Netflix Is Treading Water Around a 2-Year Low. Is It the Most Obvious Growth Stock to Buy in October?

Netflix (NASDAQ: NFLX) stock is in the middle of its toughest period since the end of pandemic lockdowns earlier in the decade. The company escaped earlier slumps by fostering new revenue sources that brought investors back into the stock.

Today, no such catalyst has appeared, and the stock has fallen to a two-year low. Knowing that, should investors buy the entertainment stock in October or stay on the sidelines?

Netflix and the streaming market

One challenge after another has weighed on Netflix stock. The company lost its bid to acquire Warner Bros. Discovery to Paramount (now Skydance), a move that made Netflix less competitive in the content race.

Moreover, viewers who once took great interest in its content now find the programming less compelling. Also, YouTube's (owned by Alphabet) lead over Netflix in TV viewing keeps growing.

This comes at a time when consumer spending has shifted toward necessities and budget-friendly options. Although customers could perceive a standard subscription with ads costing $8.99 per month as inexpensive, the premium, ad-free Netflix subscription at $26.99 per month appears pricey in today's market.

Amid this sentiment, revenue growth has slowed. Still, in the first half of 2026, revenue of almost $25 billion increased by 15% year over year. Also, its profit for the same period of $8.7 billion rose from the $6 billion earned in the same year-ago time frame amid rising income taxes. Still, if not for its $2.9 billion in interest and other income, its profit would have declined thanks to rising income tax expenses.

Thanks in large part to slowing revenue growth, investors have also increasingly sold off the stock. With the decline, its 22 P/E ratio is not a record low, though its earnings multiple averaged 39 over the last five years. Consequently, investors now have to wonder whether that valuation is justified given the lack of obvious options to reinvigorate growth.

Not all the news is bad for Netflix. Analysts forecast a 13% revenue growth rate this year, which they expect to decline to 11% in 2027.

While investors will probably not look upon the slowing growth favorably, it is probably also not the time to turn on the stock, given its low P/E ratio. Additionally, if the company starts to foster new sources of revenue growth as it did in the past, it may be time to add shares.

Moving forward with Netflix

Ultimately, Netflix is probably not the most obvious buy story in October.

Admittedly, it still maintains double-digit revenue growth, and at 22 times earnings, the stock remains inexpensive.

The problem with Netflix stock is its dwindling moat. Losing the bidding war for the Warner Bros. Discovery content probably means it has fallen behind in that race. Moreover, it has not found an obvious alternative to the lower-cost, user-generated content that has helped YouTube to thrive.

Hence, while Netflix remains well-positioned to hold its own, the company needs to strengthen its competitive moat or fall to a significantly lower valuation before investors should consider buying its stock.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Netflix. The Motley Fool has a disclosure policy.