Key Points
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Netflix stock has fallen more than 40% over the past year.
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The sell-off appears driven by overblown concerns.
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The stock is trading at its lowest earnings multiple in four years.
Netflix (NASDAQ: NFLX), the streaming leader, has had a remarkably eventful year.
Investors have watched the share price collapse by roughly 41% over the past twelve months and 26% year-to-date in 2026. The downturn was underscored by its failed bid to acquire Warner Bros. Discovery (NASDAQ: WBD).
Last summer and fall, there was constant chatter that Netflix was the front-runner in the bidding war to acquire Warner Bros. Discovery (or rather, most but not all of its assets), but investors balked, thinking that Netflix was paying too much for assets that would be hard to integrate. There were also concerns that it would be saddled with debt and forced to change its business model.
Then, when Paramount Skydance (NASDAQ: PSKY) swooped in with a large enough counter-bid to snatch Warner Bros. Discovery away from Netflix, some investors decried the loss of a potentially transformational purchase, asking, “OK, what’s next?”
Image source: Getty Images.
Slowing revenue growth, rising margins
Netflix has faced decelerating revenue growth over recent quarters. Year-over-year growth came in at 13% in the second quarter, down from 16% in Q1 and 18% in Q4 2025.
For Q3, the company guided revenue of $13 billion, implying 12% year-over-year growth. It also tightened its full-year 2026 revenue forecast to $51 billion–$51.4 billion, up from the prior range of $50.7 billion–$51.7 billion.
Viewership nonetheless improved, rising 2% in the first half of 2026 compared with 1.5% in the first half of 2025.
Its operating margin has continued to expand, reaching 33% in Q2 (up from 32% in Q1 and 24% in Q4 2025). The company’s outlook projects 33% in Q3 and 31.5% for the full year, compared with 29.5% in 2025.
The improvement is largely driven by the expansion of its higher-margin advertising business. Netflix expects ad revenue to double in 2026 to $3 billion.
It’s time to buy
The concerns appear to be overblown. Netflix remains the clear streaming leader, with the most hours of content viewed and the largest subscriber base.
Moreover, the company boasts ample free cash flow. Netflix expects $12.5 billion in free cash flow in 2026, up from $10.1 billion in 2025, providing a strong foundation for continued growth, including potential expansions into live TV streaming to drive engagement and ad revenue.
Moderating revenue growth and expanding margins reflect a maturing business—yet one that still leads its industry. The sell-off has driven Netflix’s valuation to a fraction of its former level: its price-to-earnings ratio stands at just 21, down from 63 a year ago, marking a four-year low.
Sentiment on Wall Street remains positive, with 68% of analysts assigning a buy rating. The median price target of $94.50 suggests roughly 37% upside over the next twelve months, reinforcing the attractiveness of the current entry point.
Should you buy stock in Netflix right now?
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