Netflix Stock Hasn’t Been This Cheap In Four Years as Earnings Loom

Netflix (NASDAQ:NFLX) stock has plunged since June last year, wiping out $257 billion in value. It dropped to $73, and is hovering near its lowest level since October 2024, making it the top laggard in the FAANG group of stocks. 

Netflix Stock Has Become a Bargain Ahead of Earnings

The ongoing NFLX stock retreat has made it a bargain in most measures. For example, the price-to-earnings ratio has dropped to 23.70, its lowest level since October 2022. This figure has been in a strong downtrend after peaking at 62.65 in June last year.

Other valuation multiples have also slumped in the past few months, with the price-to-free cash flow multiple slumping to 24.9 from last year’s high of 60. 

This valuation dip has happened at a time when its revenue growth has slowed as its business has matured. Its last earnings report showed that its revenue rose by 16.2% in Q1 to $12.25 billion. 

Wall Street analysts predict that its upcoming earnings report will show that its revenue grew by 13.5% in Q2 to $12.58 billion. For the year, analysts expect revenue will grow by 13.7% to $51.39 billion, followed by 11% next year. 

With its valuation falling, the upcoming earnings may push the company to buy more shares. It repurchased 13.5 million shares worth $1.3 billion in Q1 and had $6.8 billion remaining in its existing authorization. The company may decide to boost its share repurchase program when it releases its earnings.

Netflix is also considering other ways to boost its business and stock. For example, it is said to be considering live TV and bundles as it struggles to keep viewers hooked. According to the WSJ, the management has observed that its subscribers were less engaged.

Analysts are largely optimistic that Netflix stock will rebound over time. The consensus NFLX stock target among analysts is $353, representing a 370% increase.

NFLX Stock Technicals Point to More Downside

Technicals, on the other hand, suggest that NFLX stock may drop further before its eventual rebound. The weekly chart shows that it is about to form a death cross pattern as the 50 and 200 weighted moving averages near their crossover. 

Netflix has also moved below the support of $75, invalidating the bullish outlook of the double-bottom pattern. It has also slumped below the 50% Fibonacci Retracement level.

Therefore, there is a risk that the stock may continue falling in the near term, before bouncing back, potentially to $100. 

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