Netflix (NFLX) reportedly lost out to Fox (FOX) in the bidding for streaming platform Roku (ROKU) this week. This comes on the heels of losing to David Ellison’s Paramount (PSKY) in its bid to buy Warner Bros. Discovery (WBD).
Another thing Netflix is losing is market cap as investors eye these deal letdowns and slowing growth and hit the sell button on the stock.
AlphaSpace intel: Netflix stock finished Tuesday’s session down 4%, and it’s off by 27% in the last two months following a brief late February to mid-April rally. Year to date, the stock is down 16% compared to a 10% gain for the S&P 500.
Yahoo Finance AlphaSpace data shows Netflix shares are trading below the 50-day, 100-day, and 200-day moving averages.
The analysis: When Netflix reports second quarter earnings on July 16 after the close of trading, the company has a lot of room to improve upon the first quarter disappointment that has added further fuel to the bear raid on the stock.
Investors were left frustrated in April when Netflix failed to raise its full-year 2026 revenue guidance range from $50.7 billion to $51.7 billion.
The company’s full-year operating margin guidance of 31.5% came in below the 32% analysts had modeled at the time, suggesting that the “breakup fee” gains from the Warner Bros. deal are masking higher content amortization costs.
And adding to the uncertainty, longtime chairman Reed Hastings announced he was officially stepping down, marking the end of an era just as the company faces increasing pressure to prove its advertising business can truly scale.
“We see Netflix’s recent earnings report as supportive of the long-term thesis — compounded revenue growth, rising margins (while investing in content and platform initiatives) & the scope to return capital in an outsized way (relative to annualized free cash flow),” Goldman Sachs analyst Eric Sheridan wrote in a note. “On this last point, we took it as a positive post the earnings report when Netflix announced a $25bn stock repurchase authorization. Against these long theses, the short-term debate is likely going to stay anchored on themes around engagement trends and the building blocks (user growth, pricing etc.) that underpin the company’s Q2 revenue commentary.”
The bottom line: Catching a falling knife isn’t good in life or in investing. Wait for Netflix to show that its growth is headed in the right direction and for it to provide more details on its acquisition strategy.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
