Netflix (NFLX) Plunges to 52-Week Low...Wall Street Rates It 'Buy'

▲ Netflix (NFLX), stock price decline/AI-generated image

Netflix (NFLX) stock price has fallen to the brink of its 52-week low, testing the judgment of growth stock investors. While the stock price has plummeted, free cash flow forecasts and the expansion of its advertising business have actually improved, leading to analysis that the market's selling pressure has outpaced fundamentals.

According to 24/7 Wall St. on July 1st (local time), Netflix traded at $73.78, leaving it just about $3 away from its 52-week low of $70.86. The stock price has fallen by 21.31% this year and is down 44.24% from its peak. This is a clear divergence from the S&P 500 Index (SPX), which rose by 8.66% during the same period.

Despite the stock price decline, business indicators are still considered robust. Netflix has secured over 325 million paid subscribers worldwide. The company raised its 2026 free cash flow forecast from the previous $11 billion to $12.5 billion. The operating profit margin is also expected to rise to around 31.5%. The price-to-earnings ratio is 24x based on recent earnings and 23x based on future earnings.

The advertising business has also emerged as a growth driver. Ad-supported plans accounted for more than 60% of new subscribers in the first quarter, based on the ad sales market. The number of advertisers increased by 70% year-over-year, exceeding 4,000. 24/7 Wall St. evaluated that advertising revenue is expanding towards $3 billion in 2026. The company repurchased 13.5 million shares for $1.3 billion in the first quarter, with a remaining share repurchase authorization of $6.8 billion.

The reasons for the bearish sentiment are also clear. Netflix's first-quarter earnings per share (EPS) of $1.23 fell 8.55% short of expectations. The reported net income of $5.28 billion included a $2.8 billion termination fee related to the canceled acquisition of Warner Bros. Excluding this effect, the pace of earnings improvement is not as strong as it appears. Competition for viewing time and advertising spending with Disney, Amazon, Apple, YouTube, and TikTok is also a burden.

Wall Street's assessment still leans towards 'buy'. Out of 50 analysts, 37 issued a 'buy' or 'strong buy' rating, with no 'sell' ratings. The consensus target price is $114.15. If the operating profit margin remains in the 32-36% range in the next earnings report, a stock revaluation is possible, but if it falls below 30% or the 2026 free cash flow forecast is lowered, the pressure for a 52-week low breakdown could increase.

[Article Key Summary]

-Netflix's stock price is $73.78, close to its 52-week low of $70.86, and has fallen 21.31% this year.

-Netflix has raised its 2026 free cash flow forecast to $12.5 billion, and its advertising business and share repurchases also support its growth narrative.

-First-quarter EPS fell 8.55% short of expectations, and the $2.8 billion termination fee from Warner Bros. that boosted net income remains a concern.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*