Netflix’s rally stalled following the company’s stock split at the end of 2025.
While the company missed Wall Street earnings estimates in the third quarter, Netflix still has a number of compelling long-term tailwinds.
Netflix stock is trading near its lowest valuation in nearly three years.
10 stocks we like more than Netflix ›
For much of 2025, the streaming pioneer’s stock netflix(NASDAQ: NFLX) They were on a roll. Through mid-November, the stock had gained about 25%, outperforming both S&P 500 and Nasdaq Composite through that period.
But on Nov. 17, Netflix completed a 10-for-1 stock split, its first in nearly 10 years. Since the split went into effect, the streaming giant’s shares have plummeted 19% (as of the close on January 9).
Let’s look at what’s driving the selling pressure on Netflix stock right now. With the stock trading below $100, is there now an opportunity for savvy investors to buy the dip? Keep reading to find out.
Image source: Netflix.
In my opinion, there are two main reasons driving the sell-off in Netflix stock.
First, the company missed Wall Street expectations in its third-quarter earnings report. While revenue continues to accelerate thanks to strong subscriber acquisition and retention, Netflix’s results were not as strong as analysts anticipated.
The biggest drag on Netflix stock, however, is attributable to the company’s pending takeover bid for Netflix’s film and television assets. Warner Bros. Discovery. Netflix is in a heated bidding process along with Paramount Skydance Corporation for the agreement with Warner Bros.
Concerns over the financing of the acquisition and the integration of Warner Bros. content into Netflix’s existing content library have ushered in a period of uncertainty about what’s next for the streaming powerhouse.
In this context, it is not uncommon for investor confidence to fall in fluid and unpredictable situations.
In recent months, Netflix has released a number of highly anticipated content, including the final season of stranger things as well as a film adaptation by Guillermo del Toro of Frankenstein.
Building on this, the company also opened the first two Netflix House locations, an immersive experience that allows fans to connect with their favorite shows on a more personal level. Netflix House features games and recreations inspired by fan-favorite hits, including Wednesday, Squid Gameand more.
I think both developments could lead to stronger-than-expected subscriber growth both in the fourth quarter and beyond.
Another catalyst for Netflix comes from its fast-growing, high-margin advertising business. When this segment first launched a couple of years ago, the ads on Netflix were pretty generic, essentially identical to ones you’d see on network television.
However, the company is now employing a new strategy. First, ads on Netflix are becoming more targeted. In other words, the ads viewers see vary based on specific subscriber demographics.
A more lucrative opportunity for the company’s advertising ambitions revolves around the content of the ads themselves. Many of the companies running marketing campaigns on Netflix are actually collaborating with the streamer by featuring some of the actors, themes, and sets from actual Netflix shows.
For example, Tide laundry detergent and Discover Financial ran ads promoting their respective products, but featuring several of the actors in stranger things.
This is quite clever, since large corporations pay Netflix to, in a sense, promote their own content in addition to other products. In a way, this helps Netflix show off its content catalog without spending a lot of money on its own marketing budget.
Given the decline in Netflix stock in recent months, I’d say there’s a good chance investors have already priced in the worst-case scenario.
While the deal with Warner Bros. Discovery remains fluid and could continue for some time, nothing in Netflix’s underlying business fundamentals has materially changed downward. In other words, I think the current selling pressure reflects more of an emotional reaction to Netflix’s current situation than a legitimate problem in the company’s business model.
Ultimately, Netflix is laying the foundation for long-term success against the competition. In addition to its rich content library, the company has now complemented its intellectual property (IP) with a highly profitable advertising business and a lower-cost alternative to disney in the experiential entertainment vertical.
NFLX PE Ratio Data (Ahead) by YCharts
While Netflix’s forward price-to-earnings (P/E) ratio of 28 isn’t necessarily a bargain by traditional valuation standards, it’s approaching the lowest levels Netflix has seen in three years. With this in mind, I think now is an interesting opportunity to take advantage of the depressed price action and prepare to hold it for the long term, as this current price drop will not last forever.
Before you buy Netflix stock, consider this:
He Varied and Dumb Stock Advisor The analyst team has just identified what they believe are the 10 best stocks for investors to buy now… and Netflix was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you would have $482,451!* Or when NVIDIA made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $1,133,229!*
Now, it is worth noting stock advisor The total average return is 968.%: An overwhelming outperformance of the market compared to the S&P 500’s 197%. Don’t miss the latest Top 10 list, available with Stock Advisorand join an investing community created by individual investors for individual investors.
See the 10 actions »
*Stock Advisor returns starting January 13, 2026.
Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
Is Netflix Stock a Buy Under $100? was originally published by The Motley Fool
