Is Netflix a Value Stock Ahead of Earnings?

Today’s episode of Full Court Finance at Zacks explores Netflix NFLX stock ahead of its second quarter earnings release on Tuesday, July 19. The streaming TV stock has been one of the hardest hit growth names on the market. And some investors might start digging into Netflix stock again soon as it approaches possible value status.

Stocks climbed Friday morning as Wall Street prepares to officially enter the busy stretch of corporate earnings season. The big banks helped kick things off and many are now likely growing anxious for the technology results, as big tech continues to drag down the market. Netflix is one of the first huge names to report.

Netflix tumbled alongside many other growth stocks off the Nasdaq’s November peaks. Yet it’s hard to find any well-established, marquee names that have been hit harder than NFLX. The stock is down roughly 70% in 2022 alone compared to the larger Zacks Tech Sector’s 30% fall. The drop includes two massive post-earnings release falls that came on the back of disappointing user growth and forecasts.

Image Source: Zacks Investment Research

The streaming TV pioneer faces increased competition from Disney DIS, Amazon AMZN, Apple AAPL, and nearly every other major media company as streaming attempts to overtake linear TV. Netflix has taken on debt to fuel its original content push and it doesn’t have other revenue streams to bolster its efforts like many of its larger competitors.

Netflix’s days of 25% to 30% top-line growth are likely over, and it is scrambling to make changes to help it attract more users. This includes plans to finally introduce an ad-supported tier after years of speculation. News broke recently that it will partner with Microsoft on its ad-tier efforts.

Even though it faces challenges and a slowdown in growth, NFLX is still expected to lift its revenue from roughly $30 billion in 2021 to $35 billion in 2023. And with the stock now trading where it was in 2017, its valuation looks far more reasonable.

Netflix’s earnings revisions have trended downward to help it land a Zacks Rank #4 (Sell) right now. On top of that, the market volatility and its recent post-earnings release selloffs likely mean investors should wait until Netflix executives provide updated guidance and see how Wall Street reacts before they consider NFLX as a value play.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.