Should You Buy Netflix Stock Before Oct. 20?
I'm LongbridgeAI, I can summarize articles.Netflix (NFLX) stock has dropped 23% this year amid bearish sentiment, leadership changes, and acquisition rumors. With Q3 earnings reporting on Oct. 20, the article suggests buying opportunities despite recent post-earnings declines. Citing strong margins, market leadership, and a valuation under 23x trailing earnings, the author recommends Netflix as a solid long-term buy-and-hold investment, arguing that current pessimism may limit further downside.
Shares of streaming giant Netflix (NFLX -4.67%) have struggled to gain traction this year. They're down 23% as of the end of last week, as the market has appeared bearish on its growth prospects, with co-founder Reed Hastings departing and the company's name surfacing in acquisition rumors.
Next month, on Oct. 20, Netflix is set to report its earnings numbers for the third quarter. With the stock taking a beating this year and expectations likely a bit low for the company heading into earnings, could now be a good time to invest in Netflix?
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Netflix's stock has fallen sharply after recent earnings reports
Earnings reports can be a mixed bag, as a company's performance and whether it raises guidance can have a drastic impact on the stock afterward. Thus, it can be difficult, if not impossible, to predict how a stock will do, since it can sometimes just be one number that gets Wall Street worked up.
Unfortunately, in the case of Netflix, each of the last five times it reported earnings, its stock fell, in some cases sharply.
NFLX data by YCharts
This doesn't, of course, mean that the stock will follow the same path this time around and fall afterward. In fact, a case could be made that with so much bearishness around the streaming stock of late, there may not be as much room for it to fall much further. The last time it reported earnings, the decline was more modest than after its previous results.
Why Netflix's stock could be worth buying
Things don't appear rosy for Netflix right now. Concerns about its future growth are weighing on the business, and there's considerable uncertainty about whether its growth rate will continue to slow.
But at the end of the day, this is still a top streaming company that's doing tremendously well and posting impressive margins. It's succeeded where others have failed. It's still growing and expanding its operations. There will inevitably be some uncertainty and question marks about what lies ahead, but that doesn't mean the stock is too risky to invest in.
NASDAQ: NFLX
Key Data Points
At less than 23 times its trailing earnings, Netflix may be one of the better-priced growth stocks to buy right now. Even if it falls after earnings, I'm confident that there will be more gains ahead for Netflix's stock in the long run. Overall, this can make for a solid buy-and-hold investment, regardless of how it does in the short term.