back on the report's frequency at a time when there are concerns over a dip in engagement. While hours per member have decreased, Netflix said that engagement remains “healthy.”

In response to a question on engagement, Co-CEO Greg Peters said during the Q2 earnings call that “there is not a linear relationship between view hours and revenue and profit because all hours are not created equal.” Peters specifically pointed to live events, which have much lower proportionate watch time (based on the content spend) versus family or kids’ content, for example. However, the executive stressed that live events help drive customer acquisition.

Notably, Netflix has scaled back on reporting its subscription numbers. In 2023, the company stopped providing guidance for the metric, and beginning in Q1 2025, it stopped reporting the number on a quarterly basis. Instead, the firm reports the metric when it crosses major subscriber milestones. Most recently, Netflix disclosed that it had 325 million subscribers globally at the end of 2025.

Should You Buy NFLX Stock?

Several firms lowered their price targets for NFLX stock heading into the Q2 report, including KeyCorp, Oppenheimer, Citi, and Morgan Stanley. Analysts are following a similar impulse following the confessional, with many having lowered their target prices.

As I have noted previously, Netflix needs a compelling story to sell to markets after the password-sharing crackdown and ad-supported tier. Both of these efforts have helped drive its subscriber numbers — and by extension its top- and bottom-line growth — but have largely run their course. That's even as ad revenue growth remains a tailwind, as it is coming from a low base.

I have been bullish on Netflix for the last few months, even as the price action has been disappointing to say the least. NFLX stock has lost more than a fifth of its market capitalization this year and trades at around half of its 52-week high reached in September 2025.

While the Q2 earnings failed to enthuse, I remain invested in NFLX stock and see the dip as a good buying opportunity, primarily given Netflix's attractive valuations. NFLX stock trades at about 17.5 times its expected 2028 EPS of $3.84, which is much lower than the five-year average. Yes, the company may not be able to repeat the kind of subscriber adds it saw between 2023 and 2025, when it onboarded almost 100 million new members, but the growth flywheel is far from over.

Netflix should be able to deliver double-digit top-line growth over the foreseeable future, led by price hikes, ad revenue growth, and member additions. The bottom line should rise at an even faster pace as Netflix aims to keep content spending growth below revenue growth. The streaming industry has high operating leverage, as content and technology costs are largely fixed, and revenues from new members help expand margins. Netflix has gone through painful periods in the past, most recently in 2022 when it lost subscribers in the first half. However, management rose to the situation, which helped turn the tide. 

Overall, I'm not giving up on Netflix despite the recent drop. I see the dip as a good buying opportunity.